Tuesday, January 25, 2005

Tuesday Watch

Late-Night News
Asian indices are mixed as strength in commodity-related shares is being offset by weakness in tech stocks in the region. Bill Gates will donate $750 million to help children in developing countries receive access to life-saving vaccines and immunizations, the London-based Times said. China's economy expanded 9.5% last year, Xinhua News Agency reported. SEC Chairman Donaldson may today signal that the US will ease listing rules for international companies who want to avoid the costs involved in meeting corporate governance rules, the Financial Times said. The European Union is preparing to lift its 15-year-old arms embargo against China and replace it with a code of conduct that regulates all weapons sales, the AP reported, citing UK Foreign Secretary Jack Straw. Equipping 6,800 US commercial airplanes with antimissile defense systems would cost $11 billion, plus $2.1 billion a year in operating expenses, the NY Times reported. Hedge funds are beginning to play a more assertive role in shaping mergers and acquisitions, especially in Europe, the Wall Street Journal reported.

Late Recommendations
Goldman Sachs reiterated Outperform on MO, TPX, MDT, X, AMGN and Underperform on CR.

Night Trading
Asian Indices are -.75%. to +.25% on average.
S&P 500 indicated +.14%.
NASDAQ 100 indicated +.13%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Before the Bell CNBC Video(bottom right)
Asian Indices
European Indices
Top 20 Business Stories
In Play
Bond Ticker
Analyst Actions
Macro Calls
CNBC Guest Schedule

Earnings of Note
Company/Estimate
ADTN/.17
AKS/.66
ABC/.63
AV/.18
BLS/.41
EAT/.45
BNI/.78
CTX/1.88
COH/.68
CA/.19
GLW/.12
EMC/.12
ERTS/1.18
FLEX/.19
INSP/.40
JNJ/.64
MER/1.11
MRK/.50
SLB/.56
TXN/.26

Splits
None of note.

Economic Data
Consumer Confidence for January estimated to fall to 101.0 versus 102.3 in December.
Existing Home Sales for December estimated to decline to 6.8M versus 6.94M in November.

BOTTOM LINE: I expect US equities to open mixed-to-higher in the morning on a bounce after today's sell-off. However, stocks will likely weaken again later in the day on continuing worries over slowing global growth, violence in Iraq and earnings. The Portfolio is market neutral heading into tomorrow.

Monday, January 24, 2005

Monday Close

S&P 500 1,163.75 -.35%
NASDAQ 2,008.70 -1.26%


Leading Sectors
Energy +.82%
Utilities +.80%
Oil Service +.71%

Lagging Sectors
Biotech -2.09%
Internet -2.21%
Airlines -4.49%

Other
Crude Oil 48.88 +.14%
Natural Gas 6.52 +.76%
Gold 427.40 +.07%
Base Metals 120.95 -.08%
U.S. Dollar 83.24 -.02%
10-Yr. T-note Yield 4.12% -.42%.
VIX 14.65 +2.02%
Put/Call .73 -12.05%
NYSE Arms 1.27 -23.95%
ISE Sentiment 149.00 -4.49%

After-hours Movers
NFLX +15.17% after beating 4Q estimates and raising 1Q outlook.
SLAB +21.01% after beating 4Q estimates and raising 1Q guidance.
PLMO -10.79% after saying CEO Bradley will resign.
JDAS +12.95% after substantially beating 4Q estimates.
CAI -4.98% after meeting 2Q estimates, but lowering 3Q/4Q outlook.
FILE -11.67% after missing 4Q estimates.

Recommendations
Goldman Sachs reiterated Outperform on DDR, RE, SBC, BLS, MERQ and STN.

