Sunday, March 28, 2004

Weekly Outlook

Some relatively important economic reports and a few earnings reports are due for release this week. The economic reports are the Conference Board's Consumer Confidence reading, Chicago Purchasing Manager report, Factory Orders, Initial Jobless Claims, ISM Manufacturing/Prices Paid Indices, Unemployment Rate, Change in Non-farm Payrolls and Average Weekly Hours. The Chicago Purchasing Manager, ISM Manufacturing/Prices Paid, Unemployment Rate and Change in Non-farm Payrolls are the most important releases. The Chicago Purchasing Manager report for March is estimated at 61.0 versus 63.6 in February. The ISM Manufacturing Index for March is estimated at 59.5 versus 61.4 in February. The ISM Prices Paid Index for March is estimated at 81.0 versus 81.5 in February. The Unemployment Rate for March is estimated at 5.6% versus 5.6% in February. Finally, the Change in Non-farm Payrolls for March is estimated at 120K versus 21K in February.

Monsanto(MON), Best Buy(BBY), Circuit City(CC), Pier 1(PIR), Bed Bath & Beyond(BBBY), Fisher Scientific(FSH), CarMax(KMX) and Steelcase(SCS) are some of the more important companies that release quarterly earnings this week.

BOTTOM LINE: The Portfolio is 125% net long heading into the week. The late-day sell-off Friday may lead to more weakness Monday morning. However, I expect another decent rally before quarter-end on Wednesday. I will cut market exposure on any significant rallies before the employment report on Friday. Several forecasters raised their change in Non-farm Payroll estimates on Friday as a result of the ending of the California grocer strike. UBS went from estimates of 125K to 160K, Bank 1 raised its estimates from 75K to 150K and went from 90K to 120K. This was one of the main reasons interest rates rose Friday. I believe the report will be slightly lower to right at expectations of 120K. The market should respond favorably to this. However, if the number comes in significantly below expectations or significantly above expectations the market will fall, thus I do not want to have a lot of market exposure heading into the report on Friday.

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