Sunday, April 30, 2006

Monday Watch

Weekend Headlines
Bloomberg:
- Wal-Mart Stores said April same-store sales in the US increased about 6.8% on sales of Easter food and clothing. The company had projected an April sales gain of 4% to 6%.
- Iran, whose nuclear program is being reviewed by the UN Security Council, is keen to negotiate a solution on “large-scale” uranium enrichment, said Hamid Reza Asefi, a spokesman for the Foreign Ministry.
- Secretary of State Condoleezza Rice said Iran is “playing games” in its latest offer to negotiate on uranium enrichment, and the US will continue pressing for possible sactions at the UN.
- Shares of Toshiba Corp., Japan’s second-largest chipmaker, rose after the company forecast profit would gain and reported record annual sales on demand for chips used in mobile phones and music players such as Apple Computer’s(AAPL) iPod Nano.

Wall Street Journal:
- Higher prices for crude oil and gasoline may help change US energy policy meaningfully for the first time since the 1970s.

NY Times:
- New York officials have revived a plan to develop a fourth major airport for the NYC region amid predictions its three airports will reach maximum capacity in 15 years.
- Mexico passed a law early yesterday that permits legal possession of small amounts of drugs such as heroin, marijuana and cocaine and mandates treatment for addicts.
- The US government may seek to use espionage laws to put more pressure on reporters to disclose their sources for stories on classified information.
- Most US charities collected as much or more money last year than in 2004, citing a survey by the Assoc. of Fundraising Professionals.

San Francisco Chronicle:
- Leaders in California’s Silicon Valley issued a formal request yesterday for proposals to build a wireless Internet network that will encompass cities in four counties stretching from Daly City to Santa Cruz.

Economist.com:
- Among its latest record-busting yardsticks was Goldman Sachs’(GS) 40% quarterly return on equity.

Barron’s:
- The Dow Jones Industrial Average will climb another 5% to almost 12,000 by the end, institutional investors told Barron’s.

San Jose Mercury News:
- Intel Corp.(INTC), which on Thursday announced plans to restructure, has turned to marketing chief Eric Kim to remake the company’s image as a cutting-edge supplier of microprocessors.

Nikkei Financial Daily:
- Japanese assets held by hedge funds rose 38% last year as pensions and other institutions broadened investments amid a recovery in the nation’s shares.

Financial Times:
- Hedge fund managers are increasingly avoiding risky investments to retain customers and fees, citing Julius Baer Holding AG’s GAM hedge fund unit. It is difficult to find managers willing to take the level of risk required to generate returns demanded by wealthy investors, citing GAM.
- The Kremlin signed a multi-million dollar contract with a US-based PR firm to improve communications with western press while Russia heads the Group of Eight industrial nations.
- US television broadcasters and networks are concentrating on digital component in pitches for advertising dollars.

Independent:
- C. Boyden Gray, the US ambassador to the European Union, said US regulations may have to be eased to stop an exodus of companies from New York to London to list their shares.

El Universal:
- Venezuela, the world’s fifth-largest oil exporter, approved a plan to build 15 plants to produce ethanol.

Shanghai Securities News:
- China may stop approving new steel plants to curb excess capacity in the country, citing Luo Bingsheng, vice chairman of the China Iron and Steel Association.

AFP:
- Iranian troops shelled positions held by Kurdish guerrillas in Iraq’s northern Arbil province, the second attack of its kind in the last 10 days.
- Iraq’s government is close to reaching an agreement with seven insurgent groups on ending violence, citing a statement from Iraqi President Jalal Talabani.

The Business:
- Dow Jones(DJ) and China’s Xinhua News Agency may bid for AFX News Ltd., the financial unit of AFP, rivaling an offer from Thomson Corp.

Weekend Recommendations
Barron's:
- Had positive comments on (XRX).
- Had negative comments on (UNM).

Night Trading
Asian indices are unch. to +.75% on average.
S&P 500 indicated +.22%.
NASDAQ 100 indicated +.23%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Before the Bell CNBC Video(bottom right)
Global Commentary
Asian Indices
European Indices
Top 20 Business Stories
In Play
Bond Ticker
Daily Stock Events
Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule

Earnings of Note
Company/Estimate
- (AG)/.11
- (ARG)/.43
- (CHK)/.98
- (CMVT)/.98
- (FSH)/.83
- (HUM)/.43
- (PLAY)/.35
- (SWN)/.30
- (SYY)/.32
- (TSN)/-.25

Upcoming Splits
- (LEH) 2-for-1
- (SONC) 3-for-2

Economic Releases
8:30 am EST:
- Personal Income for March is estimated to rise .4% versus a .3% gain in February.
- Personal Spending for March is estimated to rise .4% versus a .1% gain in February.
- PCE Core for March is estimated to rise .2% versus a .1% gain in February.

10:00 am EST:
- Construction Spending for March is estimated to rise .4% versus a .8% gain in February.
- ISM Manufacturing for April is estimated to fall to 55.0 versus a reading of 55.2 in March.
- ISM Prices Paid for April is estimated to rise to 70.0 versus a reading of 66.5 in March.

BOTTOM LINE: Asian Indices are mostly higher, boosted by commodity shares in the region. I expect US stocks to open modestly higher and to trade modestly lower into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the week.

Weekly Outlook

Click here for The Week Ahead by Reuters

There are a number of economic reports of note and significant corporate earnings reports scheduled for release this week.

Economic reports for the week include:

Mon. - Personal Income, Personal Spending, PCE Core, Construction Spending, ISM Manufacturing

Tues. - Pending Home Sales, Total Vehicle Sales

Wed. - Factory Orders, ISM Non-Manufacturing

Thur. - Non-farm Productivity, Unit Labor Costs, Initial Jobless Claims

Fri. - Change in Non-farm Payrolls, Unemployment Rate, Average Hourly Earnings, Consumer Credit

Some of the more noteworthy companies that release quarterly earnings this week are:

Mon. - Chesapeake Energy(CHK), Fisher Scientific(FSH), Humana Inc.(HUM), Sysco Corp.(SYY), Tyson Foods(TSN)

Tues. - Administaff(ASF), Archer-Daniels(ADM), Caremark Rx(CMX), CB Richard Ellis(CBG), Cephalon(CEPH), CNA Financial(CNA), DreamWorks Animation(DWA), Duke Energy(DUK), Electronic Data Systems(EDS), Emerson Electric(EMR), Genesis Microchip(GNSS), IAC/InterActive Corp.(IACI), Loews Corp.(LTR), Sirius Satellite(SIRI), St. Joe(JOE), Timberland(TBL), TXU Corp.(TXU), Verizon Communications(VZ), Vornado Realty(VNO)

Wed. - Allergan Inc.(AGN), Alltel(AT), Cigna Corp.(CI), Clear Channel(CCU), Clorox(CLX), Devon Energy(DVN), Electronic Arts(ERTS), GlobalSantaFe Corp.(GSF), Hewitt Assoc,(HEW), JDS Uniphase(JDSU), Lone Star Steakhouse(STAR), Marsh & McLennan(MMC), Patterson-UTI(PTEN), PG&E Corp.(PGC), Priceline.com(PCLN), Procter & Gamble(PG), Prudential Financial(PRU), QLogic(QLGC), Qwest Communications(Q), Safeguard Scientific(SFE), Starbucks(SBUX), Teekay Shipping(TK), Terex Corp.(TEX), Tidewater(TDW), Time Warner(TWX), Whole Foods Market(WFMI)

