Wednesday, February 09, 2005

Mid-day Report

S&P 500 1,197.00 -.44%
Dow 10,692.26 -.30%
NASDAQ 2,068.50 -.87%
Russell 2000 632.09 -1.04%
DJ Wilshire 5000 11,789.88 -.50%
S&P Barra Growth 573.87 -.65%
S&P Barra Value 618.80 -.27%
Morgan Stanley Consumer 588.55 -.51%
Morgan Stanley Cyclical 759.05 -.65%
Morgan Stanley Technology 471.92 -.61%
Transports 3,584.41 -.70%
Utilities 353.23 +.01%
Put/Call .81 +3.85%
NYSE Arms .96 -12.50%
Volatility(VIX) 11.81 +1.81%
ISE Sentiment 130.00 -15.58%
US Dollar 85.04 -.07%
CRB 280.49 -.34%

Futures Spot Prices
Crude Oil 45.10 -.77%
Unleaded Gasoline 121.70 +.07%
Natural Gas 6.11 -.88%
Heating Oil 125.10 +.40%
Gold 413.80 -.12%
Base Metals 120.10 +.37%
Copper 138.20 -.43%
10-year US Treasury Yield 3.99% -.58%

Leading Sectors
Oil Service +.85%
Insurance +.68%
Energy +.34%

Lagging Sectors
Semis -1.67%
Biotech -1.97%
Airlines -2.39%

Market Movers
HPQ +5.1% on the ousting of CEO Fiorina after a five-year reign in which the shares dropped 50%.
ISPH -45.0% after saying its experimental treatment for dry eye failed to work in a study and Morgan Stanley downgrade to Equal-Weight.
ISRG +15.11% after substantially beating 4Q estimates.
NILE +14.2% after beating 4Q estimates, lowering 1Q guidance, reiterating 05 outlook and announcing $30M share buy-back.
ATN +12.66% after beating 1Q estimates and saying it will restructure its distribution chain.
USNA +11.19% after beating 4Q estimates and raising 1Q outlook.
VSTA +10.75% after substantially beating 1Q estimates and raising 05 guidance.
TBL +6.71% after beating 4Q estimates and giving positive guidance.
AOC +8.07% after beating 4Q estimates.
INPC +7.86% after beating 4Q estimates.
DRTK -17.2% after missing 4Q estimates.
SYNA -16.4% on continuing worries over sales to Apple Computer.
SNIC -15.45% after beating 3Q estimates and lowering 4Q outlook.
ASFI -12.83% after missing 1Q estimates.
CSC -5.12% after missing 3Q estimates.
NFI -5.91% on continuing weakness from 4Q report.

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

Economic Data
Wholesale Inventories for December rose .4% versus estimates of a .9% increase and a 1.2% gain in November.

-Goldman Sachs: Reiterated Outperform on CSCO, AIG, AL and CI. Reiterated Underperform on TRB and LVLT. Raised PKG to Outperform.
-Citi SmithBarney: Said to Buy ACI, target $43. Reiterated Buy on CSCO, target $30. Reiterated Buy on CSC, target $67. Reiterated Buy on SLM, target $61. Reiterated Buy on RSG, target $36. Reiterated Buy on AMAT, target $22. Reiterated Buy on PRU, target $60. Reiterated Buy on PRE, target $71. Reiterated Buy on MPG, target $28.
-Merrill Lynch: Raised EBAY to Buy, target $96. Raised BEN to Buy, target $75.
-CSFB: Reiterated Outperform on CSCO.
-Deutsche Bank: Cut MSTR to Sell, target $60.
-CIBC: Rated GS Outperform, target $126.
-UBS: Raised OTEX to Buy, target $25.
-Morgan Stanley: Raised AMD to Overweight, target $25.
-Bear Stearns: Raised GRP to Outperform, target $28. Downgraded HPQ to Underperform.
-Prudential: Raised GGP to Overweight, target $38.
-Banc of America: Raised RHAT to Buy, target $16.

