Wednesday, March 02, 2005

Wednesday Close

Indices
S&P 500 1,210.08 -.03%
Dow 10,811.97 -.17%
NASDAQ 2,067.50 -.18%
Russell 2000 637.33 -.19%
DJ Wilshire 5000 11,924.59 -.03%
S&P Barra Growth 583.02 +.06%
S&P Barra Value 622.60 -.12%
Morgan Stanley Consumer 588.34 -.22%
Morgan Stanley Cyclical 771.70 -.39%
Morgan Stanley Technology 476.22 -.29%
Transports 3,752.41 -.18%
Utilities 353.45 +.10%
Put/Call .80 -10.11%
NYSE Arms .91 +3.41%
Volatility(VIX) 12.50 +3.82%
ISE Sentiment 153.00 +9.29%
US Dollar 83.08 +.36%
CRB 306.65 +.46%

Futures Spot Prices
Crude Oil 53.03 -.04%
Unleaded Gasoline 148.00 -.26%
Natural Gas 6.73 +.27%
Heating Oil 150.00 -.56%
Gold 434.20 +.09%
Base Metals 126.65 -1.05%
Copper 147.70 unch.
10-year US Treasury Yield 4.38% +.27%

Leading Sectors
Energy +1.35%
Oil Service +1.19%
Broadcasting +.60%

Lagging Sectors
Homebuilders -1.08%
Semis -1.57%
Airlines -2.63%

After-hours Movers
SBUX +3.20% after beating same-store-sales estimates for February.
PETM -7.2% after missing 4Q revenue estimates, restating prior results and maintaining 05 outlook.
FHRX -9.3% after missing 4Q revenue estimates and lowering 1Q outlook.

Detailed Market Summary
Market Wrap CNBC Video(bottom right)
Futures Recap
NASDAQ 100 After-hours Indicator
Real-time/After-hours Stock Quote

Afternoon Recommendations
- Goldman Sachs: Reiterated Outperform on AMLN and DNA.
- Banc of America: Reiterated Buy on DHI, target $53.
- Prudential: Reiterated Overweight on FD, target $75.

After-hours News
US stocks finished modestly lower today on concerns over higher energy prices and Social Security. After the close, crude oil rose above $53/bbl. for the first time in four months and gasoline surged to an all-time high on concern that oil production and refining capacity are not keeping up with demand, Bloomberg reported. Boone Pickens, chairman of BP Capital LLC, opened a second partnership for investing in energy stocks after reaching a cutoff of $500 million in assets at his first hedge fund, Bloomberg said. The US dollar rose against the euro as Fed Chairman Greenspan said the US economy is expanding at a “reasonably good pace,” while a European Union report showed growth in the region is stagnate, Bloomberg reported. Neiman Marcus Group said second quarter profit surged as customers bought more designer dresses and handbags, Bloomberg reported. Iran’s military has new anti-ship cruise missiles that give it the capability to threaten the flow of oil in the Persian Gulf, Bloomberg reported. Martha Stewart Living Omnimedia’s second-biggest shareholder, VA Partners LLC, sold 915,000 shares of the media and houseware company’s stock at prices between $32.66-$35.58/share, Bloomberg said. MCI began discussing a combination with Qwest Communications, bowing to pressure from shareholders who oppose a lower bid from Verizon Communications, Bloomberg reported.

BOTTOM LINE: The Portfolio finished slightly lower today as losses in my semi and alternative energy longs more than offset gains in my software and telecom equipment longs. I did not trade in the afternoon, thus leaving the Portfolio 100% net long. The tone of the market deteriorated into the afternoon as the advance/decline line finished the day lower, sector performance was mixed and volume was decent. Measures of investor anxiety remained mixed into the close. Semis underperformed and energy-related stocks outperformed throughout the day. I still expect the DJIA and S&P 500 to make new cycle highs over the next few days. I also expect the Russell 2000 and Nasdaq to break to the upside from their recent trading ranges. The likely catalysts will be provided by a drop in long-term interest rates after Friday’s employment report, strong earnings reports, short-covering and the stabilization of energy prices. A substantial spike in long-term interest rates or oil above $55/bbl. poses the greatest near-term risk to my bullish view.

