ECRI Weekly Leading Index 134.10 +.30%
Construction Spending for April rose 1.3% to a record annual pace of $970 billion versus estimates of a .4% rise and an upwardly revised 2.4% increase in March. Builders completed homes at the highest rate since 1979 in April, the agency said last month. Government and company spending on construction may pick up the slack should home building slow later this year amid higher mortgage costs, Bloomberg reported. "We're still riding the wave of the super-strong housing starts numbers," said Ken Mayland, chief economist of Clear View Economics. "We can't expect these sorts of increases to persist in the second half, but the baton is being handed off as nonresidential is starting to perform better."
ISM Manufacturing for May came in at 62.8 versus estimates of 61.5 and a reading of 62.4 in April. ISM Prices Paid for May came in at 86.0 versus an estimate of 89.3 and a reading of 88.0 in April. The report showed that more factories were hiring than at any time in 31 years, Bloomberg reported. The index reached 63.6 earlier this year, the highest since December 1983 and has been greater than 60 for seven months in a row. Manufacturers are hiring workers and buying new equipment to boost production as sales improve. "Production should remain strong for many months and probably into 2005. I am very optimistic about manufacturing," said Richard DeKaser, chief economist at National City Corp.
The final 1Q Non-farm Productivity reading showed an increase of 3.8% versus estimates of a 3.7% rise and a prior estimate of 3.5%. The final 1Q Unit Labor Costs reading showed an increase of .8% versus estimates of a .4% rise and a prior forecast of .5%. Gains in productivity, aided by higher spending on equipment and software, may help companies hold down costs and prices as they try to keep up with orders and add to payrolls, Bloomberg reported. "We're now seeing a pickup in business investment spending, and that should help firms boost productivity even more," said Michael Moran, chief economist at Daiwa Securities.
Factory Orders for April fell 1.7% versus estimates of a 1.4% decline and an upwardly revised 5.0% increase in March. "April was essentially a month where orders took a breather," Stephen Stanley, chief economist for RBS Greenwich Capital said. As well, Factory Orders were up almost 11% compared to a year earlier.
ISM Non-manufacturing for May came in at 65.2 versus estimates of 66.0 and a reading of 68.4 in April. This gauge of activity at U.S. service companies, which make up the largest share of the economy, reached the fourth highest level on record as businesses increased hiring, Bloomberg said. The employment component of the survey reached its second highest level on record. Stronger employment and rising incomes are keeping households in a buying mood, which should help underpin economic growth for the rest of the year, economists said. "Since the beginning of the year, there has been a dramatic acceleration in the economy," said William Zollars, CEO of Yellow Roadway Corp., the biggest U.S. trucking company.
The Change in Non-farm Payrolls for May was 248,000 versus estimates of 225,000 and an upwardly revised gain of 346,000 in April. The Change in Manufacturing Payrolls for May was 32,000 versus estimates of 20,000 and an upwardly revised 29,000 in April. The Unemployment Rate for May held at 5.6%, meeting estimates and the same as April's rate. The gain in manufacturing employment was the largest in six years and the economy has now recouped all the jobs lost in the aftermath of 9/11 and the recession, Bloomberg reported. Moreover, employment has increased by 1.2 million so far this year, the best five months of job growth since the stock market bubble burst and the economy began to deteriorate in early 2000. "People wouldn't be hiring like this if they didn't have a high level of confidence," said Edward McKelvey, chief U.S. economist at Goldman Sachs.
Bottom Line: There are several key takeaways for the week. First, construction is on fire. Homebuilding will likely slow from its current torrid pace to a more sustainable level of good growth. Non-residential construction is now starting to accelerate as companies flush with record-high cash hoards are expanding operations. The secular downturn in manufacturing that began over a decade ago appears to be over. Factories are now hiring and expanding at very healthy levels. This should bring good economic growth to areas of the U.S. that missed out on the technology-led prosperity of the 90's. The recent pickup in business investment for technology products should result in continued high levels of productivity, allowing companies to shield their customers from significant price increases. Lastly, American's net worth is at all-time highs, incomes are rising and hiring is accelerating, more than offsetting the increase in energy prices and interest rates, resulting in strong demand for many goods and serives. Thus, the service sector, which accounts for 85% of the U.S. economy is very strong and getting stronger.