Thur. - Activision(ATVI), Andrx Corp.(ADRX), Avid Technology(AVID), Chiquita Brands(CQB), Conseco Inc.(CNO), CVS Corp.(CVS), Eastman Kodak(EK), Estee Lauder(EL), Goodyear Tire(GT), International Paper(IP), Kerr-McGee(KMG), Las Vegas Sands(LVS), Legg Mason(LM), Marvel Entertainment(MVL), Maytag Corp.(MYG), McKesson(MCK), News Corp.(NWS/A), Transocean Inc.(RIG), Tyco Intl.(TYC), Univision Communications(UVN), Wynn Resorts(WYNN)

Fri. - Cablevision Systems(CVC), El Paso Corp.(EP), Medco Health Solutions(MHS), Mills Corp.(MLS), Nabors Industries(NBR), Pixar(PIXR), Sina Corp.(SINA), THQ Inc.(THQI)

Other events that have market-moving potential this week include:

Mon. - None of note

Tue. - Kaufman Brothers Small-cap Growth Forum, CSFB Semi/Semi Equip. Conference, Lehman Brothers Retail Conference, Deutsche Bank Healthcare Conference, Merrill Lynch Tech Gathering, Interop Las Vegas

Wed. - Deutsche Bank Securities Health Care Conference, CSFB Semi/Semi Equip. Conference, Merrill Lynch Tech Gathering, Morgan Stanley Global Healthcare Conference, Interop Las Vegas, Banc of American Basic Industries Conference, Lehman Brothers Retail Conference

Thur. - Banc of American Basic Industries Conference, Morgan Stanley Global Healthcare Conference

Fri. - Morgan Stanley Global Healthcare Conference

BOTTOM LINE: I expect US stocks to finish the week mixed as better-than-expected earnings reports, lower energy prices and lower long-term rates are offset by mixed economic data and profit-taking. My trading indicators are giving mostly bullish signals and the Portfolio is 75% net long heading into the week.

Saturday, April 29, 2006

Market Week in Review

S&P 500 1,310.61 -.05%*

Photobucket - Video and Image Hosting

Click here for the Weekly Wrap by Briefing.com.

BOTTOM LINE: Overall, last week's market performance was mildly bearish. The advance/decline line fell, most sectors declined and volume was above average on the week. Measures of investor anxiety were mostly lower. The AAII % Bulls rose to 42.11%, but is still only around average levels, which is a positive considering the major averages are near 6-year highs. The average 30-year mortgage rate rose to 6.58% which is 137 basis points above all-time lows set in June 2003. Notwithstanding recent strong housing data, I continue to believe housing is in the process of slowing to more healthy sustainable levels. This will also likely result in the slowing of consumer spending back to around average rates over the coming months. The benchmark 10-year T-note yield rose 5 basis points on the week as economic data exceed expectations. I still expect inflation concerns to begin declining again later this quarter as economic growth slows, unit labor costs remain subdued and the mania for commodities reverses course.

Unleaded Gasoline futures fell this week and are 28.5% below September 2005 highs even as refinery utilization remains below normal as a result of the hurricanes last year, 22.3% of Gulf of Mexico oil production remains shut-in and fears over Iranian/Nigerian production disruptions persist. The mandated switch from MTBE-based reformulated gasoline to ethanol-based fuel had been the main reason behind the recent spike in gas prices. President Bush’s decision to authorize the temporary waiver of this mandate should quell gasoline shortage fears.

Demand for gasoline is decelerating and the recent rise related to shortage speculation should further dampen demand over the coming months, sending gas prices back to reasonable levels. Moreover, the API recently said US oil demand fell 2.6% in March, notwithstanding blistering economic growth of 4.8% during the first quarter. Natural gas inventories rose more than expectations, resulting in a 15.1% plunge in the price of the commodity this week to new cycle lows. Supplies are now 62.2% above the 5-year average, an all-time record high for this time of year, even as 13.3% of daily Gulf of Mexico production remains shut-in. Natural gas prices have plunged 58.3% since December 2005 highs. U.S. oil inventories are now at 8-year highs. I continue to believe oil is priced at extremely elevated levels on fear and record speculation by investment funds, not fundamentals. As the fear premium in oil dissipates back to more reasonable levels and supplies continue to rise as economic growth slows, oil should head meaningfully lower over the intermediate-term.

Gold rose for the week as the US dollar declined and economic data exceeded estimates. The US dollar fell on dovish comments from Fed Chairman Bernanke and increased speculation that a Fed “pause” is imminent.

Financial stocks outperformed for the week as the yield curve steepened. S&P 500 earnings growth for the 1st quarter is up about 13.4% year-over-year so far, almost double the long-term average and substantially above expectations of 8-9% growth just a few weeks ago. As well, 70% of companies have exceeded estimates versus the long-term average of 57%. This is the 16th consecutive quarter of double-digit profit growth, the best streak since record-keeping began in 1936. The forward p/e on the S&P 500 has contracted relentlessly during this time period and now stands at a very reasonable 15.4.

The average US stock, as measured by the Value Line Geometric Index(VGY), is up a very strong 9.1% so far this year. Moreover, the Russell 2000 Index is up 13.94% year-to-date. I still believe US economic growth peaked for the year during the first quarter and will decelerate back to around average levels through year-end. I expect stocks to continue trading mixed-to-lower over the next few weeks. Subsequently, a reversal lower in long-term rates and/or energy prices should provide the catalyst for another push higher by the major averages. The ECRI Weekly Leading Index was unchanged this week and is still forecasting healthy, but decelerating, US economic activity.


*5-day % Change

Friday, April 28, 2006

Weekly Scoreboard*

Indices
S&P 500 1,310.61 -.05%
DJIA 11,367.14 +.17%
NASDAQ 2,322.57 -.87%
Russell 2000 764.54 -.98%
Wilshire 5000 13,252.50 -.18%
S&P Equity Long/Short Index 1,189.89 +1.57%
S&P Barra Growth 609.13 -.54%
S&P Barra Value 699.33 +.43%
Morgan Stanley Consumer 609.49 +.86%
Morgan Stanley Cyclical 849.67 -.29%
Morgan Stanley Technology 544.16 -.80%
Transports 4,664.49 -.88%
Utilities 397.46 -.23%
S&P 500 Cum A/D Line 8,142 -2.0%
Bloomberg Crude Oil % Bulls 25.0 -54.34%
Put/Call .86 -5.49%
NYSE Arms 1.08 unch.
Volatility(VIX) 11.59 unch.
ISE Sentiment 167.00 +17.61%
AAII % Bulls 42.11 +24.84%
AAII % Bears 35.96 -11.93%
US Dollar 85.98 -2.31%
CRB 349.89 -2.43%
ECRI Weekly Leading Index 137.10 unch.

Futures Spot Prices
Crude Oil 71.58 -2.26%
Unleaded Gasoline 207.38 -3.77%
Natural Gas 6.59 -15.11%
Heating Oil 200.60 -1.71%
Gold 656.70 +5.29%
Base Metals 215.77 +.66%
Copper 324.90 +4.13%
10-year US Treasury Yield 5.05 +.78%
Average 30-year Mortgage Rate 6.58% +.77%

Leading Sectors
Banks +3.95%
Airlines +2.90%
Insurance +2.29%
Broadcasting +2.03%
Disk Drives +1.94%

Lagging Sectors
Defense -3.03%
I-Banks -3.77%
Energy -4.38%
Homebuilders -4.64%
Internet -5.21%

One-Week High-Volume Gainers
One-Week High-Volume Losers

*5-Day % Change

Stocks Lower into the Final Hour on Losses in the Tech Sector

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Medical longs, Networking longs and Computer longs. I covered some of my (IWM) and (QQQQ) shorts today and added to my (RACK) and (TLT) longs, thus leaving the Portfolio 75% net long. The tone of the market is slightly positive as the advance/decline line is modestly higher, sector performance is mostly positive and volume is very heavy. Natural gas finished floor trading near session lows, down 4%. It has now broken its cycle low and is down 58.5% from its highs. I expect its weakness to begin to weigh on the entire energy complex over the coming weeks. Energy-related stocks have given back much of this morning's gains. I expect US stocks to trade mixed-to-higher into the close from current levels on lower long-term rates and short-covering.