Mid-day News
US stocks are lower mid-day on worries over slowing earnings growth and hawkish Fed comments. Foreign investment into Russia fell 12% last year, Interfax reported. A newly formed group of more than 20 companies is seeking to protect the Internet telephone service industry from hackers and viruses, the Wall Street Journal said. MCI Inc. investors may be uninterested in Qwest Communications’ tentative $6.3 billion offer for the second largest US long-distance company without a premium to the current share price, the Wall Street Journal reported. Iran may face UN sanctions if it doesn’t halt efforts to build nuclear weapons, the AP reported. Diamond retailers such as South Africa’s De Beers are facing increased competition and marketing and a more educated consumer that is demanding lower prices for the gems, the NY Times reported. Luxury retailers such as Neiman Marcus, Coach and Tiffany may be seeking to acquire other retailers or perhaps sell themselves to take advantage of strong demand, the NY Times reported. Starbucks plans to begin selling hot breakfast items in 100 outlets in Washington, DC, this year and offer customers the chance to burn music CDs in stores, the Wall Street Journal reported. A new estimate by the Bush administration increases the expected cost of the Medicare drug benefit to $720 billion, more than the $400 billion forecast when the law was passed, the NY Times reported. The US last week sent an emissary to see Chinese President Hu Jintao to urge him to put more pressure on North Korea to stop its nuclear weapons program, the NY Times reported. About 68% of American surveyed said benefits for the wealthiest should be cut to help address concerns about the Social Security system, USA Today reported. Citigroup plans to introduce the Chairman card for its wealthy clients beginning next month, giving them free access to airport lounges and enabling them to earn free airline tickets faster, the Wall Street Journal reported. Sempra Energy’s San Diego Gas & Electric utility plans to offer some customers high-speed Internet access through power lines as part of a pilot project, the LA Times reported. White House officials are meeting today on plans that may restrict the growth of Fannie Mae and Freddie Mac, or sever the companies’ ties to the US Treasury, the American Banker reported. Russia plans to sign an agreement with the US to restrict the sale of shoulder-fired anti-aircraft missiles to hot spots of concern to the US, the AP reported. Hewlett-Packard Chairwoman and CEO Fiorina will step down, effective immediately, Bloomberg reported. GM, Ford and DaimlerChrysler are testing a program with Michigan health care and hospital companies where doctors cut costs and errors by submitting prescriptions electronically, Bloomberg reported. Transsexual golfers will be allowed to play in professional competitions such as the women’s British Open following a review by the Ladies’ Golf Union, Bloomberg reported. The European Union said it is going ahead with plans to lift its 15-year-old embargo on arms sales to China, rebuffing a plea by US Secretary of State Condoleezza Rice, Bloomberg said. The US Senate, considering a measure favored by the Bush administration to restrain class-action lawsuits, defeated the first of several Democratic amendments to make it easier for consumers to press damage claims against companies, Bloomberg reported. Long-term interest rates are falling after Fed Bank of Atlanta President Guynn suggested the bank may soon need to remove the word “measured” from its interest-rate policy statement, Bloomberg reported.

BOTTOM LINE: The Portfolio is lower mid-day on losses in my alternative energy, semiconductor and software longs. I have not traded today, thus the Portfolio remains 125% net long. The tone of the market is weaker as decliners are swamping advancers, volume is decent, most sectors are lower and small-caps/tech are underperforming. The continuing decline in long-term interest rates leads me to believe the Fed would be making a huge mistake to increase rates at an accelerated pace. However, I think recent hawkish comments are just attempts to maintain the rally in the US dollar and do not pose a serious risk at this point. In my opinion, with the US dollar stabilizing, global growth slowing and inflation decelerating, there is not sufficient reason to continue to hike rates at their current pace, much less an accelerated rate. Oil’s inability to maintain morning gains is a positive, considering today’s inventory data. Measures of investor anxiety are mixed on today’s declines, which is a negative. I expect US stocks to rise modestly into the close on falling interest rates, weaker energy prices and short-covering.

No comments: