Indices
S&P 500 1,136.47 +1.02%
Dow 10,410.10 +2.10%
NASDAQ 1,999.87 +.55%
Russell 2000 569.12 -.77%
Wilshire 5000 11,046.64 +1.59%
Volatility(VIX) 15.04 -10.37%
AAII % Bulls 55.26 +65.80%
US Dollar 89.97 +1.64%
CRB 269.93 -1.75%
Futures Spot Prices
Gold 386.60 -1.38%
Crude Oil 38.65 +.39%
Natural Gas 6.18 -1.34%
Base Metals 103.57 -2.53%
10-year US Treasury Yield 4.80% +.63%
Average 30-year Mortgage Rate 6.30% +.32%
Leading Sectors
Gaming +4.14%
Telecom +2.72%
Computer Boxmakers +2.68%
Lagging Sectors
Nanotechnology -2.38%
Airlines -3.83%
Biotech -5.52%
*% Gain or loss for the week
Saturday, June 12, 2004
Friday, June 11, 2004
Economic Week in Review
ECRI Weekly Leading Index 132.90 -.89%
Consumer Credit for April fell to $3.9 billion versus estimates of $5.9 billion and an upwardly revised $9.3 billion in March. Measured at an annual rate, debt rose 2.3% in April after increasing 5.5% in March. Borrowing may again pick up with gains in payrolls and incomes, which may take some of the place of tax cuts and mortgage refinancing as a spur to the economy, Bloomberg reported. Employment has increased by 1.2 million so far this year and incomes are rising at the fastest rate in several years, Bloomberg said. "U.S. consumer spending continues to be healthy. Car sales went through the roof in May," said chief financial economist at Bank of Tokyo-Mitsubishi. Consumers' "willingness to pay full price at our stores is very strong and creating momentum," Burton Tansky, CEO of Neiman Marcus Group said. Finally, Ford Motor expects no "significant impact" on the company from U.S. interest rate increases this year, CFO Don Leclair said.
The National Association of Realtors said sales of existing single-family homes will rise to a record 6.17 million this year, bolstered by an accelerating economy. The estimate is higher than the forecast for 6 million re-sales that the group provided a month ago. "The higher employment rate has made it possible for more people to obtain loans, even as the cost of financing a home purchase increased as mortgage rates rose," said David Lereah, NAR's chief economist. Lareah said he expects the economy to add about 3 million jobs this year, Bloomberg reported. The median existing home price is forecast to rise 5.4% this year to $179,000, while the median new-home price likely will gain 7.9% to $210,000, Lereah said.
Fed Chairman Greenspan said the U.S. central bank is ready to raise interest rates and would accelerate the pace of increases if inflation picks up. The Fed "is prepared to do what is required to fulfill our obligations to achieve the maintenance of price stability" and ensure maximum sustainable economic growth, Greenspan said. Consumer prices are expected to rise 2.7% this year, the same rate as in 2000, and below the 45-year average rate of 3.0%, according to the median forecast of 45 economists polled by Bloomberg. "The exceptional reluctance to expand payrolls appears to have ended, and businesses are once again hiring vigorously. An increased willingness to borrow, and ample liquid assets, should provide a further lift to capital investment and, with it, economic activity," Greenspan said.
Wholesale Inventories for April fell .1% versus expectations of a .5% gain and a .5% gain in March. That brought supplies at distribution centers, warehouses and terminals to a record low of 1.12 months' worth in April. Lean inventories at wholesalers as well as factories suggest that companies may have to step up production and keep adding workers, Bloomberg reported.
The Import Price Index for May rose 1.6% versus estimates of a .8% gain and a .2% gain in April. Excluding petroleum, the index rose .4%. Imported petroleum prices rose 43.9% in the year ended in May, Bloomberg reported. A drop in oil prices this month "may or may not signal a trend, but is nonetheless welcome," Alan Greenspan said earlier in the week. Oil prices have dropped about 12% since reaching $42.33/bbl. on June 1.