After-hours News
U.S. stocks finished lower today, led by technology and small-cap shares. After the close, as many as half of New York City’s workers in the 1990’s were foreign-born, with Latin America replacing Europe as the dominant source, according to a study issued today. Lehman Brothers Holdings’ talks to buy London-based hedge fund GLG Partners LP have been delayed by tax issues and an investigation into alleged insider trading, the Financial Times reported. The assets of the largest 1,000 US pension funds rose 10.6% in the 12 months ended Sept. 300, the second consecutive year of double-digit gains, as US and foreign stocks bolstered fund performance, Pensions & Investments reported. Delphi Corp. Chairman and CEO Battenberg said high inventories and increasing costs of pensions and health care are weighing on the auto parts industry, CNBC reported. Citigroup traders may face a criminal investigation by German prosecutors that they manipulated the government bond futures market in that country, the Financial Times reported. The production value of Taiwan’s semiconductor industry is expected to grow 14.8% this year, outpacing the predicted 1.2% global growth, the Commercial Times reported. China’s advertising market grew 32% to $18.9 billion in 2004, the Asian Wall Street Journal reported. US Senate Republican leaders said they’ll debate legislation limiting rewards for class-action lawsuits before acting on the creation of private Social Security accounts, Bloomberg reported. Krispy Kreme Doughnuts will pay new CEO Cooper $760/hour, Bloomberg said. US antitrust enforcers are reviewing plans by Gannett Co., the largest US newspaper publisher, to buy the publisher of weekly newspapers near three cities where Gannett publishes dailies, Bloomberg reported. ATI Technologies will place new order for mobile phone chips with Taiwan Semiconductor Manufacturing, the Commercial Times reported.

BOTTOM LINE: The Portfolio finished slightly higher today on gains in my software and auto parts shorts. I took profits in a couple of semiconductor shorts and added OIH short in the afternoon, thus leaving the Portfolio market neutral. I am using a stop-loss of $90.25 on this new position. In what has become a very bad habit, the market finished at its lows for the day, volume increased and market internals were very weak. Measures of investor anxiety were mixed on the day which is also a negative. I continue to expect a tradable bottom in the major indices towards the latter part of the week. I also believe crude oil will top this week and begin heading lower next week after the Iraqi elections on worries over increasing supply, a stabilizing US dollar and slower global demand.

Mid-day Report

S&P 500 1,171.95 +.35%
NASDAQ 2,030.13 -.20
%

Leading Sectors
Energy +1.48%
Oil Service +1.46%
Utilities +1.26%

Lagging Sectors
Boxmakers -.84%
Internet -.90%
Airlines -2.83%

Other
Crude Oil 48.60 +.14%
Natural Gas 6.44 +3.21%
Gold 427.20 +.07%
Base Metals 120.95 -.08%
U.S. Dollar 83.32 +.07%
10-Yr. T-note Yield 4.14% unch.
VIX 14.29 -.49%
Put/Call .77 -7.23%
NYSE Arms .98 -41.32%
ISE Sentiment 145.00 -7.05%

Market Movers
RIMM -5.62% after Barron’s reported the company faces increasing competition from cell-phone makers that offer camera capabilities and other functions.
ADSK -13.28% after Banc of America cut it to Sell.
COCO +12.3% after saying the SEC ended an informal inquiry without recommending action.
MERQ +12.81% after boosting 4Q estimates.
INCX +9.03% on Roth Capital upgrade to Buy.
LM +5.03% after beating 3Q estimates substantially.
CPO +4.38% on Deutsche Bank upgrade to Buy.
TZOO -19.65% after missing 4Q estimates.
CCMP -10.22% after Lehman downgrade to Equalweight.
CME -4.02% on continued profit-taking.
DECK -5.0% on continued profit-taking.

Economic Data
None of note.

Recommendations
-Goldman Sachs: Reiterated Outperform on CVD, DTV, SBC, BLS, IPP, SPP. Reiterated Underperform on . Rated WYNN and LVS Outperform.
-Citi SmithBarney: Rated WOLF to Buy, target $26. Rated CONR Buy, target $26. Raised FIC to Buy, target $43. Cut APU to Sell, target $26.
-Banc of America: Lowered ADSK to Sell, target $25. Downgraded OKE to Sell, target $23.
-JP Morgan: Added FNM to Focus List, target $80. Raised EAT to Overweight. Rated LVS Overweight.
-UBS: Downgraded UHS to Reduce, target $35.
-Deutsche Bank: Raised ISIL to Buy, taget $17. Raised CPO to Buy, target $62.
-CIBC: Rated CONR, target $26. Raised MCD to Sector Outperform.
-CSFB: Rated CSCO Outperform, target $22.50.
-Morgan Stanley: Raised ATHR to Overweight, target $15.
-Legg Mason: Raised CTSH to Buy, target $47.
-Merrill Lynch: Rated SIRI Buy, target $7.50. Raised LIZ to Buy.

Mid-day News
U.S. stocks are mixed mid-day as gains in energy-related stocks are being offset by weakness in the technology sector. Walt Disney Co. still needs to address problems at the company’s ABC television network before it can successfully confront rivals including Fox television, the Wall Street Journal said. Mexico and the country’s powerful drug lords are heading for a major confrontation, the Wall Street Journal reported. EchoStar Communications won’t make major gains on its rival DirectTV Group by acquiring Cablevision Systems’ satellite unit for $200 million, the Wall Street Journal reported. General Motors, Motorola and Campbell Soup are among the companies increasing their spending on “event marketing” at the Super Bowl, the Wall Street Journal reported. US watchdogs are paying closer attention to hedge funds, which were for years lightly regulated on the assumption that the wealthy they catered to could handle the risk, the Wall Street Journal reported. Take-Two Interactive Software reached a game-software licensing accord with the union representing Major League Baseball players, the Wall Street Journal reported. Research In Motion’s bid to overturn a US patent-infringement ruling against it received support from EarthLink, the NY Times reported. The US Air Force and Navy may have to turn away thousands of potential recruits, even as the Army and Marine Corps are having difficulty meeting their annual recruiting goals, USA Today reported. Iran’s nuclear program is close to a “point of no return,” where the Islamic state won’t need any outside help in enriching uranium to build an atomic weapon, Israel’s spy agency chief said, the Jerusalem Post reported. The California Institute for Regenerative Medicine, the new stem-cell research facility, will consider putting its headquarters in either San Francisco or San Diego, the San Francisco Chronicle reported. Fidelity Investments is losing customers in Canada and struggling to compete with domestic banks that have made the nation’s investment market among the fastest-growing anywhere, Bloomberg said. Police can use drug-sniffing dogs to check vehicles stopped for traffic offenses, even without reason to suspect the presence of illegal narcotics, the US Supreme Court ruled. ImClone Systems agreed to pay $75 million to settle a class-action shareholder lawsuit from 2002 accusing the company of making false or misleading statements about prospects for its Erbitux colon-cancer drug, Bloomberg reported. Microsoft said it won’t appeal a European court antitrust decision that requires it to immediately begin licensing protocols to rivals and selling a stripped-down version of its Windows operating system, Bloomberg said. Monsanto agreed to buy Seminis for $1 billion in cash from Fox Paine & Co. and minority investors to gain the largest maker of vegetable and fruit seeds, Bloomberg reported. American Express said profit rose 17% last quarter as rising consumer confidence boosted card use, Bloomberg reported.

Bottom Line: The Portfolio is unchanged mid-day as gains in my auto parts and software shorts are offsetting losses in my commodity-related shorts. I have not traded today and the Portfolio is still market neutral. The tone of the market is weaker today, notwithstanding the mixed performance by the major indices. The advance/decline line is poor and volume is decent. As well, most measures of investor anxiety are falling. On the positive side, bonds are holding recent gains and crude oil finding stiff resistance at $49-$49.50/bbl. I expect US stocks to trade mixed-to-weaker into the close.

Monday Watch

Weekend News
Bank of China and China Construction Bank abandoned plans to sell shares on the NYSE because of the exchange's strict corporate governance rules, the Economic Observer reported. China may spend more than $1.2 billion to boost the country's stock markets, the Economic Observer reported. General Maritime, the second-largest US-based oil-tanker owner, would be interested in a merger with Frontline Ltd., the world's biggest oil-tanker company, only if it paid "heavily" in cash, the Financial Times reported. The US and UK are evaluating ways to withdraw from Iraq as early as possible following the Jan. 30 elections, the Guardian reported. President Bush will propose spending $3.2 billion next year to fight AIDS worldwide, the Washington Post reported. Hossein Eslambolchi, AT&T's Chief Technology Officer, is seeking to lower the long-distance carrier's costs by reducing the number of computer systems needed, the NY Times reported. The Bureau of Land Management has determined that oil drilling in the northeastern corner of Alaska's National Petroleum Reserve can go forward with "minimal impact" on the environment, the AP reported. DirectTV Group said in a regulatory filing that the SEC was looking at how it accounted for several transactions made last year, Reuters reported. China's central bank may raise the percentage of deposits banks must set aside as reserves to take money out of circulation to cool economic growth, China Business newspaper reported. The Nasdaq Stock Market and the Chicago Stock Exchange have joined the bidding for Reuters Group's Instinet Group, the Sunday Telegraph reported. Clinics offering full body scans to detect diseases had a rush of demand, then saw business drop off rapidly, the NY Times reported. The Bush administration is likely to double the bounty for al-Qaeda leader Osama bin Laden to $50 million by the end of February, Time magazine reported. Procter & Gamble is considering creating a national hotel-cleaning business, the Denver Post said. Napster, the online music service, may begin offering movies and video games to attract new customers, the Financial Times said. Wal-Mart Stores said January sales are rising within its forecast for a gain of as much as 4% as shoppers purchased food more than general merchandise, Bloomberg said. US regulators are raising national-security concerns over IBM's pending $1.25 billion sales of its personal-computer business to China's Lenovo Group, Bloomberg reported. Crude oil futures in NY are rising for a second day after a snowstorm in the US Northeast and forecasts of more bad weather to come boosted heating-fuel demand, Bloomberg said. Palestinian President Abbas said an accord with Palestinian groups on ending attacks against Israelis will be reached "very soon," Haaretz reported. Shares of Creative Technology had their biggest decline in three years after the company, whose products compete with Apple Computer's iPod, said it will concentrate more on boosting sales than profitability, Bloomberg said.