Mid-day Report

Detailed Market Summary
Market Snapshot

Sector Performance

Market Movers

NYSE Unusual Volume
NASDAQ Unusual Volume
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Hot Spots
Option Dragon

Economic Data
None of note.

Recommendations

Mid-day News

BOTTOM LINE: Due to a scheduling conflict, I am posting an abbreviated version of the Mid-day Report. The Wednesday Close will be posted at its regular time around 7pm est. The Portfolio is slightly higher mid-day on gains in my telecom equipment, retail and software longs. I exited a biotechnology long this morning and added JNPR long, thus leaving the Portfolio 100% net long. I am using a $21 stop-loss on this position. The tone of the market is modestly positive today as the advance/decline line is slightly higher, volume is solid and most sectors are higher. Rising energy prices are likely muting an otherwise more positive day. Measures of investor anxiety are mostly lower, which is a negative. I expect the DJIA and S&P 500 to break to new cycle highs within the next 2 days. I will likely increase market exposure on a convincing break of these levels. A failure to do so would lead me to cut exposure.

Wednesday Watch

Late-Night News
Asian indices are mixed as gains in auto stocks in the region are being offset by weakness in commodity-related shares. Diana Shipping, a Greek owner of ships that carry coal, grain and other so-called dry bulk commodities, plans to raise $242 million selling shares in New York, Lloyd's List reported. Advanced Micro Devices will today begin testing and packaging microprocessors at its plant in the eastern Chinese city of Suzhou to compete with Intel Corp., Shanghai Daily said. Taiwanese President Chen Shui-bian told the European Union its plans to lift an arms embargo on China will threaten the balance of military power in east Asia, AFP reported. China will cut by 80% the number of companies licensed to import iron ore under a new permitting system, China Business News said. Asylum applications to industrialized countries fell in 2004 for the third consecutive year to their lowest level for 16 years, the Financial Times reported. Australia's economy barely grew in the fourth quarter as home building slumped, retail sales fell and companies reduced their stockpiles, Bloomberg reported. Toyota Motor, Nissan Motor and other Asian automakers extended US market-share gains for a sixth straight month in February as their new light-truck models helped draw more buyers, Bloomberg said. China's four biggest shipping lines are buying or building oil tankers with the combined capacity to carry more than half the global increase in oil production this year, Bloomberg reported. The US dollar is rising for a third day against the euro in Asia on expectations Fed Chairman Greenspan will ease concerns over the US current account deficit when he testifies before Congress today, Bloomberg reported.

Late Recommendations
- Goldman Sachs: Reiterated Outperform on CAT and raised EPS estimates. Reiterated Outperform on HOT and FS. Reiterated Underperform on PSS and HMT.

Night Trading
Asian Indices are -.50% to +.25% on average.
S&P 500 indicated -.18%.
NASDAQ 100 indicated -.39%.

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
AEOS/1.39
AMLN/-.44
AZO/1.19
CEC/.45
CHS/.20
COO/.55
COST/.55
EV/.29
ESRX/1.06
HOV/1.20
LIZ/.74
MIK/.78
NMG/A/1.43
PETM/.44
PDE/.03
TTN/.21

Splits
EOG 2-for-1
RECN 2-for-1

Economic Data
None of note.

BOTTOM LINE: I expect US equities to open mixed ahead of multiple Fed speeches later in the day and significant economic reports on Thur. and Fri. The Portfolio is 100% net long heading into tomorrow.

Tuesday, March 01, 2005

Tuesday Close

Indices
S&P 500 1,210.41 +.57%
Dow 10,830.00 +.59%
NASDAQ 2,071.25 +.95%
Russell 2000 638.53 +.70%
DJ Wilshire 5000 11,927.83 +.57%
S&P Barra Growth 582.66 +.46%
S&P Barra Value 623.32 +.67%
Morgan Stanley Consumer 589.65 +.75%
Morgan Stanley Cyclical 774.73 +.37%
Morgan Stanley Technology 477.60 +.96%
Transports 3,759.30 +.88%
Utilities 353.08 +.05%
Put/Call .89 +30.88%
NYSE Arms .88 -38.89%
Volatility(VIX) 12.04 -.33%
ISE Sentiment 140.00 -30.69%
US Dollar 82.78 +.33%
CRB 305.26 +.09%