Today's Headlines

Bloomberg:
- Archer Daniels Midland(ADM) appointed former Chevron Corp.(CVX) executive Patricia Woertz as its new president and chief executive officer as it expands its fuel-making business.
- Vonage Holdings, a pioneer of Internet phone calling, plans to raise as much as $563.4 million in an IPO to help fund its expansion.
- Pinnacle Entertainment increased its bid for Aztar Corp.(AZR) to $1.85 billion, stepping up the competition to win the owner of the Tropicana casinos.
- The US dollar reached the weakest since May 2005 versus the euro and approached its lowest this year against the yen on anticipation interest rates will rise faster in Europe and Japan than the US.
- President Bush urged Congress to extend tax cuts to keep the economy growing and called on oil companies to help lower gasoline prices by reinvesting profits to expand productions.
- President Bush said diplomatic options to halt Iran’s suspected nuclear weapons program “are just beginning” and a report today by nuclear inspectors is helping to forge international unity on the issue.
- The UN nuclear agency today told the UN Security Council that Iran enriched uranium and is stonewalling inspectors’ efforts to determine whether the program is intended for the production of nuclear weapons.

Wall Street Journal:
- Mexico’s smaller families may strengthen the Latin American nation’s middle class and reduce the flow of migrants to the US.
- An Iraqi official predicted that a large number of US troops will leave the country this year and the remainder will be pulled out within two years.
- Time Warner’s(TWX) AOL Internet service will start a set of Web logs devoted to individual stocks such as General Electric(GE), Wal-Mart Stores(WMT) and Microsoft(MSFT).

AP:
- Iraq’s top Shiite Muslim cleric, Grand Ayatollah Ali al-Sistani, backed a plan by the incoming prime minister to disband militias.

NY Times:
- Suffolk County, on NY’s Long Island, is planning the largest government-sponsored wireless network, providing free Internet access to its 1.5 million residents.

Washington Post:
- A Spanish-language version of the US national anthem “The Star-Spangled Banner” hit the airwaves today, its release timed to coincide with the debate in Congress over immigration reform.

LA Times:
- As many as 1 million people may join two immigrant rights demonstrations Monday in LA.

China Iron and Steel Association:
- China’s first-quarter crude steel output rose 18% from a year ago to 92.2 million metric tons.

MSNBC:
- A special tax on the “windfall profits” of oil companies hasn’t worked in the past and would curtail exploration and production by energy companies, US Energy Secretary Bodman said.

US Growth at Robust Levels, Inflation in Check, Confidence Still Irrationally Low, Manufacturing Slowing

- Advance 1Q GDP rose 4.8% versus estimates of a 4.9% increase and a 1.7% gain in 4Q.
- Advance 1Q GDP Price Index rose 3.3% versus estimates of a 2.7% gain and a 3.5% rise in 4Q.
- Advance 1Q Personal Consumption rose 5.5% versus estimates of a 5.0% increase and a .9% gain in 4Q.
- 1Q Employment Cost Index rose .6% versus estimates of a .9% gain and a .8% rise in 4Q.
- Final Univ. of Mich. Consumer Confidence for April fell to 87.4 versus estimates of 89.0 and a prior estimate of 89.2.
- Chicago Purchasing Manager for April fell to 57.2 versus estimates of 58.0 and a reading of 60.4 in March.
BOTTOM LINE: The US economy expanded in the first quarter at an annual pace of 4.8%, the fastest in more than two years, led by resurgent consumer spending and the biggest jump in business investment since 2000, Bloomberg said. A healthy labor market and rising wages boosted shopping at retailers and auto dealers, while businesses purchased equipment and software at the fastest pace since before the bursting of the stock market bubble in 2000. Nominal GDP rose at an 8.2% annual pace to $13 trillion. The 5.5% gain in consumer spending was the highest since the third quarter of 2003 and significantly above the long-term average of 3.3%. Business spending on new equipment and software rose 16.4%, the most since the first quarter of 2000. The core PCE index, the Fed’s favorite inflation gauge decelerated to 2.0% from 2.4% during the fourth quarter. I expect GDP growth to moderate to average levels through year-end as a slowdown in consumer spending more than offsets increased business spending.

Confidence among US consumers declined this month as rising gas prices siphoned money from people’s wallets, Bloomberg reported. The decline was muted by a strong job market and the fastest economic growth in 2 years. The current conditions component of the index, which reflects American’s perceptions of their financial situations and whether they believe it is a good time to buy large items, rose to 109.2 from 109.1 in March. The expectations component of the index fell to 73.4 from 76 the prior month. I still expect this reading to join the Conference Board’s Consumer Confidence reading and reach cycle highs by year-end as stocks rise, housing moderates to more healthy levels, energy prices fall from current levels, the job market remains healthy, interest rates remain low and the situation in Iraq improves.

Manufacturing growth in the Chicago area slowed in April from the highest level this year as orders eased, Bloomberg reported. The new orders component of the index fell to 60.8 from 62.2 the prior month. The employment index fell to 47.2 this month from 55.6 in March. The prices paid index rose to 77.2 from 71.1 in March. Finally, the measure of order backlogs fell to 44.8 from 51.6 in March. I expect manufacturing to slow from recent robust rates as economic growth slows to average levels. I continue to believe the most cyclical stocks that have recently posted the strongest gains are at the greatest risk of underperforming going forward.

Links of Interest

Market Snapshot
Detailed Market Summary
Market Internals
Economic Commentary
Movers & Shakers
Today in IBD
NYSE OrderTrac
I-Watch Sector Overview
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Option Dragon
Real-time Intraday Chart/Quote

Friday Watch

Late-Night Headlines
Bloomberg:
- China Petroleum & Chemical Corp., Asia’s biggest oil refiner, said profit fell 3.6% in the first quarter as state curbs on fuel prices prevented it from passing on record crude costs.
- China’s decision to raise lending rates and further restrict bank lending will damp property sales and prices, deterring investment from abroad and putting developers under financial strain, analysts and executives said.
- The yen fell after Chief Cabinet Secretary Shinzo Abe and Heizo Takenaka, the minister of internal affairs, said mild deflation persists in Japan.
- Oil fell for a fifth straight day in NY as speculation increased production at US refineries will replenish gasoline supplies before the peak summer driving season.

Business Week:
- Tribune Co.(TRB), whose shares are down 28% in the past year, is a potential takeover target, citing Lawrence Haverty of Gabelli Global Multimedia Trust.
- Infocrossing Inc.(IFOX), which provides information technology outsourcing services, may rise because it may be a takeover target and its earnings are expected to increase, citing Sidoti’s David Gold.

Late Buy/Sell Recommendations
- None of note

Night Trading
Asian Indices are -1.50% to +.25% on average.
S&P 500 indicated -.20%.
NASDAQ 100 indicated -.48%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Before the Bell CNBC Video(bottom right)
Global Commentary
Asian Indices
European Indices
Top 20 Business Stories
In Play
Bond Ticker
Daily Stock Events
Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule

Earnings of Note
Company/EPS Estimate
- (ADP)/.63
- (AXL)/.19
- (AVP)/.26
- (CVX)/1.78
- (CEG)/.66
- (COCO)/.16
- (CVH)/.73
- (CMI)/2.62
- (IDXX)/.55
- (ITT)/.61
- (MXRE)/.89
- (OSTK)/.-64
- (SWX)/1.03
- (VMSI)/.11

Upcoming Splits
- None of note

Economic Releases
8:30 am EST
- Advance 1Q GDP is estimated to rise 4.9% versus a 1.7% gain in 4Q.
- Advance 1Q GDP Price Index is estimated to rise 2.7% versus a 3.5% increase in 4Q.
- Advance 1Q Personal Consumption is estimated to rise 5.0% versus a .9% increase in 4Q.
- 1Q Employment Cost Index is estimated to rise .9% versus a .8% increase in 4Q.