Weekend Recommendations
Bulls and Bears had guests that were positive on CAG, PXD, CTRX, BHP, BRL, VZ and mixed on GM, VAR, EBAY, KR, SWY. Forbes on Fox had guests that were positive on ATML, EXTR, EEM, XLE and mixed on CYH, AH. Cashin' In had guests that were positive on VIA, BCO, UHCO, NSC, PTR and mixed on NSL, AMZN. Barron's had positive comments on CVCO, C, STA, GIS, AZR, USM, TNB, COO, FSCI, TVL, V, DIS, TWX, L, UCOMA. Goldman Sachs reiterated Outperform on KRB, GE, EBAY, ADP, UTX and AWA. Goldman reiterated Underperform on HBAN, HRB.

Night Trading
Asian Indices are mostly lower, -1.0%. to +.75% on average.
S&P 500 indicated +.11%.
NASDAQ 100 indicated +.17%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Before the Bell Video(bottom right)
Asian Indices
European Indices
Top 20 Business Stories
In Play
Bond Ticker
Analyst Actions
Macro Calls
CNBC Guest Schedule

Earnings of Note
Company/Estimate
ALTR/.13
AXP/.70
AUDC/.05
CNF/.74
CAI/.67
ETN/1.13
KMB/.90
LXK/1.14
NVR/20.72
SLAB/.20
TZOO/.13

Splits
NCR 2-for-1
JOYG 3-for-2

Economic Data
None of note.

BOTTOM LINE: I expect U.S. stocks to open mixed in the morning and weaken later in the day on rising energy prices and apprehension ahead of the Iraqi elections. The Portfolio is market neutral heading into the week.

Sunday, January 23, 2005

Weekly Outlook

There are some important economic reports and a number of significant corporate earnings reports scheduled for release this week. Economic reports include (Tues.)-Consumer Confidence, Existing Home Sales (Thur.)-Durable Goods Orders, Initial Jobless Claims (Fri.)-Advance 4Q GDP, Personal Consumption. Existing Home Sales, GDP and Personal Consumption all have market-moving potential.

Mon.- Altera(ALTR), American Express(AXP), Lexmark International(LXK) Tues.- Bellsouth(BLS), Coach Inc.(COH), Computer Associates(CA), Corning Inc.(GLW), Electronic Arts(ERTS), EMC Corp.(EMC), Flextronics(FLEX), Johnson & Johnson(JNJ), Merck & Co.(MRK), Merrill Lynch(MER), Schlumberger(SLB), Texas Instruments(TXN) Wed.- Altria(MO), E*Trade(ET), Eastman Kodak(EK), General Dynamics(GD), SBC Communications(SBC), Starbucks(SBUX) Thur.- Amgen(AMGN), Beazer Homes(BZH), Du Pont(DD), Broadcom(BRCM), Caterpillar(CAT), Guidant(GDT), Lockheed Martin(LMT), Microsoft(MSFT), Novellus Systems(NVLS), Phelps Dodge(PD), UPS(UPS), Verizon Communications(VZ) Fri. - ChevronTexaco(CVX), Proter & Gamble(PG), Halliburton(HAL), McDonald's(MCD) are some of the more important companies that release quarterly earnings this week. There are also a few other events that have market-moving potential. The Fed's Guynn speaking(Mon.), Piper Jaffray Health Care Conference(Tues.-Thur.), Fed's Hoenig speaking(Tues.) and Citi SmithBarney Financial Services Conference(Wed.-Thur.) could also impact trading this week.