Futures Spot Prices
Crude Oil 51.67 -.02%
Unleaded Gasoline 140.30 +.02%
Natural Gas 6.68 unch.
Heating Oil 146.45 -.05%
Gold 433.40 -.12%
Base Metals 128.00 -.23%
Copper 146.45 unch.
10-year US Treasury Yield 4.36% -.27%

Leading Sectors
Airlines +4.79%
Retail +2.59%
Semis +2.25%

Lagging Sectors
Energy -2.12%
Iron/Steel -2.17%
Oil Service -2.52%

After-hours Movers
PSUN +3.55% after beating 4Q estimates and reporting strong February same-store-sales.
TIBX -13.82% after lowering 1Q estimates substantially.
LEA -13.08% after cutting 1Q forecast substantially.
VRTY -10.01% after cutting 3Q estimates substantially.
KTO -8.7% after beating 4Q estimates and lowering 05 outlook.
NKTR -5.82% after beating 4Q estimates and restating prior results.

Detailed Market Summary
Market Wrap CNBC Video(bottom right)
Futures Recap
NASDAQ 100 After-hours Indicator
Real-time/After-hours Stock Quote

Afternoon Recommendations
- Goldman Sachs: Reiterated Outperform on XOM, target $90. Reiterated Underperform on MMC.
- Prudential: Raised CTSH to Overweight, target $54. Reiterated Buy on DHI, target $53.
- Banc of America: Reiterated Buy on HOV, target $64.
- Legg Mason: Reiterated Buy on PGNX, target $31.
- Lehman Brothers: Upgraded UNFI to Overweight. Reiterated Buy on SBL, target $21. Reiterated Buy on MOVI, target $26.
- UBS: Reiterated Buy on VSEA, target $48.
- Deutsche Bank: Reiterated Buy on DD, target $62.
- Smith Barney: Reiterated Buy on RCI, target $48.
- Merrill Lynch: Reiterated Buy on BXP, target $67.
- CSFB: Reiterated Outperform on SHS, target $24.

After-hours News
US stocks finished higher today on optimism over US economic growth and stabilizing long-term interest rates. After the close, former Hewlett-Packard CEO Fiorina is among candidates to become the next president of the World Bank, the NY Times reported. Ahmed Omar Ali, a Virginia man accused of planning the assassination of President Bush, talked about the plans after joining al-Qaeda while studying in Saudi Arabia, the FBI said. Morgan Stanley’s real estate unit may invest $4 billion in Europe this year, part of it in the German property market, the Financial Times said. Iraq’s former deputy Prime Minister Tariq Aziz was interrogated for eight hours yesterday by representatives of a UN panel probing the UN/Iraq oil-for-food scandal, AFP reported. Qwest Communications was given “substantial access” to MCI financial information and representatives of the two companies discussed merger proposals in 25 meetings, Bloomberg reported. General Electric CEO Immelt expects faster earnings growth from industrial businesses than financial areas for the first time in two decades, Bloomberg reported. A US judge dismissed Rambus’ patent infringement lawsuit against German chipmaker Infineon Technologies AG, Bloomberg reported. Bank of America said the SEC is conducting a formal investigation into trading and research related activities by its Banc of America Securities unit between 1999 and 2001, Bloomberg said. US bankruptcy filings dropped in 2004 for the first time in four years, Bloomberg reported. Canadian consumer interest in satellite radio continues to grow, with almost four million people expressing interest in the service within the next year, according to Decima Research. China’s inflation rate will probably remain within 4% this year because of stable grain prices, Shanghai Securities News reported.

BOTTOM LINE: The Portfolio finished substantially higher today on gains in my semi, alternative energy and biotechnology longs. I added a number of new longs from various sectors in the afternoon, thus leaving the Portfolio 100% net long. One of my new longs is ESLR and I am using a $6.50 stop-loss on this new position. The tone of the market improved into the afternoon as the advance/decline line finished near its highs for the day, almost every non-commodity-related sector gained and volume was decent. Measures of investor anxiety were mixed on the day, while consumer-oriented and technology shares outperformed. My short-term trading indicators have improved and I expect the DJIA and S&P 500 to make new cycle highs within days, barring a substantial rise in long-term interest rates or energy prices. I also expect the Russell 2000 and Nasdaq to break to the upside from their recent trading ranges.

Mid-day Report

Indices
S&P 500 1,208.43 +.40%
Dow 10,810.87 +.42%
NASDAQ 2,063.49 +.57%
Russell 2000 637.02 +.47%
DJ Wilshire 5000 11,914.71 +.46%
S&P Barra Growth 582.20 +.38%
S&P Barra Value 622.91 +.60%
Morgan Stanley Consumer 589.18 +.67%
Morgan Stanley Cyclical 773.69 +.23%
Morgan Stanley Technology 475.09 +.42%
Transports 3,757.05 +.42%
Utilities 353.03 +.04%
Put/Call .89 +30.88%
NYSE Arms .91 -36.81%
Volatility(VIX) 12.01 -.58%
ISE Sentiment 134.00 -33.66%
US Dollar 82.82 +.38%
CRB 305.51 +.17%

Futures Spot Prices
Crude Oil 51.60 -.29%
Unleaded Gasoline 139.50 -1.19%
Natural Gas 6.66 -.97%
Heating Oil 145.90 +.33%
Gold 433.70 -.91%
Base Metals 128.00 -.23%
Copper 146.40 -2.30%
10-year US Treasury Yield 4.36% -.32%

Leading Sectors
Airlines +3.49%
Retail +2.06%
Semis +1.34%

Lagging Sectors
Iron/Steel -1.76%
Energy -2.05%
Oil Service -2.32%

Market Movers
BIIB +4.0% on rebound after yesterday’s decline and Smith Barney upgrade to Buy.
OVTI -15.5% after beating 3Q estimates, raising 4Q eps guidance, lowering 4Q revenue outlook and Jefferies downgrade to Hold.
PSS +17.83% after beating 4Q estimates and reporting strong February same-store-sales.
ESLR +14.38% after beating 4Q estimates and California Governor Schwarzenegger said he would support a bill that provides funding for 1 million solar roofs in the state.
NETL +11.48% after saying that its NL5000 processors are shipping in production volume in the Extreme Networks’ BlackDiamond 10K core switch.
UVN +12.7% after beating 4Q estimates and maintaining 1Q outlook.
COGT +11.74% after announcing new follow-on contracts from the Italian National Police and Los Angeles County Sheriff’s Department.
FD +6.02% on multiple upgrades.
BJ +8.7% after beating 4Q estimates.
NTES +4.04% on positive comments from Piper Jaffray Conference.
SPW +4.27% on Merrill Lynch upgrade to Buy.
INCX -37.0% after meeting 4Q estimates and lowering 1Q outlook substantially.
MSA -16.98% after missing 4Q estimates and multiple downgrades.

Market Internals
NYSE Unusual Volume
NASDAQ Unusual Volume
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Hot Spots
Option Dragon

Economic Data
- Construction Spending for January rose .7% versus estimates of a .4% increase and a 1.2% rise in December.
- ISM Manufacturing for February fell to 55.3 versus estimates of 56.9 and a reading of 56.4 in January.
- ISM Prices Paid for February fell to 65.5 versus estimates of 68.0 and a reading of 69.0 in January.

Recommendations
- Goldman Sachs: Reiterated Outperform on DEX and USB. Reiterated Underperform on MMC.
- Smith Barney: Said the market has overreacted to the BIIB/ELN news. Upgraded BIIB to Buy, target $49. Upgraded SONS to Buy, target $7.10. Reiterated Buy on NT, target $4. Reiterated Buy on SCH, target $14.50. Reiterated Buy on FD, target $80. Reiterated Buy on CD, target $28. Reiterated Buy on MGA, target $95. Reiterated Buy on PLUG, HYGS and Sell on FCEL, BLDP.
- Prudential: Rated SAPE Overweight, target $11.
- Oppenheimer: Raised ECA to Sector Outperform, target $82.
- JP Morgan: Raised CY, ONNN, INTC and FCS to Overweight. Rated OPEN Overweight.
- Deutsche Bank: Downgraded PCU to Sell, target $47. Raised FD to Buy, target $68. Rated SHO to Buy, target $24.
- Bear Stearns: Rated GENZ Outperform, target $65. Raised FD to Outperform.
- UBS: Raised XMSR to Buy, target $40.50. Raised SIRI to Buy, target $6.75.
- CSFB: Rated GWR Outperform, target $30.
- Merrill Lynch: Raised JNJ to Buy, target $75. Raised SPW to Buy, target $55.

Mid-day News
US stocks are higher mid-day as reports showed a measure of inflation declined and construction gained steam. US shopping mall developers are planning to have fewer department stores per mall, as sales have fallen in recent years, the NY Times reported. Toys “R” Us has shortlisted four potential bidders for its retail business and is asking them to raise their offers, the Wall Street Journal reported. JP Morgan will announce today that it’s spinning off its private-equity unit into an independent arm, the Wall Street Journal reported. Federated Department Stores’ $11 billion acquisition of May Department Stores will probably reduce advertising revenue at US newspapers, the Wall Street Journal reported. The FDA’s procedure for approving promising treatments for serious conditions quickly is under review, the Wall Street Journal said. US shopping malls are using discounters such as Target and Wal-Mart, or high-end retailers, as anchors to replace traditional department stores, the Wall Street Journal reported. E*Trade Financial plans to give clients with $50,000 or more in assets or that make 15 trades per quarter a second layer of security when accessing their accounts, the Wall Street Journal reported. Life expectancy of men and women in the US has risen to a record 77.6 years in 2003, as death rates from the most common illnesses such as heart disease and cancer declined as medical technology improved, the National Center for Health Statistics reported. News Corp.’s Fox television network probably had the highest number of viewers for primetime programming in February, the Wall Street Journal said. Time Warner’s CNN has agreed to air commercials for Grey Goose vodka, making it the first national cable news channel to advertise for liquor, the NY Times reported. Hollywood’s two big acting unions approved a new contract that calls for a raise of 9% over three years, the LA Times reported. Biogen Idec’s board approved $4.6 million in bonuses and some officials sold stock before providing the FDA with information of a death related to its Tysabri drug, Reuters reported. French President Chirac’s approval rating fell by 3 percentage points to 45% in February, the Liberation reported. Israel’s plan to withdraw from the Gaza Strip is boosting investment and tourism that may push 2005 economic growth as high as 6%, Bloomberg reported. Exxon Mobil plans to sell its stake in China Petroleum & Chemical for as much as $1.4 billion, twice the investment cost four years ago, Bloomberg said. Toyota Motor is introducing today its first Lexus luxury car equipped with a diesel engine to capture sales in the fastest growing segment of the European car market, Bloomberg reported. Brazil’s economy grew 4.9% in the fourth quarter, capping the strongest annual expansion in a decade, Bloomberg reported. IAC/InterActiveCorp agreed to buy Cornerstone Brands for $720 million to expand its catalog and Internet retail offerings, Bloomberg said. Trading at the Chicago Mercantile Exchange rose 50% form a year earlier to a daily record last month as the biggest US futures market handled more interest-rate futures contracts, Bloomberg reported. US construction spending rose .7% in January to a record as residential, commercial and public building increased, Bloomberg said. Manufacturers said business cooled in February for the third straight month, Bloomberg reported. US corporate leaders plan to invest more in new plants and equipment as confidence in the economy rises to the highest level in at least two years, a survey of CEOs found. Intel will outline plans today to speed up work on new processors and convince customers the company has recovered from delays that hurt sales last year, Bloomberg reported. Fidelity Investments said it made permanent expense reductions on six US stock index funds in a continued bid to undercut competitors’ prices, Bloomberg said. Ford Motor said US sales of cars and trucks fell 2.9% in February, while DaimlerChrysler said sales rose 5.5%, Bloomberg said. Iran refused to let UN inspectors make another visit to a military base that the US says is being used in nuclear weapons research, the IAEA said. US steel prices may fall this year because distributors of the metal bought more than they need from producers including Nucor and US Steel, traders and executives said. The euro is falling the most in a week against the US dollar as German unemployment rose to a post WWII high, Bloomberg reported.