9:45 am EST
- Final Univ. of Mich. Consumer Confidence for April is estimated to fall to 89.0 versus a prior estimate of 89.2.

10:00 am EST
- Chicago Purchasing Manager for April is estimated to fall to 58.0 versus a reading of 60.4 in March.

BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and technology stocks in the region. I expect US equities to open lower and to maintain losses into the afternoon. The Portfolio is 50% net long heading into the day.

Thursday, April 27, 2006

Stocks Finish Mostly Higher on Dovish Fed Comments, Falling Energy Prices and Declining Long-term Rates

Indices
S&P 500 1,309.72 +.33%
DJIA 11,382.51 +.25%
NASDAQ 2,344.95 +.49%
Russell 2000 761.40 -.50%
Wilshire 5000 13,235.29 +.22%
S&P Barra Growth 611.23 +.24%
S&P Barra Value 695.99 +.42%
Morgan Stanley Consumer 610.07 +.66%
Morgan Stanley Cyclical 847.10 -.71%
Morgan Stanley Technology 5550.12 +.89%
Transports 4,670.13 -.65%
Utilities 396.97 +1.17%
Put/Call .75 -30.56%
NYSE Arms 1.0 +9.49%
Volatility(VIX) 11.84 +.68%
ISE Sentiment 159.00 -18.88%
US Dollar 86.63 -.68%
CRB 345.69 -1.95%

Futures Spot Prices
Crude Oil 70.90 -.10%
Unleaded Gasoline 206.50 -.33%
Natural Gas 6.75 -.73%
Heating Oil 198.03 -.27%
Gold 636.50 +.03%
Base Metals 216.12 -3.58%
Copper 320.70 +.82%
10-year US Treasury Yield 5.07% +.82%

Leading Sectors
Banks +1.97%
Software +1.43%
Biotech +1.32%

Lagging Sectors
Gold & Silver -3.55%
Steel -5.46%
HMOs -5.94%

Evening Review
Detailed Market Summary
Market Gauges
Daily ETF Performance
Style Performance
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Economic Calendar
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Movers
Real-time/After-hours Stock Quote
In Play

Afternoon Recommendations
- None of note

Afternoon/Evening Headlines
Bloomberg:
- China, which unexpectedly raised its benchmark lending rate yesterday, may follow with more measures aimed at cooling the world’s fastest-growing major economy.
- Former Enron Corp. Chairman Kenneth Lay acknowledged his son was among short sellers of the company’s stock, a group of investors the executive blamed at his fraud trial for destroying the company.
- Nokia(NOK) agreed to pay $253 million to InterDigital Communications(IDCC) to end a dispute over phone technology.
- More than 1,100 people wanted for sex crimes were arrested in a 27-state sweep of fugitives, US officials said.
- Oil fell for a fourth day on speculation that increased operating rates at US refineries will replenish gasoline supplies before the peak-demand summer driving season.
- President Bush returned to the hurricane-battered Gulf Coast today to thank volunteers helping rebuild the region.
- The Univ. of Penn.’s Wharton School, the US’s oldest business college, has the best undergraduate business program in the nation, a new poll says.
- Nasdaq Stock Market(NDAQ) raised $691.2 million through a stock sale intended to pay for its minority stake in London Stock Exchange Plc.
- President Bush’s administration said it wants authority to raise fuel-economy standards for cars.
- Microsoft(MSFT) said third-quarter profit rose 16% on orders for database programs. Earnings this year and next may miss some analysts’ estimates.

BOTTOM LINE: The Portfolio finished higher today on gains in my Computer longs, Retail longs, Semi longs and Energy-related shorts. I added to my (IWM) and (QQQQ) shorts in the final hour, thus leaving the Portfolio 50% net long. The tone of the market was slightly negative today as the advance/decline line finished modestly lower, sector performance was mostly positive and volume was very heavy. Measures of investor anxiety were mostly higher into the close. Overall, today's market performance was neutral. Breadth was weak throughout the day and finished negative as cyclicals underperformed. Notwithstanding the low VIX, intraday volatility is increasing. On the positive side, outside of commodities, most sectors rose on heavy volume. Moreover, it appears to me that Bernanke has much better "vision" than Greenspan which should result in some P/E multiple expansion. His comments make a hard landing in housing less likely.

Stocks Higher into Final Hour as Energy Prices Fall and Fed Members Make Dovish Comments

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Retail longs, Semi longs, Computer longs and Energy-related shorts. I covered some of my (IWM) and (QQQQ) shorts today, thus leaving the Portfolio 75% net long. The tone of the market is slightly positive as the advance/decline line is about even, sector performance is mostly positive and volume is very heavy. Natural gas is trading down $0.48 to $6.79. I expect it to break its recent low of $6.70 in the near future. There is no sign of a substantial pick-up in industrial demand for the commodity, even as prices have plunged 58% from highs. I expect US stocks to trade mixed-to-higher into the close from current levels on lower long-term rates and declining energy prices.

Today's Headlines

Bloomberg:
- Siemens AG, Europe’s largest engineering company, agreed to buy Diagnostics Products(DP) for about $1.86 billion in cash to bolster its medical division, the manufacturer’s most profitable unit.
- China’s central bank unexpectedly raised its benchmark interest rate for the first time since October 2004 to cool the world’s fastest-growing major economy.
- Zinc and copper tumbled and oil extended declines after China raised its key interest rate, prompting speculation increased borrowing costs will curb demand for commodities in the world’s fastest-growing economy.
- Fed Chairman Bernanke gave his strongest signal yet that the central bank may pause in its cycle of interest rate increases.
- Exxon Mobil(XOM) said first-quarter profit rose 6.9% to $1.37/share, .10 lower than analyst estimates.
- Treasuries due in five years or less jumped after Fed Chairman Bernanke said the central bank may slow the pace of interest-rate increases.

Wall Street Journal:
- IBM(IBM) will offer a smaller version of its mainframe computers, designed for small-to medium-sized businesses.
- Toyota Motor(TM), Honda Motor and Nissan Motor are giving US executives more influence over decision-making in Japan.
- Time Warner(TWX) plans to start television production of reality shows and less costly cable programs at Warner Bros.
- Fiber optic spare capacity is being gradually filled as a result of the growth in Internet traffic though there is still too much excess capacity around.
- Google’s(GOOG) new Web-based shareable calendar is easy to use and avoids the need to reload or switch to a new page every time a change is needed or an appointment has to be added.
- Verizon Wireless(VZ) has adopted strict decency standards for the music, video and games that can be downloaded onto its cell phones.

Legal Week:
- The US’s 50 biggest law firms generated combined revenue of $36 billion last year, an increase of 12% on the previous year, according to a survey.

NY Times:
- Some US companies’ shareholders for the first time are organizing as they seek more say in executive pay practices and director elections.
- Walt Disney(DIS) and CBS Corp.(CBS) have met with Univision Communications(UVN) over a possible buyout offer.
- General Electric(GE) plans to invest $75 million to build the world’s largest solar energy plant with PowerLight Corp. in Serpa, Portugal.

San Francisco Chronicle:
- California’s income tax collections for April are $1.5 billion higher than Republican Governor Schwarzenegger and independent analysts expected, and lawmakers are debating how to use the surplus.

EE Times:
- Samsung Electronics won orders to supply media processors for Apple Computer’s(AAPL) next line of iPod music players at the expense of PortalPlayer(PLAY).

Arab News:
- Saudi Arabian Mining Co. plans to increase its gold production by 20% as prices for the precious metal soar, citing the CEO.

