Wednesday, February 27, 2008

Bear Radar

Style Underperformer:

Mid-cap Value -.12%

Sector Underperformers:

Airlines (-4.09%), Oil Tankers (-1.86%) and Coal (-1.18%)

Stocks Falling on Unusual Volume:

ADSK, SCRX, ELN, ENOC, LAMR, OFIX, PBKS, CRI, URS and NNN

Fed Funds Futures Probabilities Graph

(Click on image to enlarge)

Durable Goods Orders, New Home Sales Below Estimates

- Durable Goods Orders for January fell 5.3% versus estimates of a 4.0% decline and a downwardly revised 4.4% gain in December.

- Durables Ex Transports for January fell 1.6% versus estimates of a 1.4% gain and a downwardly revised 2.0% increase in December.

- New Home Sales for January fell to 588K versus estimates of 600K and 605K in December.

BOTTOM LINE: Orders for durable goods fell more than forecast in January, Bloomberg reported. Bookings for non-defense capital goods excluding aircraft, a gauge for future business spending, fell 1.4%. Shipments of those items, used to compute GDP, gained .1%. Orders for military gear fell 20%. The 3-month average of Durable Goods Orders is -.1%, which isn’t near levels normally associated with economic contraction. The Morgan Stanley Cyclical Index is outperforming today, rising .6%. The 10-year yield is 2 basis points higher. I expect Durable Goods Orders to bounce back this month on inventory rebuilding as exports continue to boom at record levels.

Purchases of new homes in the US fell more than forecast in January, Bloomberg reported. The median price of a new home fell to $216,000 from $254,400 a year earlier. The supply of new homes at the current sales rate rose to 9.9 months’ worth. Sales fell 10% in the Northeast, which sales gained 2.2% in the West. After today’s data, the odds of the Fed lowering the fed funds rate at the March 18th meeting by 50 basis points fell to 90.0% from 96.0% yesterday. The odds of a 75 basis point cut rose to 10.0% from 0.0% yesterday. I still expect home sales to surprise on the upside this spring on pent-up demand, lower prices and lower mortgage rates. This should make a meaningful dent in inventories.

Bull Radar

Style Outperformer:

Small-cap Growth (+.71%)

Sector Outperformers:

Homebuilders (+4.07%), Computer Services (+1.11%) and I-Banks (+1.11%)

Stocks Rising on Unusual Volume:

FSS, LFC, IVN, FCX, STO, BARE, CPL, LAD, HLF, RDEN, ERES, MXWL, SYNO, MASI, LKQX, CLHB, BARE, ATHN, DLTR, HWAY, CEDC, WRNC, NFLX, CRDN, CCOI, COIN, GTXI, PZZA, SSRI, ASTE, FNM, OME, DOX, CDI, SHS and HLF

Links of Interest

Market Snapshot Commentary
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Sector Performance
WSJ Data Center
Top 20 Biz Stories

IBD Breaking News

Movers & Shakers

Upgrades/Downgrades

In Play

NYSE Unusual Volume

NASDAQ Unusual Volume

Hot Spots

Option Dragon

NASDAQ 100 Heatmap

DJIA Quick Charts

Chart Toppers

Intraday Chart/Quote

Dow Jones Hedge Fund Indexes

Tuesday, February 26, 2008

Wednesday Watch

Late-Night Headlines
Bloomberg:
- Goldman Sachs(GS) advised investors to exit its trade recommendation to purchase five-year Treasury Inflation Protected Securities. The difference in yield between five-year TIPS and nominal Treasuries, known as the breakeven rate, has widened to about 2.34 percentage points from 1.95 percentage points since the recommendation was made on Feb. 6. “Since then, the market has become increasingly more concerned about inflation,” said Goldman strategists Michael Vakin, Francesco Garzarelli and Sergiy Verstyuk in a research note. Breakevens are now at “a level at which we are comfortable in taking profits.”
- Asian stocks rose for a third day, led by commodity producers and department-store operators, after raw-material prices advanced and US retailers reported an increase in earnings.