BOTTOM LINE: The Portfolio is substantially higher mid-day on gains in my biotechnology, alternative energy and semi longs. I have not traded today, thus the Portfolio’s market exposure remains 50% net long. The tone of the market is modestly positive today as the advance/decline line is higher, almost ever sector is gaining and volume is decent. Losses are almost completely confined to commodity-related shares, which is a positive. Measures of investor anxiety are mixed. I continue to expect alternative energy stocks to outperform on multiple catalysts. As well, semi and retail should strengthen through week’s end on positive commentary from conferences and stronger-than-expected economic reports. I expect US stocks to trade mixed-to-higher from current levels into the close as optimism over US economic growth and stabilizing long-term interest rates mostly offsets worries over stubbornly high energy prices.

Tuesday Watch

Late-Night News
Asian indices are mixed as weakness in Hong Kong is being offset by strength in Taiwanese shares. Taiwan Semiconductor Manufacturing's factory use will exceed 80% in the second quarter because customers have eliminated excess inventory, the Commercial Times reported. US Deputy Defense Secretary Paul Wolfowitz is among the leading candidates to succeed James Wolfensohn as president of the World Banks, the Financial Times reported. Three men convicted of the 1993 bombing of the World Trade Center in NYC have sent letters out of prison praising Osama bin Laden and encouraging other terrorists, MSNBC reported. Cablevision Systems will close the Voom satellite-tv business after talks to sell the unit to company Chairman Charles Dolan failed, Bloomberg reported. Palestinians want to win support today from international leaders, including the "Quartet" of the UN, European Union, US and Russia at talks in London on building institutions in the occupied territories, Bloomberg reported. OPEC is producing enough oil to meet higher-than-expected demand in the first quarter, acting Secretary-General Adnan Shihab-Eldin said two weeks before the group meets to debate calls for increased output to stem prices that are above $50/bbl. in NY, Bloomberg reported. OPEC won't consider cutting production at the meeting, Bloomberg said. The euro weakened by the most in a week against the US dollar in Asia on expectations reports today will show German unemployment rose to a post WWII high and US manufacturing growth accelerated in February, Bloomberg said. Residents in the northeastern US were hit with another round of winter weather overnight as heavy snow and strong winds combined to create almost "white-out" conditions in parts of New England, Bloomberg reported. According to Nielsen Media Research, 2 million fewer people watched this year's Academy Awards, hosted by controversial comedian Chris Rock, compared to last year's, the Boston Globe reported. DaimlerChrysler AG's Chrysler unit and GM's Cadillac division are preparing to expand sales of their American brands in Europe, the Wall Street Journal reported. Google and Yahoo! are pursuing different strategies to attract more online advertising, the Wall Street Journal reported.

Late Recommendations
- Goldman Sachs: Reiterated Outperform on RIG, BHI and PETC.

Night Trading
Asian Indices are -.50% to +.50% on average.
S&P 500 indicated +.05%.
NASDAQ 100 indicated +.03%.

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
BJ/.71
CDIS/.63
FL/.54
HSIC/.85
MMC/-.60
PSUN/.53
SMTC/.16
SFD/.87
SBL/.10
WIND/.05

Splits
HSIC 2-for-1

Economic Data
- Construction Spending for January is estimated to rise .4% versus a 1.1% gain in December.
- ISM Manufacturing for February is estimated to rise to 56.9 versus a reading of 56.4 in January.
- ISM Prices Paid for February is estimated to fall to 67.0 versus a reading of 69.0 in January.
- Total Vehicle Sales for February are estimated to rise to 16.6M versus 16.2M in January.
- Domestic Vehicle Sales for February are estimated to rise to 13.4M versus 13.0M in January.

BOTTOM LINE: I expect US equities to open modestly lower on a further rise in long-term interest rates. However, stocks may gain later in the day on optimism over good earnings/economic reports and a decline in energy prices. The Portfolio is 50% net long heading into tomorrow.