Il Sole 24 Ore:
- UniCredit SpA’s Pioneer division will make more acquisitions in the US after the purchase of Vanderbilt Capital Advisors LLC.

Job Market Remains Healthy

BOTTOM LINE: First-time claims for unemployment benefits in the US rose last week while staying at a level that points to job growth, Bloomberg reported. The four-week moving-average of continuing claims fell to 2.43 million, the lowest in more than five years. The unemployment rate among those eligible for benefits, which tracks the US unemployment rate, held steady at 1.9%. I continue to believe the job market will remain healthy over the intermediate-term without generating substantial unit labor cost increases, which comprises two-thirds of inflation.

Links of Interest

Market Snapshot
Detailed Market Summary
Market Internals
Economic Commentary
Movers & Shakers
Today in IBD
NYSE OrderTrac
I-Watch Sector Overview
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Option Dragon
Real-time Intraday Chart/Quote

Wednesday, April 26, 2006

Thursday Watch

Late-Night Headlines
Bloomberg:
- McDonald’s(MCD) plans to sell about 5 million shares in Chipotle Mexican Grill, the fast-food chain that went public in January.

Maeil Business:
- Shares of Reigncom Co., a South Korean maker of portable music players, rose on a report the company is in talks to team up with Microsoft(MSFT) to take on iPod maker Apple Computer(AAPL).

AP:
- A US Senate panel will say tomorrow that the Federal Emergency Management Agency(FEMA) can’t be repaired and should be shut down.

Late Buy/Sell Recommendations
Citigroup:
- Removed (EBAY) from Focus List.

Night Trading
Asian Indices are unch. to +.50% on average.
S&P 500 indicated +.08%.
NASDAQ 100 indicated +.09%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Before the Bell CNBC Video(bottom right)
Global Commentary
Asian Indices
European Indices
Top 20 Business Stories
In Play
Bond Ticker
Daily Stock Events
Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule

Earnings of Note
Company/EPS Estimate
- (AET)/.63
- (ACS)/.86
- (ALTR)/.20
- (APCC)/.12
- (APC)/2.92
- (APA)/2.13
- (BZH)/2.27
- (BEBE)/.14
- (BDK)/1.39
- (BWA)/1.05
- (BMY)/.32
- (CAH)/.86
- (CELG)/.07
- (CHIR)/.31
- (CMCSA)/.14
- (CNX)/1.19
- (CAM)/.41
- (DECK)/.24
- (DPZ)/.37
- (DOW)/1.17
- (XOM)/1.46
- (FII)/.49
- (BEN)/1.20
- (GNW)/.65
- (HET)/.92
- (HIG)/2.11
- (ISRG)/.20
- (K)/.63
- (KLAC)/.56
- (LIZ)/.59
- (MRO)/2.35
- (MBI)/1.39
- (MFE)/.29
- (MGM)/.52
- (MSFT)/.33
- (OMX)/.33
- (PD)/2.58
- (RTN)/.53
- (RAI)/1.87
- (ROK)/.75
- (SPF)/1.28
- (HOT)/.34
- (WEN)/.46
- (WDC)/.38
- (XEL)/.31
- (XMSR)/-.55

Upcoming Splits
- (PDX) 2-for-1
- (BAM) 3-for-2

Economic Releases
8:30 am EST
- Initial Jobless Claims for last week are estimated to rise to 305K versus 303K the prior week.
- Continuing Claims are estimated to rise to 2441K versus 2439K prior.

BOTTOM LINE: Asian indices are mostly higher, boosted by auto stocks in the region. I expect US equities to open modestly higher and to fade into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.

Stocks Finish Higher on Energy Price Decline, Strong Economic Data and Surging Corporate Profits

Indices
S&P 500 1,305.41 +.28%
DJIA 11,354.49 +.63%
NASDAQ 2,333.63 +.14%
Russell 2000 765.23 +.05%
Wilshire 5000 13,205.88 +.20%
S&P Barra Growth 609.76 +.21%
S&P Barra Value 693.09 +.35%
Morgan Stanley Consumer 606.04 +.61%
Morgan Stanley Cyclical 853.14 +.95%
Morgan Stanley Technology 545.26 +.18%
Transports 4,700.68 -.14%
Utilities 392.39 -1.11%
Put/Call 1.08 +13.68%
NYSE Arms .91 -3.49%
Volatility(VIX) 11.76 +.09
ISE Sentiment 199.00 +2.05%
US Dollar 87.26 -.07%
CRB 352.57 -.10%

Futures Spot Prices
Crude Oil 71.64 -.40%
Unleaded Gasoline 211.60 -.82%
Natural Gas 7.22 -.63%
Heating Oil 202.29 -1.71%
Gold 639.00 +1.24%
Base Metals 224.14 +.81%
Copper 338.00 -.44%
10-year US Treasury Yield 5.10% +.71%

Leading Sectors
Gold & Silver +1.72%
Networking +1.49%
Disk Drives +1.20%

Lagging Sectors
HMOs -1.13%
Energy -1.50%
Gaming -1.83%

Evening Review
Detailed Market Summary
Market Gauges
Daily ETF Performance
Style Performance
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Economic Calendar
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Movers
Real-time/After-hours Stock Quote
In Play

Afternoon Recommendations
Oppenheimer:
- Reiterated Buy on AAP.

Afternoon/Evening Headlines
Bloomberg:
- The US Senate voted to use $1.9 billion from an emergency spending measure to buy more patrol boats, aircraft and other equipment to secure the US borders.
- MediaNews Group, publisher of the Denver Post, agreed to buy four newspapers from McClatchy for $1 billion, including three in California.
- The US Senate is seeking tax returns from the 15 largest US oil and gas companies to ensure they are paying the full amount due on record profits.
- House Republican leaders plan to introduce measures next week to reduce energy costs.
- Chevron(CVX) plans to boost natural-gas production in Colombia by as much as 50%.
- Crude oil prices fell $1.40 from session highs to $71.60/barrel as speculation over a summer gas shortage waned.

Reuters:
- Walt Disney(DIS) will introduce new interactive advertising when it begins showing television programs from ABC’s prime-time lineup on the network’s Web site.

IDG News Service:
- Symantec(SYMC) will announce on May 1 the reintroduction of a project aimed at curbing online identity theft attacks, called phishing.

Canadian Broadcasting Corp.:
- The US has agreed to return almost $4 billion of lumber duties under a preliminary agreement that would give Canada access to about 34% of the US softwood lumber market.
BOTTOM LINE: The Portfolio finished about unchanged as losses in my Semi longs and Biotech longs were offset by gains in my Energy-related shorts, Retail longs and Computer longs. I did not trade in the final hour, thus leaving the Portfolio 50% net long. The tone of the market was neutral today as the advance/decline line finished about even, sector performance was mixed and volume was above average. Measures of investor anxiety were mixed into the close. Overall, today's market performance was only mildly bearish considering the rise in long-term rates and recent stock gains. The frenzy for cyclicals continued, however energy stocks came under pressure into the afternoon, finishing at session lows. A number of market-leading stocks finished lower on the day. However, given today's news, the fact that the major averages were mostly higher was a big positive. I am surprised by the bond market's muted reaction to such positive economic data.

Stocks Mixed into Final Hour as Lower Energy Prices Offset Higher Long-term Rates

BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Internet longs, Biotech longs and Semi longs. I covered some of my (IWM) and (QQQQ) shorts today, thus leaving the Portfolio 50% net long. The tone of the market is slightly negative as the advance/decline line is modestly lower, sector performance is mixed and volume is above average. Here are the top 10 Nasdaq stocks with the largest percentage increase in short interest relative to their float:

1. (OLAB) +57.8%
2. (NRPH) +20.54%
3. (CROX) +19.5%
4. (RHEO) +14.7%
5. (XING) +13.8%
6. (CONN) +11.9%
7. (WPSC) +11.3%
8. (MFLX) +10.6%
9. (MNTA) +9.7%
10. (TWPG) +9.3%

I expect US stocks to trade mixed-to-lower into the close from current levels on higher long-term rates and profit-taking.