Initial jobless claims rose to 352K last week versus expectations of 335K and 340K the prior week. Continuing Claims came in at 2881K versus expectations of 2972K and 2987K prior. Last week included the Memorial Day holiday, which can present a more difficult time to seasonally adjust the data, Bloomberg said. "Growth in payrolls is robust and the labor market is coming out of the doldrums. I would classify the job market as healthy," said Michael Englund, chief economist at Action Economics. "The next few weeks we're entering the preparation for auto retooling phase and because of that jobless claims will remain on the firm to slightly higher side, obscuring what would otherwise be an overall downward trend," said John Herrmann, chief U.S. economist at Cantor Fitzgerald.
U.S. household net worth rose to a record $45.15 trillion in the first quarter of 2004, Bloomberg reported. Another government report showed the federal budget deficit narrowed to $62.5 billion last month as the strengthening economy boosted tax revenue 12% and federal spending declined 7.5%. "The budget situation is improving -- no question," said John Herrmann, chief U.S. economist at Cantor Fitzgerald. Finally, another report showed that only 1.9% of the jobs lost during the first quarter were a result of outsourcing to other countries. "There is a lot of political sound and fury out there about outsourcing, but at the end of the day it's not a big source of weakness for the labor market," said Jay Bryson, global economist at Wachovia.
Most CEOs of U.S. companies with annual sales of $1 million to $1 billion said they expect to add workers, raise prices and increase profits during the next 12 months, according to a survey by TEC International, Bloomberg reported. 60% of the 1,100 CEOs participating in the quarterly TEC Confidence Index said they planned to add jobs. Moreover, only 6% said they planned to reduce their workforce. The TEC survey provides a glimpse into the thinking of the CEOs who run smaller companies. The organization's 9,000 member companies have a combined workforce of 1.1 million employees and annual sales of $280 billion. The survey also found that 73% of small-company CEOs said they planned to vote for President Bush, down from 74% last quarter. Support for Senator Kerry grew to 21% from 16%, Bloomberg reported.
Japanese consumer spending is driving the fastest growth in the G-7, spurring optimism a rebound in the world's second-largest economy will endure longer than two failed recoveries since 1991 and boost global growth, Bloomberg reported. "Purchasing power is rising and consumers are buying more expensive things now," said Tatsuhiko Izumi, president of Clarion Co., a maker of car navigation systems. Consumers accounted for more than a third of Japan's 6.1% annual growth in the first quarter. Spending by households headed by a salaried worker had a record 9.3% jump in April, Bloomberg said. Confidence among consumers was boosted by a 47% gain in the Nikkei in the year ended March 31, the biggest since 1973. "For almost a dozen years, the Japanese economy has been near zero growth and plagued by deflation. What we see now is strong sustainable growth and price stability," U.S. Treasury Undersecretary John Taylor said.
Bottom Line: Economic data released last week continued to show a very healthy U.S. economy. Consumer borrowing rose less-than-expected, which is a positive considering American's high debt levels. Job growth, rising incomes and record-high household net worth are more than offsetting the negative effects from higher interest rates and gas prices with respect to consumer spending. Multiple Fed members made statements last week that supported my view that they will hike rates by 50 basis points in the very near future. Rates are currently at emergency levels that are not warranted in today's vigorous economic environment. Record-low inventories, notwithstanding the recent surge in economic activity, bodes well for future economic growth and hiring. Inflation, while rising, is not currently a problem and is below its 46-year average. At current levels, inflation is actually a positive as companies regain pricing power, boost profits, increase production and hire more people. Americans' net worth is at all-time high levels, a very positive fact that is barely reported by the mainstream press, and is the main reason that higher energy prices and interest rates are not hurting the economy. Finally, Japan continues to improve and is leading the G-7 in economic growth, which is a big positive for global growth. Japan's recovery appears sustainable this time as consumers are participating for the first time in over a decade.
Consumer Credit for April fell to $3.9 billion versus estimates of $5.9 billion and an upwardly revised $9.3 billion in March. Measured at an annual rate, debt rose 2.3% in April after increasing 5.5% in March. Borrowing may again pick up with gains in payrolls and incomes, which may take some of the place of tax cuts and mortgage refinancing as a spur to the economy, Bloomberg reported. Employment has increased by 1.2 million so far this year and incomes are rising at the fastest rate in several years, Bloomberg said. "U.S. consumer spending continues to be healthy. Car sales went through the roof in May," said chief financial economist at Bank of Tokyo-Mitsubishi. Consumers' "willingness to pay full price at our stores is very strong and creating momentum," Burton Tansky, CEO of Neiman Marcus Group said. Finally, Ford Motor expects no "significant impact" on the company from U.S. interest rate increases this year, CFO Don Leclair said.