Saturday, June 05, 2004
Friday, June 04, 2004
Weekly Scoreboard*
Indices
S&P 500 1,122.50 +.11%
Dow 10,242.82 +.37%
NASDAQ 1,978.62 -.30%
Russell 2000 567.75 -.14%
Wilshire 5000 10,934.60 +.11%
Volatility(VIX) 16.78 +9.82%
AAII % Bulls 33.33 -7.70%
US Dollar 88.54 -.18%
CRB 274.75 -.35%
Futures Spot Prices
Gold 391.70 -1.14%
Crude Oil 38.49 -2.48%
Natural Gas 6.26 -4.41%
Base Metals 106.26 -2.34%
10-year US Treasury Yield 4.77% +2.58%
Average 30-year Mortgage Rate 6.28% -.63%
Leading Sectors
Gaming +3.18%
HMO's +2.13%
Broadcasting +2.09%
Lagging Sectors
Homebuilders -1.89%
Semis -2.39%
Disk Drives -2.60%
*% Gain or loss for the week
S&P 500 1,122.50 +.11%
Dow 10,242.82 +.37%
NASDAQ 1,978.62 -.30%
Russell 2000 567.75 -.14%
Wilshire 5000 10,934.60 +.11%
Volatility(VIX) 16.78 +9.82%
AAII % Bulls 33.33 -7.70%
US Dollar 88.54 -.18%
CRB 274.75 -.35%
Futures Spot Prices
Gold 391.70 -1.14%
Crude Oil 38.49 -2.48%
Natural Gas 6.26 -4.41%
Base Metals 106.26 -2.34%
10-year US Treasury Yield 4.77% +2.58%
Average 30-year Mortgage Rate 6.28% -.63%
Leading Sectors
Gaming +3.18%
HMO's +2.13%
Broadcasting +2.09%
Lagging Sectors
Homebuilders -1.89%
Semis -2.39%
Disk Drives -2.60%
*% Gain or loss for the week
Mid-day Update
S&P 500 1,125.57 +.80%
NASDAQ 1,988.91 +1.46%
Leading Sectors
Gaming +3.01%
Semis +2.63%
Airlines +2.35%
Lagging Sectors
Iron/Steel +.06%
Oil Service -.38%
Energy -.69%
Other
Crude Oil 38.58 -1.60%
Natural Gas 6.28 -1.30%
Gold 390.50 +.44%
Base Metals 105.74 -2.20%
U.S. Dollar 88.72 -.26%
10-Yr. T-note Yield 4.73% +.50%
VIX 16.05 -5.75%
Put/Call .83 -26.55%
NYSE Arms .67 -56.77%
Market Movers
SKIL -24.83% after beating 1Q estimates and lowering 05 guidance.
DYAX +21.83% after saying the FDA allowed it to resume clinical trials on a rare genetic disorder.
PETS +10.0% on continued rise after being named Business Week's #1 hot growth company.
KMRT +11.0% after saying Home Depot may buy as many as 24 stores for $365 million.
MBG +8.29% after beating 1Q estimates substantially.
CRDN +6.19% after Roth Capital raised to Buy, target $38.
RDEN -13.5% after meeting 1Q estimates and CL King downgrade.
FBN -8.0% after cutting 2Q forecast.
MYG -7.42% after cutting 2Q/04 forecast and announcing restructuring.
Economic Data
Unemployment Rate for May was 5.6%, meeting estimates and the same as April.
Average Hourly Earnings for May +.3% versus estimates of +.2% and +.3% in April.
Change in Non-farm Payrolls for May was +248,000 versus estimates of +225,000 and an upwardly revised +346,000 in April.
Change in Manufacturing Payrolls for May was +32,000 versus estimates of +20,000 and an upwardly revised +29,000 in April.
Average Weekly Hours for May came in at 33.8 versus an estimate of 33.8 and an upwardly revised 33.8 in April.
Recommendations
WSH rated Buy at UBS, target $43. Goldman Sachs raised SLB to Outperform, target $72. Goldman reiterated Outperform on EMC, target $14-17. Goldman reiterated Outperform on AMD, IR, ADP, CEN, PAYX and INTC. MBG rated Buy at Legg Mason, target $70. FD raised to Outperform at CSFB, target $55. Citi SmithBarney reiterated Buy on INTC, target $33. Citi said tone of analog semi companies on day 2 of semi conference was upbeat, favorites are MXIM and LLTC. Citi reiterated Sell on KFT, target $29.50. Citi reiterated Buy on NMG/A, target $68. Citi reiterated Buy on AV, target $25.
Mid-day News
U.S. stocks are higher mid-day as a government report showing significant U.S. job growth and falling energy prices boost investor optimism. China will start on Sunday a weeklong energy-saving campaign, aiming to avoid a repeat this summer of the power shortages that affected parts of the country last year, Bloomberg reported. GM expects China to become its second-biggest vehicle market this year behind the U.S., Xinhua reported. Amazon.com is targeting a new subscription service to entertainment-industry insiders, hoping to not only sell movies but also help Hollywood make them, the LA Times said. Crude oil prices have plummeted 8.6% from recent highs, heading toward the third straight weekly drop, as rising OPEC production bolsters U.S. inventories and eases concern over summer fuel supplies, Bloomberg reported. U.S. employers added 248,000 workers to payrolls in May, helped by the biggest gain in manufacturing employment in almost six years. The only major category showing job losses was government employment, which declined by 27,000. The economy has now recouped all the jobs lost in the aftermath of 9/11 and the recession, Bloomberg reported. Moreover, American's incomes are now rising at a 5.7% annual rate, the fastest pace since the stock market bubble burst in early 2000, Bloomberg said.