- US House Financial Services Committee Chairman Barney Frank wants to provide $35 billion in federal funds to buy homes in foreclosure and offer refinancing for “distressed” homeowners under a plan unveiled today.
- Blackstone Group LP(BX), manager of the world’s biggest private-equity fund, plans to bypass Wall Street firms and directly find lenders for leveraged buyouts, President Hamilton James said.
- Coal power investments are increasingly risky when the price of greenhouse-gas emissions is factored into fuel costs, according to a report by a consulting firm whose clients include the US Energy Dept. Proposed coal-fired generators across the US are being canceled or delayed as pending regulation of heat-trapping gases threatens investment returns, Synapse Energy Economics Inc. said.
- A new Bloomberg/LA Times survey shows Obama is preferred by Democratic primary voters 48% to 42%, the first time he has overtaken Clinton in a Bloomberg/Times poll. In a general-election match-up among registered voters, McCain is 2 points ahead of Obama and 6 points ahead of Clinton.
- McDonald’s Corp.(MCD) and Honeywell(HON) led a rush of borrowers selling $9.5 billion in US corporate bonds today, the most since January.

Wall Street Journal:
- Hillary Rodham Clinton and Barack Obama blamed each other for spreading false information about their respective health care plans Tuesday night in a high stakes debate one week before a quartet of primaries.

MarketWatch.com:
- JPMorgan(JPM) gets nod to underwrite China government bonds.
- Despite price, Visa may be a bargain.

CNBC.com:
- Private equity firms and unexposed banks have joined a group to rescue bond insurer Ambac Financial(ABK). The appearance of the private equity firms and unexposed banks indicates the bailout group thinks there is still a market for bond insurance and that Ambac “can survive in the future,” said CNBC anchor Charlie Gaspparino.
- MBIA CEO: Bond Insurer Is Done Raising Capital.
- Charting Asia: Shanghai Alert.
- Fund Manager: Buy Fast – and Buy These Names.

BusinessWeek.com:
- Earnings: A Clearer Picture Emerges.

SmartMoney.com:
- CEO Interview: Morningstar’s(MORN) Joe Mansueto.

Boston Globe:
- Hedge funds embrace Obama, donate less to Clinton.

Reuters:
- Google(GOOG) winner as Microsoft(MSFT) and Yahoo(YHOO) face off.
- Delta(DAL) says no merger yet, deal must meet conditions.

Financial Times:
- Don Kohn, Federal Reserve vice-chairman, on Tuesday indicated that he remained open to cutting US interest rates further.
- Ovation in Pyongyang is music to US ears.

- Tentative signs of an improvement in global liquidity are starting to emerge, says David Shairp, global strategist at JPMorgan Asset Management.

Late Buy/Sell Recommendations
Citigroup:

- Reiterated Buy on (FWLT), target $104.

UBS:
- Raised (XLNX) to Buy, target raised to $27.

Night Trading
Asian Indices are +1.0% to +2.25% on average.
S&P 500 futures -.02%.
NASDAQ 100 futures +.14%.

Morning Preview
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Earnings of Note
Company/EPS Estimate
- (RRD)/.73
- (MYL)/-.04
- (TOL)/-.50
- (DLTR)/1.01
- (CKP)/.52
- (DYN)/.05
- (LAMR)/.07
- (BYD)/.38
- (CRM)/.04
- (FLS)/1.22
- (LTD)/.92
- (MDR)/.67
- (TIE)/.30
- (LIZ)/.20
- (SPW)/1.68
- (PSA)/.27
- (FNM)/-1.20
- (NBL)/1.62
- (HET)/.74

Upcoming Splits
- (RBN) 2-for-1

Economic Releases
8:30 am EST

- Durable Goods Orders for January are estimated to fall 4.0% versus a 5.0% gain in December.
- Durables Ex Transports for January are estimated to fall 1.4% versus a 2.3% gain in December.

10:00 am EST
- New Home Sales for January are estimated to fall to 600K versus 604K in December.

Other Potential Market Movers
- The Fed’s Bernanke speaking, Fed’s Mishkin speaking, weekly MBA Applications report, weekly EIA energy inventory data, (JPM) investor day, (SNWL) analyst meeting, (UTX) analyst meeting, BMO Capital Markets Global Metals/Mining Conference, Goldman Sachs Technology Symposium, CSFB Global Services Conference, Robert Baird Business Solutions Conference, Keefe Bruyette Regional Bank Conference, Jefferies Internet Conference, Merrill Communications Conference and Wachovia Homebuilding Conference could also impact trading today.

BOTTOM LINE: Asian indices are sharply higher, boosted by retailer and commodity stocks in the region. I expect US equities to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.