Today's Headlines

Bloomberg:
- US Secretary of State Condoleezza Rice today joined Defense Secretary Donald Rumsfeld in Baghdad on an unscheduled visit to support the country’s new government.
- Tony Snow, a Fox News radio host and former presidential speechwriter, has accepted the job of White House press secretary.
- Exxon Mobil(XOM) CEO Tillerson plans to spend $100 billion on oil exploration to increase production and profits.
- US Treasuries are falling for a second day after government reported showed orders for durable goods and new home sales rose more than forecast, bolstering speculation the Fed will continue raising interest rates.
- The US economy expanded across most parts of the country with “tightening” labor markets as companies struggled with higher energy costs, the Federal Reserve said today.
- Crude oil is falling for a third day after the EIA reported that US refineries increased output of gasoline and other fuels.

Wall Street Journal:
- Microsoft(MSFT) plans to acquire Massive Inc., a closely held company that places ads in video games, for $200 million to $400 million.
- Bank of America(BAC) is considering starting a new credit-card brand and processing network to compete with Visa USA and MasterCard Inc.
- Anheuser-Busch’s(BUD) goal of selling a beer that appeals to millions of people is out of step with rising demand for niche products.
- US mutual funds, buoyed up by rising stock markets in the past year, are increasing their advertising expenditure and trumpeting their performance.
- Iran’s oil minister said in an interview that oil exports won’t be used as a political weapon in the confrontation over the country’s nuclear program.

Washington Post:
- Power plants in Alabama and North Dakota will be required to spend more than $300 million to reduce emissions as the result of two air pollution cases settled by the US Justice Dept. and the Environmental Protection Agency.

NY Times:
- A GlaxoSmithKline Plc(GSK) executive who is leading marketing efforts for an over the counter weight-loss drug to be introduced in the US has lost 60 pounds in the past three years by using the prescription version of the treatment.

AP:
- The top US general in Iraq said the country’s progress in forming a new government is a “major step” toward the US implementing a planned reduction in troops this year.

Capital:
- Google’s(GOOG) German Web site will start a new search function that allows users to locate restaurants, doctors and other businesses in their neighborhood.

San Antonio Express:
- Drivers in Bee County in southeast Texas are being urged by elected officials to boycott Exxon Mobil(XOM) gasoline pumps to protest prices that have climbed above $3 gallon.

Durable Goods Orders and New Home Sales Soar

- Durable Goods Orders for March rose 6.1% versus estimates of a 1.8% increase and an upwardly revised 3.4% gain in February.
- Durables Ex Transportation for March rose 2.8% versus estimates of a 1.0% increase and a 1.1% fall in February.
- New Home Sales for March rose 1213K versus estimates of 1110K and 1066K in February.
BOTTOM LINE: Orders for long-lasting goods rose the most in 10 months in March as US businesses invested in new equipment to meet demand, Bloomberg said. Companies are using record profits to replace outdated equipment, add workers and factory space. Bookings for non-defense capital goods excluding aircraft, a gauge of future business spending, increased 3% in March versus a .8% fall in February. According to economists, business spending probably increased at a 13% annualized rate during 1Q, the fastest since the second quarter of 2004. Orders for computers and electronic equipment rose 7.5%, the best since September 2004. Unfilled orders, a measure of future production, surged 2.8%, the largest increase since last November. I expect increased business spending to help offset slower consumer spending going forward.

Sales of new homes in the US rose 13.8% in March, the most in 13 years, led by demand for less-expensive houses, Bloomberg said. The median price dropped 2.2% from the same month last year to $224,200. The fall in the median selling price was the first since 2003 and reflects a surge in the sales of homes priced between $150,000 and $299,999 and few sales of high-priced homes. The number of unsold homes declined to 5.5 months’ worth at the current sales pace from 6.3 months the prior month. Sales rose 36% in the West, 11% in the Midwest, 6.9% in the South and 4.7% in the Northeast. I still expect housing to slow to more healthy sustainable levels through year-end.

Links of Interest

Market Snapshot
Detailed Market Summary
Market Internals
Economic Commentary
Movers & Shakers
Today in IBD
NYSE OrderTrac
I-Watch Sector Overview
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Option Dragon
Real-time Intraday Chart/Quote

Tuesday, April 25, 2006

Wednesday Watch

Late-Night Headlines
Bloomberg:
- Nippon Steel Corp., the world’s third-largest steelmaker, will probably report a 3.8% drop in second-half profit on higher raw material costs and a decline in exports.

China Daily:
- Plantronics Inc.(PLT), which makes computer and communications headsets, opened its first manufacturing plant in China yesterday.

DigiTimes:
- Quanta Computer will give back to Dell Inc.(DELL) 1.5% of its 2006 revenue from the personal computer maker as a condition of securing 2007 orders from Dell.

Sydney Morning Herald:
- James Packer is part of a group of investors led by Nelson Peltz who have built a 5.4% stake in HJ Heinz(HNZ).

Reuters:
- Cargill Inc., the largest US agriculture company, will close seven meat processing plants on May 1 to allow workers to participate in immigration rallies around the US.

Late Buy/Sell Recommendations
- None of note

Night Trading
Asian Indices are +.25% to +.75% on average.
S&P 500 indicated -.02%.
NASDAQ 100 indicated +.04%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Before the Bell CNBC Video(bottom right)
Global Commentary
Asian Indices
European Indices
Top 20 Business Stories
In Play
Bond Ticker
Daily Stock Events
Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule

Earnings of Note
Company/EPS Estimate
- (AMG)/1.27
- (ATI)/.70
- (AKAM)/.16
- (ABK)/1.82
- (AHC)/4.79
- (AMT)/.00
- (ABC)/.54
- (BUD)/.56
- (AV)/.12
- (BHI)/.79
- (BDX)/.77
- (BIIB)/.46
- (CD)/.14
- (CTX)/3.11
- (CL)/.66
- (COP)/2.35
- (EXC)/.70
- (ESRX)/.70
- (FCL)/.50
- (HAR)/.98
- (INSP)/.05
- (MXIM)/.45
- (MNST)/.27
- (NSC)/.67
- (PEP)/.58
- (PX)/.65
- (PHM)/.96
- (COL)/.63
- (RDC)/.53
- (SOHU)/.15
- (TROW)/.82
- (TIN)/.49
- (TRID)/.16
- (WY)/.84
- (XLNX)/.28
- (ZMH)/.81

Upcoming Splits
- (RSP) 4-for-1
- (TS) 5-for-1

Economic Releases
8:30 am EST
- Durable Goods Orders for March are estimated to rise 1.8% versus a 2.7% gain in February.
- Durables Ex Transportation for March are estimated to rise 1.0% versus a 1.2% decline in February.

10:00 am EST
- New Home Sales for March are estimated to rise to 1110K versus 1080K in February.

10:30 am EST
- Bloomberg consensus estimates call for a weekly crude drawdown of 600,000 barrels. Gasoline inventories are estimated to fall 3,000,000 barrels, and distillate supplies are expected to decrease by 1,800,000 barrels.

2:00 pm EST
- Fed’s Beige Book

BOTTOM LINE: Asian indices are higher, boosted by technology stocks in the region. I expect US equities to open modestly higher and to fade into the afternoon, finishing mixed. The Portfolio is 25% net long heading into the day.