BOTTOM LINE: The Portfolio is having a very good day today as most of my long positions are higher. I added a few internet and semiconductor longs in the morning, bringing the Portfolio's market exposure to 100% net long. One of my new longs is PMCS and I am using a $13.25 stop-loss on the position. I expect U.S. stocks to rise into the close on falling oil prices, great economic news, stabilizing interest rates and positive technology sector comments.
NASDAQ 1,988.91 +1.46%
Leading Sectors
Gaming +3.01%
Semis +2.63%
Airlines +2.35%
Lagging Sectors
Iron/Steel +.06%
Oil Service -.38%
Energy -.69%
Other
Crude Oil 38.58 -1.60%
Natural Gas 6.28 -1.30%
Gold 390.50 +.44%
Base Metals 105.74 -2.20%
U.S. Dollar 88.72 -.26%
10-Yr. T-note Yield 4.73% +.50%
VIX 16.05 -5.75%
Put/Call .83 -26.55%
NYSE Arms .67 -56.77%
Market Movers
SKIL -24.83% after beating 1Q estimates and lowering 05 guidance.
DYAX +21.83% after saying the FDA allowed it to resume clinical trials on a rare genetic disorder.
PETS +10.0% on continued rise after being named Business Week's #1 hot growth company.
KMRT +11.0% after saying Home Depot may buy as many as 24 stores for $365 million.
MBG +8.29% after beating 1Q estimates substantially.
CRDN +6.19% after Roth Capital raised to Buy, target $38.
RDEN -13.5% after meeting 1Q estimates and CL King downgrade.
FBN -8.0% after cutting 2Q forecast.
MYG -7.42% after cutting 2Q/04 forecast and announcing restructuring.
Economic Data
Unemployment Rate for May was 5.6%, meeting estimates and the same as April.
Average Hourly Earnings for May +.3% versus estimates of +.2% and +.3% in April.
Change in Non-farm Payrolls for May was +248,000 versus estimates of +225,000 and an upwardly revised +346,000 in April.
Change in Manufacturing Payrolls for May was +32,000 versus estimates of +20,000 and an upwardly revised +29,000 in April.
Average Weekly Hours for May came in at 33.8 versus an estimate of 33.8 and an upwardly revised 33.8 in April.
Recommendations
WSH rated Buy at UBS, target $43. Goldman Sachs raised SLB to Outperform, target $72. Goldman reiterated Outperform on EMC, target $14-17. Goldman reiterated Outperform on AMD, IR, ADP, CEN, PAYX and INTC. MBG rated Buy at Legg Mason, target $70. FD raised to Outperform at CSFB, target $55. Citi SmithBarney reiterated Buy on INTC, target $33. Citi said tone of analog semi companies on day 2 of semi conference was upbeat, favorites are MXIM and LLTC. Citi reiterated Sell on KFT, target $29.50. Citi reiterated Buy on NMG/A, target $68. Citi reiterated Buy on AV, target $25.
Mid-day News
U.S. stocks are higher mid-day as a government report showing significant U.S. job growth and falling energy prices boost investor optimism. China will start on Sunday a weeklong energy-saving campaign, aiming to avoid a repeat this summer of the power shortages that affected parts of the country last year, Bloomberg reported. GM expects China to become its second-biggest vehicle market this year behind the U.S., Xinhua reported. Amazon.com is targeting a new subscription service to entertainment-industry insiders, hoping to not only sell movies but also help Hollywood make them, the LA Times said. Crude oil prices have plummeted 8.6% from recent highs, heading toward the third straight weekly drop, as rising OPEC production bolsters U.S. inventories and eases concern over summer fuel supplies, Bloomberg reported. U.S. employers added 248,000 workers to payrolls in May, helped by the biggest gain in manufacturing employment in almost six years. The only major category showing job losses was government employment, which declined by 27,000. The economy has now recouped all the jobs lost in the aftermath of 9/11 and the recession, Bloomberg reported. Moreover, American's incomes are now rising at a 5.7% annual rate, the fastest pace since the stock market bubble burst in early 2000, Bloomberg said.
BOTTOM LINE: The Portfolio is having a very good day today as most of my long positions are higher. I added a few internet and semiconductor longs in the morning, bringing the Portfolio's market exposure to 100% net long. One of my new longs is PMCS and I am using a $13.25 stop-loss on the position. I expect U.S. stocks to rise into the close on falling oil prices, great economic news, stabilizing interest rates and positive technology sector comments.
