Style Outperformer:
Large-cap Growth(-.89%)
Sector Outperformers:
Utilities (-.40%) Energy (-.55%) and Computer Hardware (-.54%)
Stocks Rising on Unusual Volume:
Portfolio Manager's Commentary on Investing and Trading in the U.S. Financial Markets
Style Outperformer:
Large-cap Growth(-.89%)
Sector Outperformers:
Utilities (-.40%) Energy (-.55%) and Computer Hardware (-.54%)
Stocks Rising on Unusual Volume:
* Notwithstanding historical individual investor pessimism, corporate insiders continue to buy their own stocks hand over fist.
Furthermore, the 50-week moving average of the percentage of bears is currently 38.6%, an elevated level seen during only one other period since tracking began in the 80s. That period was October 1990-July 1991, right near another major stock market bottom. The extreme reading of the 50-week moving average of the percentage of bears during that period peaked at 41.6% on Jan. 31, 1991. The current reading of 38.6% is slightly above the peak during the 2000-2003 bear market, which was 38.1% on April 10, 2003. I find this even more astonishing, notwithstanding the recent pullback, given that the S&P 500 is currently 105% higher from the October 2002 major bear market lows and just 4.6% off a record high.
Individual investor pessimism towards US stocks is currently deep-seated and historical in nature. This is just more evidence of the current “- Durable Goods Orders for November rose .1% versus estimates of a 2.0% gain and a .4% decline in October.
- Durables Ex Transports for November fell .7% versus estimates of a .5% increase and a .9% decline in October.
- Initial Jobless Claims for this week rose to 349K versus estimates of 340K and 348K the prior week.
- Continuing Claims rose to 2713K versus estimates of 2645K and 2638K prior.
- Consumer Confidence for December rose to 88.6 versus estimates of 86.5 and a reading of 87.8 in November.
BOTTOM LINE: Orders for US durable goods rose less than forecast in November, partially restrained by a drop in defense orders, Bloomberg reported. Orders for military equipment fell 24%. However, Bookings Excluding Defense Equipment rose 1.2%. Orders for non-defense capital goods excluding aircraft, a gauge of future demand, declined .4% versus a 2.9% decline in October. Shipments of those items, used in computing GDP, rose .2% versus a 1.2% drop in October. Orders for transportation equipment rose 1.9%, boosted by a 21% jump in commercial aircraft demand. I expect Durable Goods Orders Ex Transports to rebound next month on inventory rebuilding.
The number of Americans filing first-time jobless claims for unemployment insurance rose slightly last week, Bloomberg reported. However, the four-week moving-average of new claims fell to 342,500 from 343,500. As well, the unemployment rate among those eligible to collect benefits, which tracks the
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Bloomberg:
- The yuan rose the most since
- Amazon.com Says 2007 Holiday Season Is ‘Best Ever.’
Wall Street Journal:
- Congress Adds $10 Billion In Earmarks to 2008 Budget.
- ‘Long-Short’ Funds Labor to Thrive.
NY Times:
- Las Vegas Wins Big. Revenues on the Vegas strip are rising, even as rival casinos struggle.
- Inside Apple(AAPL) Stores, a Certain Aura Enchants the Faithful.
MarketWatch.com:
- Apple(AAPL) driven to record by strong iPhone, Mac sales.
BusinessWeek.com:
- Semiconductors: Healthy M&A Prospects. S&P says some recent deals show that chip companies are finding attractive prices and ways to improve by combining.
- The founder of Rembrandt Venture Partners offers predictions for next year and advice for entrepreneurs seeking funding.
CNNMoney.com:
- Hiring in ’08: Slower but steady gains.
IBD:
- Social Networking Has Taken Off With Users, Investors Swelling.
Forbes.com:
- Asset-management firm Davis Selected Advisers seems to be calling a bottom in the US financial services market. On Wednesday, it said it had acquired a 5.1% stake in MBIA(MBI), the world’s largest bond insurer, just two days after it pumped $1.2 billion into Merrill Lynch(MER).
- Unprecedented losses at Bear Stearns(BSC) couldn’t shake Joseph Lewis’s interest in the troubled brokerage. The British billionaire is still buying shares even after the company’s abysmal fourth quarter.
- Publicity over Ford Flex gains muscle with leisurely test drives.
Reuters:
- Buffet bets on America with latest purchase.
Financial Times:
- Apple Inc.(AAPL) and News Corp.’s(NWS/A) Twentieth Century Fox will start a service that lets consumers download films and rent them for a limited time.
Late Buy/Sell Recommendations
Citigroup:
- 8 Plausible and Interesting 2008 Outcomes: 1) The Republicans hold on to the White House – essentially, divided government remains the desire of the American people. 2) Oil prices fall to $70-75/bbl. alongside slower growth in the
- 8 Questions We Are Not Hearing?: 1)Where should I consider buying real estate? General agreement is that prices are headed lower but no sense of where “value” is? 2) Doesn’t the yield curve steepness mean anything anymore for Financial sector earnings? 3) Why aren’t energy companies earning more with oil near $100/bbl. 4) Whatever happened to the problems of under-funded pension programs that were supposed to be the undoing of US public companies? 5) Why doesn’t the fact that 95% or more of equity mutual fund flows going to international funds in the past few years worry more people about a new stock investing craze outside the
Night Trading
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- Durable Goods Orders for November are estimated to rise 2.0% versus a .2% decline in October.
- Durables Ex Transports for November are estimated to rise .5% versus a .4% decline in October.
- Initial Jobless Claims for this week are estimated to fall to 340K versus 346K the prior week.
- Continuing Claims are estimated to fall to 2645K versus 2646K prior.
10:00 am EST
- Consumer Confidence for December is estimated to fall to 86.5 versus 87.3 in November.
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil drawdown of -1,625,000 barrels versus a -7,586,000 barrel decline the prior week. Gasoline supplies are expected to rise by 1,550,000 barrels versus a 2,980,000 barrel increase the prior week. Distillate inventories are estimated to fall by -900,000 barrels versus a -2,158,000 barrel decrease the prior week. Finally, Refinery Utilization is estimated to rise by .7% versus a -.92% decline the prior week.
Other Potential Market Movers
- The weekly MBA mortgage applications report could also impact trading today.
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Bloomberg:
- Buy the bond insurers. If you look past the headlines, and the accompanying hysteria, maybe things are about to look up. The stocks of Ambac Financial(ABK) and MBIA Inc.(MBI) are showing up on some securities firms’ lists of buy recommendations.
- The US will avoid a recession next year as a “stable” job market keeps Americans spending, said Bear Stearns(BSC) Chief Investment Strategist Jonathan Golub.
- Michael Klein, the owner of California hedge-fund firm Pacificor LLC, his teenage daughter, Talia, and a pilot died after their private plane crashed near Panama’s tallest mountain, a colleague said.
- Billionaire investor Joseph Lewis raised his stake in Bear Stearns(BSC) for the second time this month as the fifth-largest US securities firm’s stock fell 11% in December.
- Davis Selected Advisers disclosed a 5.1% stake in MBIA Inc.(MBI).
- Crude oil is rising $1.63/bbl. in NY on year-end mark-ups by investment funds and speculation that tomorrow may show a
- Toyota Motor(TM) and Honda Motor(HMC),
- Goldman(GS) Buys Building in NYC for $1.15 Billion.
- The US dollar is poised to end a two-year slide against the euro in 2008 as government-backed funds in Asia and the Middle East purchase US assets, currency strategists say.
Wall Street Journal:
- Videogames Expand A Popular New Phase Of Full-Body Playing. If you gave or got videogames as gifts yesterday, you may have noticed something very different about how some of the hottest ones are played these days.
- Merrill Lynch(MER) may sell additional stock following the sale of stakes to Temasek Holdings Pte. and
NY Times:
- India’s Letter Writers Give Way to Cell Phones.
- NYC’s Amsterdam Avenue Becomes New Shopping Corridor.
CNBC:
- SLM Corp.(SLM), the largest
- Only 7% of US employers plan to trim their full-time permanent staff during the first quarter of 2008, while 29% plan to add employees. 60% plan to maintain current levels of employment, according to an online survey by Harris Interactive.
Newsweek:
- Housing Optimism. Why the year in real estate wasn’t all bad news.
engadget:
- RIM developing angled Blackberry keyboard?
International Herald Tribune:
- “China gives top priority to developing renewable energy,” the cabinet’s press office said today in a 44-page report.
-
Style Underperformer:
Small-cap Value (-1.08%)
Sector Underperformers:
Retail (-2.75%), Airlines (-2.70%) and REITs (-2.26%)
Stocks Falling on Unusual Volume:
Style Outperformer:
Large-cap Growth(-.05%)
Sector Outperformers:
Steel (+1.55%) Alternative Energy (+1.34%) and Oil Service (+.88%)
Stocks Rising on Unusual Volume:
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Style Underperformer:
Mid-cap Value (+.53%)
Sector Underperformers:
Biotech (-.25%), Utilities (-.04%) and Drugs (+.01%)
Stocks Falling on Unusual Volume:
Style Outperformer:
Small-cap Value (+.67%)
Sector Outperformers:
REITs (+1.68%) Road & Rail (+1.42%) and Homebuilders (+1.06%)
Stocks Rising on Unusual Volume:
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Bloomberg:
- US stocks rose for the third time in four weeks as higher consumer spending and the Federal Reserve’s efforts to provide cash to banks spurred speculation the economy will keep expanding.
- US 10-year Treasury note yields rose to a three-day high on signs that central banks were adding enough funds to the financial system to spur bank lending.
- The yen fell to a six-week low against the dollar and declined versus the euro as concern eased that credit-market losses will deepen, boosting demand for higher-yielding assets funded by loans in Japan.
- Rank Group Ltd., owned by New Zealand billionaire Graeme Hart, agreed to buy Alcoa’s(AA) packaging and consumer businesses for $2.7 billion to expand in the US and gain control of units including Reynolds Wrap foil.
- China, which produces a third of the world’s steel, will raise export tariffs on some steel products from Jan.1 to help rein in a record trade surplus and reduce energy consumption and pollution.
- China will support international investment by companies next year as part of its effort to expand channels for such outbound ventures, said Wei Benhua, deputy director of the State Administration of Foreign Exchange. China will also relax controls on individual overseas investment, Wei said.
- China should take measures to cool economic growth and reduce energy consumption, an official with the National Development and Reform Commission said.
- News Corp.(NWS/A) agreed to sell eight of its Fox network-affiliated television stations in the US to Oak Hill Capital Partners LP for about $1.1 billion in cash.
Wall Street Journal:
- JPMorgan Chase(JPM) and Deutsche Bank AG are among companies planning to start an exchange to compete with CME Group Inc.(CME), operator of the Chicago Mercantile Exchange. The exchange is expected to open next year and will be backed by a dozen firms, including Merrill Lynch(MER), Credit Suisse Group and Citigroup(C).
- Banks Abandon Effort to Set Up Big Rescue Fund. The banks had been trying since September to set up a fund that would buy securities tied to mortgages and other assets that were controlled by banks in off-balance-sheet funds. By the time it began to try to gather assets, banks were already handling the problems themselves.
- Nardelli Says Chrysler Hitting Targets.
Barron’s:
- Getting the red carpet treatment. Preferred shares of Fannie Mae, WaMu and others now look enticing.
- Contrarians Beware: Putin May Mark the Top of Emerging Markets. Is Vladimir Putin the new Jeff Bezos?
NY Times:
- The IRS issued a new rule yesterday that bans selling stock at a loss to get a tax deduction, then immediately buying replacement shares through a retirement account.
- With customers leery of buying toys made in China, makers of wooden toys say in the US they can barely keep up with demand and are hiring extra employees.
TheStreet.com:
- Growth Fund Smokes With Potash and RIM.
CNBC.com:
- SEC Launches Web Tool to Compare Executive Pay.
- Top Manager: Invest in The Next Info Revolution.
- The national average price for gasoline dropped about 3 cents over the last two weeks, according to a survey released Sunday.
MarketWatch.com:
- NetSuite(N): Deja Google(GOOG) all over again. Commentary: NetSuite evolves into key player in online business software.
- Retailers Hope for Big Final Push. The final weekend of the holiday shopping season will likely bring a sigh of relief from many retailers who feared that sales would be weak. This holiday season, “we had projected a 3.6% increase and we expect that number will be hit and, potentially, could go a little bit higher,” said Bill Martin, co-founder of ShopperTrak RCT Corp., which monitors retail sales.
Forbes.com:
- Shoot To Kill. Nvidia(NVDA)
Business Week:
- What the Pros Are Saying. Most of the experts we surveyed the market going up a bit – but the climb will be tough.
- For Nokia(NOK), Excess is a Vertu. Its luxury division is booming as a high-end cell phone becomes the latest status symbol for the world’s richest people.
- A Wily Road Warrior’s Airport Tips.
- Tech Sector Outlook 2008: Part 1.
- Research In Motion(RIMM): What Slowdown?
- Deconstructing the Energy Bill.
- Microsoft’s(MSFT) Games Get Serious. ESP is a new software product based on the popular PC game Flight Simulator. It’s also Microsoft’s first foray into non-entertainment games.
- MySpace cranks up heat in Facebook turf war.
- Internet renovates how homes get sold.
CNNMoney.com:
- X-mas electronics: Apple Inc.(AAPL) rules on Amazon.com(AMZN).
- The odds on an Apple(AAPL) flash memory laptop.
Reuters:
- Microsoft’s(MSFT) piracy fight gains momentum in China.
- Merrill Lynch(MER) may get up to $5 billion in a capital infusion from Singapore state investor Temasek Holdings.
- Consumer spending strong in November.
- Research In Motion(RIMM) stock shoots higher after results.
Financial Times:
- Saudi Arabia plans to establish a sovereign wealth fund that is expected to dwarf Abu Dhabi’s $900 billion and become the largest in the world. The new fund will be a formidable rival for other government-owned investment funds in the Middle East and Asia, which are playing an increasingly active role in channeling capital to western companies, particularly financial companies hard hit by the
- Central banks resolve eases year-end fears. Interbank lending rates have fallen throughout this week, with the three-month euro Libor rate fixing on Friday at 4.78%, down 17 basis points since action by central banks was announced on December 12.
- iPhone users raise network hopes. Buyers of Apple’s(AAPL) iPhone have turned out to be voracious users of electronic mail and other data services, giving network operators hope that the much-hyped device will finally unlock billions of dollars in mobile advertising revenue.
- Cisco to network whole cities. Cisco Systems(CSCO) plans to launch a business group, based in Bangalore, India, that will wire new buildings and even entire new cities with state-of-the-art networking technology.
- iPhone key to O2 growth. Mathew Key was in California last week, briefing Steve Jobs on the iPhone’s impact in the UK.
AFP:
-
Weekend Recommendations
Barron's:
- Made positive comments on (TWP) and (RHI).
- Made negative comments on (CWCO).
Night Trading
Asian indices are +1.0% to +2.0% on avg.
S&P 500 futures unch..
NASDAQ 100 futures -.08%.
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- None of note
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- None of note
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- None of note - US stock exchanges close at 1pm EST
Click here for the Wall St. Week Ahead by Reuters.