The National Association of Realtors said sales of existing single-family homes will rise to a record 6.17 million this year, bolstered by an accelerating economy. The estimate is higher than the forecast for 6 million re-sales that the group provided a month ago. "The higher employment rate has made it possible for more people to obtain loans, even as the cost of financing a home purchase increased as mortgage rates rose," said David Lereah, NAR's chief economist. Lareah said he expects the economy to add about 3 million jobs this year, Bloomberg reported. The median existing home price is forecast to rise 5.4% this year to $179,000, while the median new-home price likely will gain 7.9% to $210,000, Lereah said.
Fed Chairman Greenspan said the U.S. central bank is ready to raise interest rates and would accelerate the pace of increases if inflation picks up. The Fed "is prepared to do what is required to fulfill our obligations to achieve the maintenance of price stability" and ensure maximum sustainable economic growth, Greenspan said. Consumer prices are expected to rise 2.7% this year, the same rate as in 2000, and below the 45-year average rate of 3.0%, according to the median forecast of 45 economists polled by Bloomberg. "The exceptional reluctance to expand payrolls appears to have ended, and businesses are once again hiring vigorously. An increased willingness to borrow, and ample liquid assets, should provide a further lift to capital investment and, with it, economic activity," Greenspan said.
Wholesale Inventories for April fell .1% versus expectations of a .5% gain and a .5% gain in March. That brought supplies at distribution centers, warehouses and terminals to a record low of 1.12 months' worth in April. Lean inventories at wholesalers as well as factories suggest that companies may have to step up production and keep adding workers, Bloomberg reported.
The Import Price Index for May rose 1.6% versus estimates of a .8% gain and a .2% gain in April. Excluding petroleum, the index rose .4%. Imported petroleum prices rose 43.9% in the year ended in May, Bloomberg reported. A drop in oil prices this month "may or may not signal a trend, but is nonetheless welcome," Alan Greenspan said earlier in the week. Oil prices have dropped about 12% since reaching $42.33/bbl. on June 1.
Initial jobless claims rose to 352K last week versus expectations of 335K and 340K the prior week. Continuing Claims came in at 2881K versus expectations of 2972K and 2987K prior. Last week included the Memorial Day holiday, which can present a more difficult time to seasonally adjust the data, Bloomberg said. "Growth in payrolls is robust and the labor market is coming out of the doldrums. I would classify the job market as healthy," said Michael Englund, chief economist at Action Economics. "The next few weeks we're entering the preparation for auto retooling phase and because of that jobless claims will remain on the firm to slightly higher side, obscuring what would otherwise be an overall downward trend," said John Herrmann, chief U.S. economist at Cantor Fitzgerald.
U.S. household net worth rose to a record $45.15 trillion in the first quarter of 2004, Bloomberg reported. Another government report showed the federal budget deficit narrowed to $62.5 billion last month as the strengthening economy boosted tax revenue 12% and federal spending declined 7.5%. "The budget situation is improving -- no question," said John Herrmann, chief U.S. economist at Cantor Fitzgerald. Finally, another report showed that only 1.9% of the jobs lost during the first quarter were a result of outsourcing to other countries. "There is a lot of political sound and fury out there about outsourcing, but at the end of the day it's not a big source of weakness for the labor market," said Jay Bryson, global economist at Wachovia.
Most CEOs of U.S. companies with annual sales of $1 million to $1 billion said they expect to add workers, raise prices and increase profits during the next 12 months, according to a survey by TEC International, Bloomberg reported. 60% of the 1,100 CEOs participating in the quarterly TEC Confidence Index said they planned to add jobs. Moreover, only 6% said they planned to reduce their workforce. The TEC survey provides a glimpse into the thinking of the CEOs who run smaller companies. The organization's 9,000 member companies have a combined workforce of 1.1 million employees and annual sales of $280 billion. The survey also found that 73% of small-company CEOs said they planned to vote for President Bush, down from 74% last quarter. Support for Senator Kerry grew to 21% from 16%, Bloomberg reported.