Friday Watch
Company/Estimate
HLR/.09
Splits
None of note.
Economic Data
Unemployment Rate for May is estimated at 5.6% versus 5.6% in April.
Average Hourly Earnings for May estimated +.2% versus +.3% in April.
Change in Non-farm Payrolls for May estimated at 225K versus 288K in April.
Change in Manufacturing Payrolls for May estimated at 20K versus 21K in April.
Average Weekly Hours for May estimated at 33.8 versus 33.7 in April.
Recommendations
Goldman Sachs reiterated Outperform on BSX, NKE and SRE. Goldman reiterated Underperform on PSS. Goldman said to Buy FLEX after mid-quarter update, sees 20%+ upside. Goldman said INTC's comments on mid-quarter update bode well for second half of year. Staples is benefiting from the growing economy and continues to increase its market share in the office-supplies business, Business Week reported. Shares of Trend Micro, the world's third-largest maker of anti-virus software, may extend their gains as computer virus attacks lift sales of the Japanese company's PC-cillin and Network VirusWall programs, Bloomberg reported.
Late-Night News
Asian indices are higher after a fall in energy prices and an optimistic outlook from Intel boosted investments in technology shares in the region. Pakistan and India agreed to avoid public comments that may hinder their efforts to move the peace process forward between the South Asian neighbors, Reuters reported. Merrill Lynch, dissatisfied with a $513 billion asset-management business that is a third less profitable than independent fund managers, may sell a stake in the unit or seek to expand it, Bloomberg said. New York crude oil futures are likely to fall next week after OPEC agreed to increase production quotas by the most in more than six years, according to a Bloomberg survey of traders and analysts. Nestle SA, is considering a bid for General Mills to add brands such as Cheerios cereal and Betty Crocker dessert mixes, Bloomberg reported. Citigroup will start offering life insurance products in China next year after gaining regulatory approval to start a venture with Shanghai Alliance Investment, Bloomberg reported. Exxon Mobil, ChevronTexaco, ConocoPhilliops and Marathon Oil aren't ready to boost exploration budgets they set last year because previous market surges have been followed by plunges. Price drops averaging 54% followed the five biggest rallies in crude oil over the past two decades, Bloomberg reported. President Bush's visit to Rome Friday may disrupt transportation as 10,000 police and soldiers guard against terrorist attacks, Bloomberg said.
Late-Night Trading
Asian Indices unch. to +1.0% on average.
S&P 500 indicated +.22%.
NASDAQ indicated +.42%.
BOTTOM LINE: As I stated below in the Thursday Close, U.S. stocks will likely open modestly lower in the morning as an above-expectations jobs report sends interest rates higher. However, I will add market exposure into any excessive weakness in anticipation of a rally later in the day. High levels of investor anxiety heading into tomorrow, falling oil prices, Intel's strong comments and the recent positive shift in investor psychology leads me to believe that tomorrow's numbers will provide the catalyst to send shares higher by day's end.
HLR/.09
Splits
None of note.
Economic Data
Unemployment Rate for May is estimated at 5.6% versus 5.6% in April.
Average Hourly Earnings for May estimated +.2% versus +.3% in April.
Change in Non-farm Payrolls for May estimated at 225K versus 288K in April.
Change in Manufacturing Payrolls for May estimated at 20K versus 21K in April.
Average Weekly Hours for May estimated at 33.8 versus 33.7 in April.
Recommendations
Goldman Sachs reiterated Outperform on BSX, NKE and SRE. Goldman reiterated Underperform on PSS. Goldman said to Buy FLEX after mid-quarter update, sees 20%+ upside. Goldman said INTC's comments on mid-quarter update bode well for second half of year. Staples is benefiting from the growing economy and continues to increase its market share in the office-supplies business, Business Week reported. Shares of Trend Micro, the world's third-largest maker of anti-virus software, may extend their gains as computer virus attacks lift sales of the Japanese company's PC-cillin and Network VirusWall programs, Bloomberg reported.
Late-Night News
Asian indices are higher after a fall in energy prices and an optimistic outlook from Intel boosted investments in technology shares in the region. Pakistan and India agreed to avoid public comments that may hinder their efforts to move the peace process forward between the South Asian neighbors, Reuters reported. Merrill Lynch, dissatisfied with a $513 billion asset-management business that is a third less profitable than independent fund managers, may sell a stake in the unit or seek to expand it, Bloomberg said. New York crude oil futures are likely to fall next week after OPEC agreed to increase production quotas by the most in more than six years, according to a Bloomberg survey of traders and analysts. Nestle SA, is considering a bid for General Mills to add brands such as Cheerios cereal and Betty Crocker dessert mixes, Bloomberg reported. Citigroup will start offering life insurance products in China next year after gaining regulatory approval to start a venture with Shanghai Alliance Investment, Bloomberg reported. Exxon Mobil, ChevronTexaco, ConocoPhilliops and Marathon Oil aren't ready to boost exploration budgets they set last year because previous market surges have been followed by plunges. Price drops averaging 54% followed the five biggest rallies in crude oil over the past two decades, Bloomberg reported. President Bush's visit to Rome Friday may disrupt transportation as 10,000 police and soldiers guard against terrorist attacks, Bloomberg said.