Click here for Stocks in Focus for Monday by MarketWatch.com.
There are a few economic reports of note and significant corporate earnings reports scheduled for release this week.
Economic reports for the week include:
Mon. – None of note,
Tues. –
Wed. – S&P/CaseShiller Home Price Index,
Thur. – Weekly MBA Mortgage Applications Report, weekly EIA energy inventory report, Durable Goods Orders, Initial Jobless Claims, Consumer Confidence
Fri. – Chicago Purchasing Manager, New Home Sales, weekly EIA natural gas inventory report
Some of the more noteworthy companies that release quarterly earnings this week are:
Mon. – None of note
Tues. –
Wed. – None of note
Thur. – Christopher & Banks(CBK), Verifone(PAY)
Fri. –
Other events that have market-moving potential this week include:
Mon. – None of note
Tue. –
Wed. – None of note
Thur. – None of note
Fri. – None of note
Indices
S&P 500 1,484.47 +1.13%
DJIA 13,450.65 +.83%
NASDAQ 2,691.99 +2.1%
Russell 2000 785.60 +4.2%
Wilshire 5000 14,917.77 +1.28%
Russell 1000 Growth 619.43 +1.18%
Russell 1000 Value 803.47 +1.09%
Morgan Stanley Consumer 748.94 +.3%
Morgan Stanley Cyclical 1,005.44 +1.72%
Morgan Stanley Technology 632.29 +1.47%
Transports 4,644.05 -.72%
Utilities 540.32 +.18%
MSCI Emerging Markets 151.90 +.35%
Sentiment/Internals
NYSE Cumulative A/D Line 59,087 -5.3%
Bloomberg New Highs-Lows Index -794
Bloomberg Crude Oil % Bulls 16.0 -60.0%
CFTC Oil Large Speculative Longs 213,103 -.51%
Total Put/Call .56 -46.2%
NYSE Arms .50 -62.87%
Volatility(VIX) 18.47 -19.81%
ISE Sentiment 114.0 -3.25%
AAII % Bulls 35.85 -24.7%
AAII % Bears 47.2 +32.1%
Futures Spot Prices
Crude Oil 93.28 +1.65%
Reformulated Gasoline 237.85 +1.32%
Natural Gas 7.21 +3.11%
Heating Oil 260.70 -.19%
Gold 813.80 +2.19%
Base Metals 214.14 +2.39%
Copper 310.0 +4.59%
Economy
10-year US Treasury Yield 4.17% -7 basis points
4-Wk MA of Jobless Claims 343,000 +1.2%
Average 30-year Mortgage Rate 6.14% +3 basis points
Weekly Mortgage Applications 653.80 -19.5%
Weekly Retail Sales +1.4%
Nationwide Gas $2.98/gallon -.01/gallon
US Heating Demand Next 7 Days 10.0% below normal
ECRI Weekly Leading Economic Index 136.20 -1.23%
US Dollar Index 77.73 +.37%
CRB Index 354.23 +1.6%
Best Performing Style
Small-cap Value +4.50%
Worst Performing Style
Large-cap Value +1.09%
Leading Sectors
Alternative Energy +4.59%
Computer Service +4.27%
Oil Service +3.29%
Wireless +3.15%
Biotech +2.52%
Lagging Sectors
Gaming -.56%
Road & Rail -1.27%
Restaurants -2.25%
Oil Tankers -3.35%
Airlines -4.28%
Bloomberg:
- US stocks gained the most in two weeks, led by energy and technology shares, after the biggest increase in consumer spending in two years helped reduce concern the economy will slow.
- Merrill Lynch(MER) rose in NY trading after the Wall Street Journal reported that the world’s biggest brokerage firm may receive a cash infusion of as much as $5 billion from Singapore’s state-owned Temasek Holdings Pte.
- Dennis Gartman, economist and editor of the Gartman Letter says oil won’t likely reach $100/bbl. in 2008.
- Crude oil rose more than $2/bbl. in NY after a
- First Marblehead Corp.(FMD), the third-largest US arranger of securities backed by student loans, rose the most ever on the NYSE after Goldman Sachs(GS) agreed to a $260.5 million investment, equivalent to about 20% of current shares.
- The Federal Reserve will conduct biweekly emergency auctions of loans as “long as necessary” as part of a global attempt by central bankers to restore faith in the money markets.
- ResMed Inc.(RMD), the No. 2 maker of equipment for treating breathing-related sleep disorders, rose the most in five years on the NYSE after analyst speculation that the company may be a takeover target.
- Itron Inc.(ITRI), the maker of utility meters for electric, gas and water usage, rose the most in a year after RBC Capital Markets recommended investors buy the shares.
- Walgreen Co.(WAG), the largest US drugstore chain, posted quarterly profit that beat analysts’ estimates on higher sales of prescription drugs and reduced expenses, sending the shares up the most in more than seven years.
- NetSuite Inc.(N), the software maker majority-owned by Oracle’s Larry Ellison, rose for a second day after its IPO, advancing as much as 30% as investors seek to tap demand for business programs.
- Apple Inc.(AAPL) CEO Steve Jobs’ annual Macworld surprise may be a slimmed-down laptop and a higher-capacity model of the iPhone.
CNBC:
- Bear Stearns(BSC) has been talking to Fortress Investment Group(FIG) about a “capital infusion.”
- Third Avenue Management LLC holds common stock in Radian Group(RDN) and MBIA Inc.(MBI), citing an interview with the money manager’s founder, Martin Whitman. “We hope to be part of the capital infusions that go into these troubled financial institutions,” Whitman said. He said Third Avenue holds 19% of Radian and a little more than 10% of MBIA. He also said the company’s bets involve MGIC Investment Corp.(MTG) and Ambac Financial Group(ABK) and were made over the past 30 to 45 days. (video)
- Senator Barack Obama has pulled even with Senator Hillary Clinton among Democrats in
* Meanwhile, corporate insiders are buying hand over fist.
The AAII percentage of bulls dropped to 35.85% this week from 47.6% the prior week. This reading is approaching depressed levels. The AAII percentage of bears jumped to 47.2% this week from 35.7% the prior week. This reading is now approaching elevated levels. Moreover, the 10-week moving average of the percentage of bears is currently at 45.3%, an elevated level. It has only been higher two other times in its history, which were July-August 2006 and September 1990-December 1990. Moreover, the 10-week moving average of the percentage of bears peaked at 43.0% right near the major bear market low during 2002. It is astonishing that the 10-week moving average of the % bears is currently greater than at any time during the bubble bursting meltdown of 2000-2003, which was arguably the worst stock market decline since the Great Depression.
Furthermore, the 50-week moving average of the percentage of bears is currently 38.3%, an elevated level seen during only one other period since tracking began in the 80s. That period was October 1990-July 1991, right near another major stock market bottom. The extreme reading of the 50-week moving average of the percentage of bears during that period peaked at 41.6% on Jan. 31, 1991. The current reading of 38.3% is slightly above the peak during the 2000-2003 bear market, which was 38.1% on April 10, 2003. I find this even more astonishing, notwithstanding the recent pullback, given that the S&P 500 is currently 102% higher from the October 2002 major bear market lows and just 5.2% off a record high.
Individual investor pessimism towards US stocks is currently deep-seated and historical in nature. This is just more evidence of the current “- Personal Income for November rose .4% versus estimates of a .5% increase and a .2% gain in October.
- Personal Spending for November rose 1.1% versus estimates of a .7% gain and an upwardly revised .4% increase in October.
- The PCE Core for November rose .2% versus estimates of a .2% gain and a .2% increase in October.
-
BOTTOM LINE: Consumer spending in the