Bottom Line: I expect US stocks to finish the week modestly lower on worries over terrorism associated with the Iraqi election, high energy prices and slowing global growth. US equities should put in a tradable bottom this week as measures of investor anxiety rise and the major indices reach very oversold technical levels short-term. I plan to remain nimble and look to add market exposure into any further deterioration. My short-term trading indicators are still giving Sell signals and the Portfolio is market neutral heading into the week.

Economic Week in Review

ECRI Weekly Leading Index 133.30 +1.99%

Empire Manufacturing for January fell to 20.08 versus estimates of 25.0 and a reading of 27.07 in December. "It's still at a high level, but it's a deceleration from the healthy pace of late last year," said Elisabeth Denison, an economist at Dresdner Kleinwort Wasserstein. The New York Fed said the index reading of 20.8 "remained staunchly positive." A government report last week showed that US exports fell late last year, suggesting lagging growth overseas may also be hurting demand for factory goods, Bloomberg reported. The measure of prices manufacturers paid for materials dropped to 50.4 from 57.7. The index of what factories expect to pay six months from now fell to 55.5 from 62.5, Bloomberg said.

Net Foreign Security Purchases for November rose to $81.0B versus estimates of $58.5B and $48.3B in October. International investors accumulated US assets in November at the fastest pace since June and added to stock holdings by the most in 3 ½ years and seven times the average of the previous 12 months, Bloomberg reported. This report suggests that "in the short-term, the US has not had any problem financing its record wide trade imbalance," said Joseph LaVorgna, chief US fixed income economist at Deutsche Bank. "What we're seeing is a return to US equity investments by foreigners, which is the best way to address the current account deficit," said Drew Matus, senior economist at Lehman Brothers.

The NAHB Housing Index for January fell to 70 versus estimates of 70 and a reading of 71 in December. Job and income growth will help fuel sales and limit the restraining effects of higher mortgage rates this year, the builders group said. Home sale are forecast to be the second-highest on record in 2005, according to forecasts from Freddie Mac and the National Association of Realtors. "Builders are geared up for another solid year and expect the demand from home buyers to remain resilient," said David Wilson, president of the NAHB.

The Consumer Price Index for December fell .1% versus estimates of no gain and a rise of .2% in November. The CPI Ex Food & Energy for December rose .2% versus estimates of a .2% increase and a .2% gain in November. Americans paid 2.2% more last year for goods and services, excluding energy and food, below the 2.8% average increase of the last 14 years, Bloomberg said. "It's still a challenging market for a lot of companies to raise consumer prices," said Nariman Behravesh, chief economist at Global Insight. The Fed "can feel pretty good" about the pace of inflation, he said. Workers' weekly earnings adjusted for inflation rose .5% in December, the most in five months, the Labor Department said. The CPI is projected to rise 2.5% this year, below the long-term average of 3.0%, Bloomberg reported.

Housing Starts for December rose to 2004K, the biggest increase in more than 7 years, versus estimates of 1903K and 1807K in November. Building Permits for December fell to 2021K versus estimates of 1985K and 2028K in November. US home construction rebounded in December to cap the best year since 1978 as cheap mortgages and increased employment buoyed demand, Bloomberg said. The Midwest saw the strongest gains, rising 18.8%. "The long-term health of the housing market looks good," said Larry Sorsby, CFO of Hovnanian. "As the economy continues to improve, people that were fearful of losing their job or not finding one are going to be in the housing market, even if interest rates go up modestly."

Initial Jobless Claims fell to 319K, the biggest decline in three years, versus estimates of 345K and 367K the prior week. Continuing Claims rose to 2694K versus estimates of 2675K and 2647K prior. "You are going to get 150,000 to 200,000 jobs a month," said John Silvia, chief economist at Wachovia. "You are in a very stable period for employment." The US economy is likely to grow 3.5% to 4% this year, employment may grow in the range of 150,000 to 200,000 a month and prices will be "relatively stable," Philadelphia Fed President Anthony Santomero said. "As this expansion continues, we will not only see sustained growth in the number of jobs, but also an increase in the proportion of high-paying jobs as well," Santomero said.