Late-Night Trading
Asian Indices unch. to +1.0% on average.
S&P 500 indicated +.22%.
NASDAQ indicated +.42%.
BOTTOM LINE: As I stated below in the Thursday Close, U.S. stocks will likely open modestly lower in the morning as an above-expectations jobs report sends interest rates higher. However, I will add market exposure into any excessive weakness in anticipation of a rally later in the day. High levels of investor anxiety heading into tomorrow, falling oil prices, Intel's strong comments and the recent positive shift in investor psychology leads me to believe that tomorrow's numbers will provide the catalyst to send shares higher by day's end.
Thursday, June 03, 2004
Thursday Close
S&P 500 1,116.64 -.74%
NASDAQ 1,960.26 -1.44%
Leading Sectors
Drugs -.02%
HMO's -.08%
Retail -.11%
Lagging Sectors
Semis -2.45%
Nanotechnology -2.83%
Airlines -3.86%
Other
Crude Oil 39.25 -.08%
Natural Gas 6.36 +.03%
Gold 389.00 +.03%
Base Metals 108.12 -.29%
U.S. Dollar 88.95 +.12%
10-Yr. T-note Yield 4.71% -.59%
VIX 17.03 +5.91%
Put/Call 1.13 +20.21%
NYSE Arms 1.55 +38.39%
After-hours Movers
MBG +3.24% after beating 1Q estimates substantially.
FLSH +4.01% after INTC said flash memory biz was exceptionally strong.
SKIL -14.39% after beating 1Q estimates and lowering 05 guidance.
Recommendations
Citigroup Inc. said investors should buy the yen versus the dollar on the view that increased investment in Japan's stock market will boost the currency. Apex Silver(SIL) shares are expected to double in a year as the company prepares to develop its property in Bolivia, Business Week reported. Adelphia Communication's assets would be more valuable if combined with another company, Business Week reported. Pain Therapeutics(PTIE) is undervalued at $8 as its Remoxy painkilling medication has $1 billion market potential, Business Week reported.
After-hours News
U.S. stocks finished lower Thursday on investor fears over Intel's mid-quarter update and tomorrow's jobs report. After the close, McDonald's said it will begin giving away Sony Corp. music downloads with Big Macs to help extend its monthly sales gains, Bloomberg said. Wal-Mart may change its employee wage scales in the coming months, Business Week said. The Nasdaq is trying to attract European companies to list their shares on the U.S. exchange, the FT Deutschland said. Hoshyar Zebari, Iraq's foreign misister-designate, told the UN today that Iraqi soldiers must be under command of the interim government, while declaring that the U.S.-led military coalition is necessary for the stability of the country. The U.S. Commerce Dept. said it will cut duties on $4.6 billion in Canadian lumber imports to as low as 13% from about 27%. Tyco had its debt ratings raised to investment grade by Moody's Investors Service, Bloomberg reported. Intel said sales may meet its highest estimates this quarter as demand rises for flash-memory chips used in mobile phones, Bloomberg said. James Pavitt, the CIA's director of operations, will step down later this summer, CNN reported.
BOTTOM LINE: The Portfolio fell today on weakness in my technology long positions. I took profits in several of my biotech and security long positions in the afternoon as they hit stop-loss levels and I added a semiconductor long in the after-hours session, leaving the Portfolio with 75% net long exposure. I added SNDK long and I am using a $22.75 stop-loss on the position. As I expected, Intel had a good mid-quarter report, raising its revenue guidance range and upping gross margin expectations. With oil declining and Intel giving a positive mid-quarter update, the bond market's reaction to tomorrow's data will determine whether or not the recent rally reignites or stalls. I expect tomorrow's Non-farm Payrolls to modestly exceed economists' estimates of 225,000. However, I expect Manufacturing payrolls to significantly exceed expectations of 20,000. Under this scenario, I would expect bonds and stocks to move lower in the morning and then rally into the afternoon, leaving U.S. stocks higher on the day. A payroll number below or at expectations would likely result in a higher opening for U.S. stocks and bonds that would be sustainable throughout the day.
NASDAQ 1,960.26 -1.44%
Leading Sectors
Drugs -.02%
HMO's -.08%
Retail -.11%
Lagging Sectors
Semis -2.45%
Nanotechnology -2.83%
Airlines -3.86%
Other
Crude Oil 39.25 -.08%
Natural Gas 6.36 +.03%
Gold 389.00 +.03%
Base Metals 108.12 -.29%
U.S. Dollar 88.95 +.12%
10-Yr. T-note Yield 4.71% -.59%
VIX 17.03 +5.91%
Put/Call 1.13 +20.21%
NYSE Arms 1.55 +38.39%
After-hours Movers
MBG +3.24% after beating 1Q estimates substantially.
FLSH +4.01% after INTC said flash memory biz was exceptionally strong.
SKIL -14.39% after beating 1Q estimates and lowering 05 guidance.
Recommendations
Citigroup Inc. said investors should buy the yen versus the dollar on the view that increased investment in Japan's stock market will boost the currency. Apex Silver(SIL) shares are expected to double in a year as the company prepares to develop its property in Bolivia, Business Week reported. Adelphia Communication's assets would be more valuable if combined with another company, Business Week reported. Pain Therapeutics(PTIE) is undervalued at $8 as its Remoxy painkilling medication has $1 billion market potential, Business Week reported.
After-hours News
U.S. stocks finished lower Thursday on investor fears over Intel's mid-quarter update and tomorrow's jobs report. After the close, McDonald's said it will begin giving away Sony Corp. music downloads with Big Macs to help extend its monthly sales gains, Bloomberg said. Wal-Mart may change its employee wage scales in the coming months, Business Week said. The Nasdaq is trying to attract European companies to list their shares on the U.S. exchange, the FT Deutschland said. Hoshyar Zebari, Iraq's foreign misister-designate, told the UN today that Iraqi soldiers must be under command of the interim government, while declaring that the U.S.-led military coalition is necessary for the stability of the country. The U.S. Commerce Dept. said it will cut duties on $4.6 billion in Canadian lumber imports to as low as 13% from about 27%. Tyco had its debt ratings raised to investment grade by Moody's Investors Service, Bloomberg reported. Intel said sales may meet its highest estimates this quarter as demand rises for flash-memory chips used in mobile phones, Bloomberg said. James Pavitt, the CIA's director of operations, will step down later this summer, CNN reported.
BOTTOM LINE: The Portfolio fell today on weakness in my technology long positions. I took profits in several of my biotech and security long positions in the afternoon as they hit stop-loss levels and I added a semiconductor long in the after-hours session, leaving the Portfolio with 75% net long exposure. I added SNDK long and I am using a $22.75 stop-loss on the position. As I expected, Intel had a good mid-quarter report, raising its revenue guidance range and upping gross margin expectations. With oil declining and Intel giving a positive mid-quarter update, the bond market's reaction to tomorrow's data will determine whether or not the recent rally reignites or stalls. I expect tomorrow's Non-farm Payrolls to modestly exceed economists' estimates of 225,000. However, I expect Manufacturing payrolls to significantly exceed expectations of 20,000. Under this scenario, I would expect bonds and stocks to move lower in the morning and then rally into the afternoon, leaving U.S. stocks higher on the day. A payroll number below or at expectations would likely result in a higher opening for U.S. stocks and bonds that would be sustainable throughout the day.
Mid-day Update
S&P 500 1,122.03 -.26%
NASDAQ 1,976.15 -.65%
Leading Sectors
Broadcasting +.70%
Restaurants +.61%
Drugs +.58%
Lagging Sectors
Nanotechnology -1.60%
Semis -1.63%
Airlines -1.97%
Other
Crude Oil 38.75 -3.03%
Natural Gas 6.33 -2.90%
Gold 389.10 -.89%
Base Metals 108.12 -.29%
U.S. Dollar 89.05 +.24%
10-Yr. T-note Yield 4.71% -.42%
VIX 16.41 +2.05%
Put/Call 1.20 +27.66%
NYSE Arms 1.17 +4.46%
Market Movers
IPIX +37.5% after Tom Ridge commended the company for helping to make America more secure.
CVTX +19.38% after the company's plan to test its Ranexa heart drug for chronic chest pain was approved by the FDA.
CMVT +7.92% after beating 1Q estimates and raising 2Q and 05 forecasts.
GSL +13.28% on strong demand for its IPO.
TLB +8.77% after announcing May same-store-sales increase of 10% versus estimates of 2.3%.
ARO +7.36% after announcing May same-store-sales increase of 27% versus estimates of 13.4%.
PGTV -14.9% after saying two of its units filed for bankruptcy protection from creditors under Chapter 11.
FCEL -12.36% after missing 2Q estimates.
BRLI -10.39% after missing 2Q estimates.