Stocks Finish Modestly Lower on Profit-taking and Higher Long-term Rates

Indices
S&P 500 1,301.74 -.49%
DJIA 11,283.25 -.47%
NASDAQ 2,330.30 -.13%
Russell 2000 764.82 -.17%
Wilshire 5000 13,180.07 -.44%
S&P Barra Growth 608.46 -.39%
S&P Barra Value 690.67 -.58%
Morgan Stanley Consumer 602.36 -.25%
Morgan Stanley Cyclical 845.10 -.60%
Morgan Stanley Technology 544.26 -.36%
Transports 4,707.38 -.49%
Utilities 396.81 -1.15%
Put/Call .95 +2.15%
NYSE Arms .95 -24.32%
Volatility(VIX) 11.75 unch.
ISE Sentiment 195.00 -2.99%
US Dollar 87.35 -.11%
CRB 352.93 +.10%

Futures Spot Prices
Crude Oil 72.78 -.14%
Unleaded Gasoline 212.80 -.05%
Natural Gas 7.27 +.21%
Heating Oil 205.81 +1.30%
Gold 634.70 +.08%
Base Metals 222.34 +4.31%
Copper 333.00 +.29%
10-year US Treasury Yield 5.07% +1.89%

Leading Sectors
Networking +1.63%
Disk Drives +1.38%
Airlines +1.11%

Lagging Sectors
HMOs -1.41%
Papers -1.54%
Steel -2.30%

Evening Review
Detailed Market Summary
Market Gauges
Daily ETF Performance
Style Performance
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Economic Calendar
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Movers
Real-time/After-hours Stock Quote
In Play

Afternoon Recommendations
Deutsche Bank:
- Downgraded (CTRP) and (SINA) to Hold.

Afternoon/Evening Headlines
Bloomberg:
- Amazon.com(AMZN) said first-quarter profit fell 35% after increasing spending. The shares rose as much as 6.4% after the company raised its sales and profit forecast for the year.
- Corning Inc.(GLW) said sales rose 20% as customers bought more LCD televisions.
- Felipe Calderon, the former energy minister for Mexican President Vicente Fox, took the lead in a presidential poll for the first time, surpassing former Mexico City Mayor Andres Lopez Obrador.

AP:
- An Israeli spy satellite was launched into orbit from Russia today. The satellite is capable of monitoring Iran’s nuclear program. Iran’s President said again yesterday that Israel should be destroyed.
BOTTOM LINE: The Portfolio finished slightly lower today as losses in my Internet longs and Biotech longs more than offset gains in my Energy-related shorts, Networking longs and Index shorts. I did not trade in the final hour, thus leaving the Portfolio 25% net long. The tone of the market was negative today as the advance/decline line finished lower, sector performance was mostly negative and volume was heavy. Measures of investor anxiety were mostly higher into the close. Overall, today's market performance was only mildly bearish considering the rise in long-term rates and recent stock gains. The bears were again unable to capitalize on morning weakness. I will wait to see the bond market's reaction to tomorrow's new home sales and durable goods reports before further shifting market exposure.

Stocks Lower into Final Hour as Long-term Rates Rise

BOTTOM LINE: The Portfolio is slightly lower into the final hour as losses in my Internet longs and Biotech longs are more than offsetting gains in my Index shorts, Energy-related shorts and Networking longs. I added to my (IWM), (QQQQ) and (EEM) shorts today, thus leaving the Portfolio 25% net long. The tone of the market is negative as the advance/decline line is lower, sector performance is mostly negative and volume is heavy. The Johnson Redbook same-store sales index rose a robust 4.6% year-over-year last week vs. a 4.3% rise the prior week. This is the strongest reading since August 2005. The long-term average is a gain of around 2.5%. Notwithstanding this strong reading, I still believe retail sales growth is peaking for the year right about now. I expect US stocks to trade mixed-to-higher into the close from current levels on lower energy prices and short-covering.

Today's Headlines

Bloomberg:
- President Bush has ordered the Justice Dept. to investigate whether the recent rise in the price of gasoline is the result of illegal manipulation.
- US Treasuries tumbled, with 10-year notes falling the most since July, after gains in consumer confidence and home sales bolstered expectations that the Fed will raise rates at its next two meetings.
- NY gasoline futures are falling for a second day after President Bush said the US may ease fuel regulations to avoid short-term supply disruptions.

Wall Street Journal:
- About 10 Fidelity Investment portfolio manager have reported to the SEC that they have put at least $1 million of their own money into funds they run.
- Cable television companies such as Comcast(CMCSK), Time Warner(TWX) and Cablevision Systems(CVC) are likely to announce excellent first-quarter results.

NY Post:
- EBay’s(EBAY) Skype Technologies signed agreements with four music publishers as the Internet-based phone service prepares to start a Web music store.

NY Times:
- The number of homeless people sleeping on New York’s streets fell 13% in the past year, citing a study by the city’s Department of Homeless Services.

AP:
- The Bush administration plans to temporarily halt deliveries of crude oil to the nation’s strategic reserves to help bring down gasoline prices.

Interfax:
- Chevron Corp.(CVX), BP Plc’s Russian venture and two Russian state companies agreed to build an oil pipeline to bypass Turkey’s congested Bosporus strait, a main route to world markets for Russian crude.

Consumer Confidence Makes Another Cycle High, Existing Home Sales Exceed Expectations

- Consumer Confidence for April rose to 109.6 versus estimates of 106.2 and a reading of 107.5 in March.
- Existing Home Sales for March rose to 6.92M versus estimates of 6.66M and 6.9M in February.
BOTTOM LINE: Consumer Confidence in the US economy unexpectedly jumped to the highest in four years, as an improving labor market helped Americans overcome concerns about high gasoline prices, Bloomberg reported. Wage gains and low unemployment will keep buoying spirits and lift retail sales, economists said. The present situation component of the index rose to 136.2 versus 133.3 in March. The expectations component rose to 91.9 versus 90.3 in March. The percentage of consumers that saw jobs as plentiful rose to 29.1%, the highest since August 2001, versus 28.3% in March. The percentage that said jobs are hard to find fell to 19.6%, the lowest since the 9/11 attacks. The percentage of people planning to by a house over the next six months fell to 2.7%, the lowest since November 2004, versus 4.1% the prior month. According to a recent National Assoc. of Business Economics survey, 44% of companies expect to hire more in the next six months versus 42% in the January survey. I still believe consumer confidence will improve modestly over the intermediate-term as rising stocks, relatively low long-term rates, declining energy prices, a healthy job market and a further lifting of irrational pessimism more than offsets a housing slowdown.

Sales of previously owned homes in the US unexpectedly rose last month at the same time the number of houses on the market increased, signaling that the housing slowdown is likely to be gradual, Bloomberg said. Compared with March of last year, existing home sales fell .7%. The number of unsold homes now represents 5.5 months’ worth at the current sales pace, the highest since 1998. The median price of an existing home rose 7.4% in March from a year ago to $218,000. The median price of a home rose 58% over the last five years as the economy strengthened and interest rates remained low. Sales rose 1.7% in the Northeast and 1.2% in the Midwest. Sales fell .7% in the South and West. I continue to believe housing is slowing to more healthy sustainable levels, which will likely send US economic growth back to average levels from robust rates.

Links of Interest

Market Snapshot
Detailed Market Summary
Market Internals
Economic Commentary
Movers & Shakers
Today in IBD
NYSE OrderTrac
I-Watch Sector Overview
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Option Dragon
Real-time Intraday Chart/Quote

Monday, April 24, 2006

Tuesday Watch

Late-Night Headlines
Bloomberg:
- China, the world’s largest importer of soybeans, increased purchases of the oilseed and animal feed by 27% in March as bird flu concerns dropped.

Fox News:
- Fox News commentator Tony Snow is “highly likely” to accept the position of White House press secretary.