Japanese consumer spending is driving the fastest growth in the G-7, spurring optimism a rebound in the world's second-largest economy will endure longer than two failed recoveries since 1991 and boost global growth, Bloomberg reported. "Purchasing power is rising and consumers are buying more expensive things now," said Tatsuhiko Izumi, president of Clarion Co., a maker of car navigation systems. Consumers accounted for more than a third of Japan's 6.1% annual growth in the first quarter. Spending by households headed by a salaried worker had a record 9.3% jump in April, Bloomberg said. Confidence among consumers was boosted by a 47% gain in the Nikkei in the year ended March 31, the biggest since 1973. "For almost a dozen years, the Japanese economy has been near zero growth and plagued by deflation. What we see now is strong sustainable growth and price stability," U.S. Treasury Undersecretary John Taylor said.
Bottom Line: Economic data released last week continued to show a very healthy U.S. economy. Consumer borrowing rose less-than-expected, which is a positive considering American's high debt levels. Job growth, rising incomes and record-high household net worth are more than offsetting the negative effects from higher interest rates and gas prices with respect to consumer spending. Multiple Fed members made statements last week that supported my view that they will hike rates by 50 basis points in the very near future. Rates are currently at emergency levels that are not warranted in today's vigorous economic environment. Record-low inventories, notwithstanding the recent surge in economic activity, bodes well for future economic growth and hiring. Inflation, while rising, is not currently a problem and is below its 46-year average. At current levels, inflation is actually a positive as companies regain pricing power, boost profits, increase production and hire more people. Americans' net worth is at all-time high levels, a very positive fact that is barely reported by the mainstream press, and is the main reason that higher energy prices and interest rates are not hurting the economy. Finally, Japan continues to improve and is leading the G-7 in economic growth, which is a big positive for global growth. Japan's recovery appears sustainable this time as consumers are participating for the first time in over a decade.
Thursday, June 10, 2004
Mid-day Update
S&P 500 1,33.87 +.23%
NASDAQ 1,991.90 +.06%
Leading Sectors
Oil Service +1.37%
Energy +1.29%
Iron/Steel +1.20%
Lagging Sectors
Nanotech -1.20%
Biotech -1.31%
Airlines -3.22%
Other
Crude Oil 38.30 +1.97%
Natural Gas 6.18 +1.61%
Gold 387.50 +.60%
Base Metals 104.09 -.72%
U.S. Dollar 89.18 -.62%
10-Yr. T-note Yield 4.82% +.29%
VIX 15.01 -2.47%
Put/Call 1.13 +26.97%
NYSE Arms .86 -27.73%
Market Movers
ASKJ -6.61% on continued weakness after saying it bought Tukaroo for an undisclosed price.
DDS +13.2% on speculation that it may be acquired by FD and Bank of America upgrade to Neutral.
ACTL -11.68% after lowering 2Q estimates.
ALOG -10.39% after missing 3Q estimates.
MATK -3.49% after missing 2Q estimates lowering guidance.
Economic Data
Import Price Index for May rose 1.6% versus expectations of a .8% rise and a .2% rise in April.
Initial Jobless Claims for last week were 352K versus expectations of 335K and 340K prior week.
Continuing Claims were 2881K versus expectations of 2972K and 2987K prior.
Recommendations
Goldman Sachs reiterated Outperform on BAX, XRX, IGT, STN, BSX, FD, CIT and AMGN. Goldman still positive on cell-tower stocks, favorite is AMT. Goldman said managements of INTC, SNDK, ALTR, AMAT and MXIM are showing more optimism regarding the length of the current semi cycle. Goldman reiterated Underperform on MAY and HRB. Goldman reiterated positive stance on gold, sees 21% upside to XAU near-term, favorites are NEM and PDG. City SmithBarney upgraded EOG to Buy, target $63. Citi reiterated Sell on UST, target $28.00. Citi reiterated Buy on MNST, target $29. Citi reiterated Buy on MATK, target $90. Citi reiterated Buy on FE, target $43. Citi reiterated Buy on RDWR, target $25. BJS, ESV, NBR, NE, SII, SLB raised to Buy at UBS. ALL raised to Overweight at Morgan Stanley, target $53. CYH rated Outperform at Thomas Weisel. EXPD cut to Underweight at Morgan Stanley. NUE raised to Overweight at Prudential, target $50. STA raised to Buy at Bank of America, target $46. GVHR rated Outperform at CSFB, target $33. COST raised to Buy at Merrill Lynch, target $50. ACE rated Underweight at Lehman, target $40. INTX rated Buy at Deutsche Bank, target $26.