Economic Data
Final Non-farm Productivity for 1Q was +3.8% versus estimates of +3.7% and +3.5% prior.
Final Unit Labor Costs for 1Q were +.8% versus +.4% estimates and +.5% prior.
Initial Jobless Claims last week came in at 339K versus 335K estimate and 345k prior week.
Continuing Claims came in at 3003K versus 2925K estimate and 2938K prior.
Factory Orders for April -1.7% versus -1.4% estimate and revised +5.0% in March.
ISM Non-Manufacturing for May was 65.2 versus estimates of 66.0 and 68.4 in April.
Recommendations
PD raised to Sector Outperform at CIBC, target $95. SFNT raised to Strong Buy at Raymond James, target $32. Goldman Sachs said there is no evidence in yesterday's auto numbers that high gas prices are impacting pick-up or SUV sales. Goldman reiterated Outperform on RSE, CCL, SRE, FD, BBY, RCL, FS, HOT, IGT, STN, GCI and CBL. Goldman reiterated Underperform on DJ, SKS, F and HRB. Goldman said to Buy retail-oriented REITS ahead of the annual National Assoc. of REITs Investor Forum in NY next week, favorite is DDR. Citi SmithBarney said to Buy MCD ahead of their comp report next Mon, target $34. Citi said to Buy GIS on weakness ahead of EPS report, target $51. Citi reiterated Buy ratings on HIG and ALL, price targets are $55 and $81, respectively. Citi reiterated Buy on FFIV, target $45. Citi reiterated Buy on ITT, target $92. Citi reiterated Buy on IR, target $83. Citi reiterated Buy on BJ, target $30. Citi reiterated Buy on NMGA, target $68. Citi reiterated Buy on WYE, target $47. Citi reiterated Buy on DTV, target $21.
Mid-day News
U.S. stocks are modestly lower mid-day as investor nervousness persists ahead of Intel's mid-quarter update, tomorrow's jobs report and Bush's trip to Rome. Symbol Technologies today will likely announce a settlement with the U.S. SEC, which has been investigating Symbol's business practices, the NY Times reported. Honeywell International is testing a prototype electronic system for large airlines that would prevent commercial aircraft from crashing into nuclear power and chemical plants, the Star-Ledger reported. China has halted loans made to fixed-asset investment projects that aren't approved by the government in a bid to help slow the pace of economic growth, Agence-France Presse reported. Dust on PCs may contain a flame retardant with a chemical known to cause brain damage in animals, the San Jose Mercury News reported. About 250 investors are attending a convention in Las Vegas on opportunities in Iraq, the Washington Post reported. Cendant plans to offer 37.5 million shares of its Jackson Hewitt tax preparation unit in an IPO, Bloomberg reported. Children's Place said its in talks with Disney for the purchase of the Disney Store chain in the U.S. and Canada. Wal-Mart said May U.S. sales rose 5.9%, at the high end of forecasts, as consumers bought more groceries and electronics, Bloomberg said. OPEC agreed to the biggest increase in oil quotas in more than 6 years, seeking to prevent near-record prices from slowing world economic growth, Bloomberg said. American’s risk of getting cancer or dying of the disease is on the decline, according to a government report, Bloomberg reported. Crude oil stockpiles in the U.S. rose by a larger-than-expected 2.8 million barrels last week, sending oil prices lower, Bloomberg reported. George Tenet resigned as director of the CIA for personal reasons, Bloomberg reported. A gauge of activity at U.S. service companies, which make up the largest share of the economy, reached the fourth highest on record in May as businesses increased hiring, Bloomberg reported.
BOTTOM LINE: The Portfolio is down slightly today as one of my retail longs is up substantially, mostly offsetting losses in my technology long positions. I have not traded today and the Portfolio is still 100% net long. I continue to believe worries over Intel's report are overdone. I also expect tomorrow's Non-farm payrolls to exceed estimates of 225K. U.S. markets should respond favorably tomorrow. Finally, I expect stocks to strengthen into the close. High Put/Call and ARMs readings should cushion any unexpected afternoon weakness. Some short-covering will likely occur as well.
NASDAQ 1,976.15 -.65%
Leading Sectors
Broadcasting +.70%
Restaurants +.61%
Drugs +.58%
Lagging Sectors
Nanotechnology -1.60%
Semis -1.63%
Airlines -1.97%
Other
Crude Oil 38.75 -3.03%
Natural Gas 6.33 -2.90%
Gold 389.10 -.89%
Base Metals 108.12 -.29%
U.S. Dollar 89.05 +.24%
10-Yr. T-note Yield 4.71% -.42%
VIX 16.41 +2.05%
Put/Call 1.20 +27.66%
NYSE Arms 1.17 +4.46%
Market Movers
IPIX +37.5% after Tom Ridge commended the company for helping to make America more secure.