Financial Times:
- US investors have put $68 billion in international mutual funds this year, more than twice the amount they have poured into US funds, citing TrimTabs Investment Research. The data suggests that US retail investors are fueling the mania for emerging market equities.

Koran Tempo:
- PT Astra Agro Lestari, Indonesia’s biggest publicly traded agriculture company, expects to start commercial operations on making biodiesel fuel from palm oil within about 3 years.

Late Buy/Sell Recommendations
- None of note

Night Trading
Asian Indices are -.75% to unch. on average.
S&P 500 indicated -.02%.
NASDAQ 100 indicated -.07%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Before the Bell CNBC Video(bottom right)
Global Commentary
Asian Indices
European Indices
Top 20 Business Stories
In Play
Bond Ticker
Daily Stock Events
Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule

Earnings of Note
Company/EPS Estimate
- (AFL)/.70
- (AGR)/.08
- (AMZN)/.12
- (T)/.48
- (BJS)/.53
- (BYD)/.73
- (EAT)/.61
- (BNI)/1.04
- (CDWC)/.74
- (CEC)/.83
- (CEN)/.23
- (CKFR)/.38
- (COH)/.27
- (CVG)/.25
- (GLW)/.23
- (DBD)/.23
- (ENR)/.73
- (ESV)/.89
- (FRX)/.35
- (HCA)/.89
- (IMCL)/.83
- (IM)/.34
- (JEC)/.73
- (JBLU)/-.20
- (LLL)/1.11
- (LH)/.74
- (LXK)/.69
- (LMT)/1.14
- (LU)/.03
- (MCHP)/.35
- (NOC)/.99
- (SWK)/.44
- (VLO)/1.32
- (VMC)/.65
- (WHR)/1.50

Upcoming Splits
- None of note

Economic Releases
10:00 am EST
- Consumer Confidence for April is estimated to fall to 106.2 versus a reading of 107.2 in March.
- Existing Home Sales for March are estimated to fall to 6.67M versus 6.91M in February.

BOTTOM LINE: Asian indices are mostly lower, boosted by financial and retail stocks in the region. I expect US equities to open modestly lower and to rally modestly into the afternoon, finishing mixsed. The Portfolio is 50% net long heading into the day.

Stocks Finish Modestly Lower on Growth Worries and Profit-taking

Indices
S&P 500 1,308.11 -.24%
DJIA 11,336.32 -.10%
NASDAQ 2,333.38 -.40%
Russell 2000 766.14 -.77%
Wilshire 5000 13,237.91 -.29%
S&P Barra Growth 610.86 -.25%
S&P Barra Value 694.71 -.23%
Morgan Stanley Consumer 603.85 -.08%
Morgan Stanley Cyclical 850.16 -.24%
Morgan Stanley Technology 546.23 -.42%
Transports 4,730.47 +.52%
Utilities 401.44 +.77%
Put/Call .93 +2.20%
NYSE Arms 1.15 +6.72%
Volatility(VIX) 11.75 +1.38%
ISE Sentiment 204.0 +43.66%
US Dollar 87.54 -.58%
CRB 352.55 -1.68%

Futures Spot Prices
Crude Oil 73.18 -.20%
Unleaded Gasoline 216.25 -.52%
Natural Gas 7.50 -.74%
Heating Oil 203.00 -.08%
Gold 622.90 -.14%
Base Metals 213.14 -.57%
Copper 308.10 -.96%
10-year US Treasury Yield 4.98% -.54%

Leading Sectors
Airlines +3.97%
Steel +1.71%
Coal +1.69%

Lagging Sectors
Energy -1.62%
Homebuilders -1.62%
Internet -3.19%

Evening Review
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In Play

Afternoon Recommendations
Deutsche Bank:
- Rated (TOA) Outperform, $29 target.

Smith Barney:
- Rated (CRM)Buy, target $45.
- Rated (ADSK)Buy, target $52.
- Upgraded (ADBE) to Buy, target $45.
- Rated (RHAT) Buy, target $40.

Afternoon/Evening Headlines
Bloomberg:
- Gold and silver fell after crude oil dropped, easing concern that rising fuel prices will stoke inflation in the world’s biggest economies.
- Venezuelan President Hugo Chavez may rewrite the rules for ventures run by oil companies including Total SA and ConocoPhillips(COP) in the Faja, a region that rivals Canada’s oil sands as the Western Hemisphere’s biggest deposit.

BOTTOM LINE: The Portfolio finished higher today on gains in my Internet longs, Medical longs and Energy-related shorts. I did not trade in the final hour, thus leaving the Portfolio 50% net long. The tone of the market was negative today as the advance/decline line finished lower, sector performance was mostly negative and volume was above average. Measures of investor anxiety were mostly higher into the close. Overall, today's market performance was mildly bearish considering the fall in energy prices and long-term rates. I suspect most bulls and bears are unhappy with today's performance. I expect volume and volatility to increase over the next few days. Tomorrow's consumer confidence and existing home sales reports should lead to more bond market strength.

Stocks Slightly Lower Heading into Final Hour on Worries Over Slowing Growth

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Internet longs, Medical longs and Energy-related shorts. I added a (TLT) long and an (EEM) short today, thus leaving the Portfolio 50% net long. The tone of the market is negative as the advance/decline line is lower, sector performance is mostly negative and volume is about average. It continues to appear investors are viewing the recent parabolic rise in many commodity prices as a future hindrance to economic growth, rather than a catalyst for accelerating inflation. Weaker housing data should also prompt lower long-term rates. With 1Q economic growth poised to come in around 4.5% during 1Q and a media frenzy over the recent rise in commodity prices, long-term rates are likely near an intermediate-term peak. I expect US stocks to trade mixed-to-higher into the close from current levels on lower energy prices and long-term rates.

Today's Headlines

Bloomberg:
- Washington Mutual(WM) agreed to buy Commercial Capital Bancorp for about $983 million to increase returns from real-estate banking in California.
- Blackstone Group agreed to buy Deutsche Telekom AG(DT) shares for $3.3 billion from Germany, its first stake in a government-controlled company.
- Plans Exploration & Exploration(PXP), a US oil and natural-gas producer, agreed to buy Stone Energy(SGY) for about $1.46 billion to boost output in the Rocky Mountains and the Gulf of Mexico.
- Iran’s President Ahmadinejad said Israeli Jews should return back to the European countries from which they came.
- A federal jury awarded Rambus(RMBS) almost $307 million in a patent dispute with Hynix Semiconductor, the world’s second largest chipmaker.
- Crude oil fell from a record as OPEC said that the producer group is providing consumers with adequate supplies.
- US Treasuries are rising, pushing the benchmark 10-year note’s yield below 5%, amid speculation that high oil prices will restrain consumer spending.

Wall Street Journal:
- Cendant Corp.(CD) may put its travel unit up for sale today after some private equity firms said they would pay about $4.5 billion for it.
- TIAA-CREF CEO Allison is planning to regain lost business by introducing an online brokerage and other changes.
- The US is stepping up efforts to block funding to Hezbollah from concern that the Shiite organization is helping Iran stage terrorist attacks.
- A startup venture, DayJet Corp., will start air-taxi passenger services later this year between small cities in the southeastern US.
- Toyota Motor(TM) and News Corp’s(NWS) Fox network have reached an agreement for the automaker to sponsor and be featured in a spin-off series of the drama “Prison Break” for mobile phones.
- More companies are selling bonds convertible into shares, boosting profits at hedge funds that trade the securities.

NY Times:
- Intel Corp.(INTC) will introduce a new line of business products to manage large groups of personal computers as it tries to reverse its loss of market share to Advanced Micro Devices(AMD)
- Seven Roman Catholic cardinals and about a half-dozen archbishops are among some 50 religious leaders who have signed a petition to support a constitutional amendment banning same-sex marriage.

Economic Releases

- None of note

Links of Interest

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