The US economy expanded from late November through early January, with most of the 12 Federal Reserve districts reporting only "modest" inflation pressures, the Fed's Beige Book report said. Consumer spending increased in most districts, getting off to a slow start and then picking up after Christmas, according to the survey. The beige book mentioned in several sections that inflationary pressures were modest, Bloomberg said. "Inflation is likely to remain well under control," Fed Governor Bernanke told a gathering at the Council on Foreign Relations. The survey also said the residential real estate market remained strong and commercial real estate strengthened.

The Leading Indicators for December rose .2% versus estimates of a .2% increase and a .3% gain in November. "There's a great deal of optimism about the first six to nine months of 2005," said Will Zardrozny, CEO of Siemens Financial Services. The index of coincident indicators, a gauge of current economic activity, rose .3% in December after increasing .2% the month before, Bloomberg said.

The Philadelphia Fed. Index for January fell to 13.2 versus estimates of 25.0 and a reading of 25.4 in December. Manufacturers may be hard-pressed to sustain last year's growth in industrial production, the most in four years, economists said. "The expansion rate has been too high in recent quarters to be maintained and companies are revising their business plans downward in anticipation of slower growth," said Andreas Busch, senior economist at Bantleon Bank AG. The drop in the Philly and New York indices suggests there will be a decline in the ISM's manufacturing index on Feb. 1, Bloomberg said. A gauge measuring current manufacturing employment rose to 17 from 14 in December. Finally, the prices paid measure rose to 66.1 versus 53.8 in December, Bloomberg reported.

The preliminary Univ. of Mich. Consumer Confidence reading for January fell to 95.8 versus estimates of 97.5 and a reading of 97.1 in December. Lower stock values and a rebound in the price of crude oil "may have dampened sentiment a bit," said Michael Englund, chief economist at Action Economics. "Current levels of sentiment are still solid, and such strength has tended to correspond with solid rates of consumption growth," he said. The current index, which reflects Americans' perception of their financial situation and whether it's a good time to buy big-ticket items, rose to 110.4, the highest since December 2000, Bloomberg reported. "If you just look at what consumers do, what you are seeing is that they came through the holiday season feeling good about what they have spent," Fed Governor Susan Bies said. Citigroup, the world's biggest financial services company, is witnessing "what we view to be very responsible consumer behavior," said CFO Sallie Krawcheck, noting that payment rates on credit cards are moving toward all-time highs. "On average, consumer balance sheets are in pretty goods shape," said Gary Stern, president of the Federal Reserve Bank of Minneapolis.

Bottom Line: Overall, last week's economic data were modestly positive. Measures of manufacturing activity are decelerating from last year's exceptional levels. As of now, I believe manufacturing is just moving to slower more sustainable levels, rather than entering a serious decline. The large increase in foreign purchases of US assets is a big positive considering the weakness in the US dollar, political concerns and deficit worries. The large drop in housing starts in November was a result of the 6th wettest November on record and led to the sharp increase in December. The housing market is very strong and stable in most parts of the country and should remain so for the foreseeable future. Inflation remains below historic norms by most measures and should decelerate this year as commodity prices rise at a slower pace or fall and unit labor costs remain in check. The sharp drop in jobless claims is a positive, however seasonality is likely resulting in abnormally high volatility in this reading. I continue to expect job creation that is good enough to hold the unemployment rate down, but not enough to boost unit labor costs which would spur an acceleration of inflation. The tone of Fed comments this week was less hawkish than previous weeks and may signal they are contemplating a pause in rate hikes. A slowing of the pace of rate hikes is warranted in my opinion and would likely send stock prices higher. Consumer confidence was hurt by increased violence in Iraq ahead of their elections, domestic terrorism worries, rising energy prices and falling stock prices. I expect consumer sentiment to weaken modestly from current levels before turning up again during the second quarter. Before year-end, consumer sentiment should reach new highs for this cycle. The ECRI Weekly Leading Index experienced one of the sharpest rebounds in recent years, rising from 130.70 to 133.30 in one week. The recent declines in this index had been a concern for me.