CVTX +19.38% after the company's plan to test its Ranexa heart drug for chronic chest pain was approved by the FDA.
CMVT +7.92% after beating 1Q estimates and raising 2Q and 05 forecasts.
GSL +13.28% on strong demand for its IPO.
TLB +8.77% after announcing May same-store-sales increase of 10% versus estimates of 2.3%.
ARO +7.36% after announcing May same-store-sales increase of 27% versus estimates of 13.4%.
PGTV -14.9% after saying two of its units filed for bankruptcy protection from creditors under Chapter 11.
FCEL -12.36% after missing 2Q estimates.
BRLI -10.39% after missing 2Q estimates.
Economic Data
Final Non-farm Productivity for 1Q was +3.8% versus estimates of +3.7% and +3.5% prior.
Final Unit Labor Costs for 1Q were +.8% versus +.4% estimates and +.5% prior.
Initial Jobless Claims last week came in at 339K versus 335K estimate and 345k prior week.
Continuing Claims came in at 3003K versus 2925K estimate and 2938K prior.
Factory Orders for April -1.7% versus -1.4% estimate and revised +5.0% in March.
ISM Non-Manufacturing for May was 65.2 versus estimates of 66.0 and 68.4 in April.
Recommendations
PD raised to Sector Outperform at CIBC, target $95. SFNT raised to Strong Buy at Raymond James, target $32. Goldman Sachs said there is no evidence in yesterday's auto numbers that high gas prices are impacting pick-up or SUV sales. Goldman reiterated Outperform on RSE, CCL, SRE, FD, BBY, RCL, FS, HOT, IGT, STN, GCI and CBL. Goldman reiterated Underperform on DJ, SKS, F and HRB. Goldman said to Buy retail-oriented REITS ahead of the annual National Assoc. of REITs Investor Forum in NY next week, favorite is DDR. Citi SmithBarney said to Buy MCD ahead of their comp report next Mon, target $34. Citi said to Buy GIS on weakness ahead of EPS report, target $51. Citi reiterated Buy ratings on HIG and ALL, price targets are $55 and $81, respectively. Citi reiterated Buy on FFIV, target $45. Citi reiterated Buy on ITT, target $92. Citi reiterated Buy on IR, target $83. Citi reiterated Buy on BJ, target $30. Citi reiterated Buy on NMGA, target $68. Citi reiterated Buy on WYE, target $47. Citi reiterated Buy on DTV, target $21.
Mid-day News
U.S. stocks are modestly lower mid-day as investor nervousness persists ahead of Intel's mid-quarter update, tomorrow's jobs report and Bush's trip to Rome. Symbol Technologies today will likely announce a settlement with the U.S. SEC, which has been investigating Symbol's business practices, the NY Times reported. Honeywell International is testing a prototype electronic system for large airlines that would prevent commercial aircraft from crashing into nuclear power and chemical plants, the Star-Ledger reported. China has halted loans made to fixed-asset investment projects that aren't approved by the government in a bid to help slow the pace of economic growth, Agence-France Presse reported. Dust on PCs may contain a flame retardant with a chemical known to cause brain damage in animals, the San Jose Mercury News reported. About 250 investors are attending a convention in Las Vegas on opportunities in Iraq, the Washington Post reported. Cendant plans to offer 37.5 million shares of its Jackson Hewitt tax preparation unit in an IPO, Bloomberg reported. Children's Place said its in talks with Disney for the purchase of the Disney Store chain in the U.S. and Canada. Wal-Mart said May U.S. sales rose 5.9%, at the high end of forecasts, as consumers bought more groceries and electronics, Bloomberg said. OPEC agreed to the biggest increase in oil quotas in more than 6 years, seeking to prevent near-record prices from slowing world economic growth, Bloomberg said. American’s risk of getting cancer or dying of the disease is on the decline, according to a government report, Bloomberg reported. Crude oil stockpiles in the U.S. rose by a larger-than-expected 2.8 million barrels last week, sending oil prices lower, Bloomberg reported. George Tenet resigned as director of the CIA for personal reasons, Bloomberg reported. A gauge of activity at U.S. service companies, which make up the largest share of the economy, reached the fourth highest on record in May as businesses increased hiring, Bloomberg reported.
BOTTOM LINE: The Portfolio is down slightly today as one of my retail longs is up substantially, mostly offsetting losses in my technology long positions. I have not traded today and the Portfolio is still 100% net long. I continue to believe worries over Intel's report are overdone. I also expect tomorrow's Non-farm payrolls to exceed estimates of 225K. U.S. markets should respond favorably tomorrow. Finally, I expect stocks to strengthen into the close. High Put/Call and ARMs readings should cushion any unexpected afternoon weakness. Some short-covering will likely occur as well.
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