Mid-day News
U.S. stocks are modestly higher mid-day on strength in commodity-related shares as a higher-than expected inflation report and rising oil prices are sending those shares higher. Iraqi Prime Minister Allawi said the government would follow the interim constitution the Iraqi Governing Council approved until elections are held next year to appease Kurdish leaders, the NY Times reported. Alzheimer's disease is one of the illnesses least likely to be cured by expanded human embryonic stem cell research, even though support for such study increased following Reagan's death, the Washington Post reported. China National Petroleum plans to buy 1 million tons of pipes in the next 2 years for building a natural gas pipeline, the Tex Report said. Massachusetts Governor Romney's proposal to cut the state's income tax rate to 5% may generate thousands of jobs and boost investment, the Boston Herald said. CNN will hire an executive to overhaul prime time programming, which has trailed Fox News badly in ratings for almost 2 years, the NY Post said. Iraq is ready to re-sell oil to Jordan and revive talks on building a $450 million oil pipeline, al-Rai newspaper reported. Kmart Holding Chairman Lampert may turn Kmart into an investment company as Warren Buffett did with Berkshire Hathaway, the NY Daily News said. FedEx said it probably beat analysts' expectations for the fourth quarter, Bloomberg reported. World oil demand this year will rise the most since 1980 as economic growth leads to higher-than-expected use in Brazil, India, China and the U.S., the IEA said. Iraq's Prime Minister Allawi said those who attack the country's power grid and oil pipelines are "traitors" and "not freedom fighters," and he called on Iraqis to defeat the saboteurs, Bloomberg reported.
BOTTOM LINE: The Portfolio is unchanged today as my longs and shorts are offsetting each other. I took profits in a couple of gaming longs and added a few internet shorts this morning, leaving the Portfolio with 25% net short market exposure. One of my new shorts is YHOO and I am using a $32.50 stop-loss on the position. I expect stocks to fall modestly into the afternoon on concerns over weekend violence in the middle-east, rising oil prices and increasing interest rates.
NASDAQ 1,991.90 +.06%
Leading Sectors
Oil Service +1.37%
Energy +1.29%
Iron/Steel +1.20%
Lagging Sectors
Nanotech -1.20%
Biotech -1.31%
Airlines -3.22%
Other
Crude Oil 38.30 +1.97%
Natural Gas 6.18 +1.61%
Gold 387.50 +.60%
Base Metals 104.09 -.72%
U.S. Dollar 89.18 -.62%
10-Yr. T-note Yield 4.82% +.29%
VIX 15.01 -2.47%
Put/Call 1.13 +26.97%
NYSE Arms .86 -27.73%
Market Movers
ASKJ -6.61% on continued weakness after saying it bought Tukaroo for an undisclosed price.
DDS +13.2% on speculation that it may be acquired by FD and Bank of America upgrade to Neutral.
ACTL -11.68% after lowering 2Q estimates.
ALOG -10.39% after missing 3Q estimates.
MATK -3.49% after missing 2Q estimates lowering guidance.
Economic Data
Import Price Index for May rose 1.6% versus expectations of a .8% rise and a .2% rise in April.
Initial Jobless Claims for last week were 352K versus expectations of 335K and 340K prior week.
Continuing Claims were 2881K versus expectations of 2972K and 2987K prior.
Recommendations
Goldman Sachs reiterated Outperform on BAX, XRX, IGT, STN, BSX, FD, CIT and AMGN. Goldman still positive on cell-tower stocks, favorite is AMT. Goldman said managements of INTC, SNDK, ALTR, AMAT and MXIM are showing more optimism regarding the length of the current semi cycle. Goldman reiterated Underperform on MAY and HRB. Goldman reiterated positive stance on gold, sees 21% upside to XAU near-term, favorites are NEM and PDG. City SmithBarney upgraded EOG to Buy, target $63. Citi reiterated Sell on UST, target $28.00. Citi reiterated Buy on MNST, target $29. Citi reiterated Buy on MATK, target $90. Citi reiterated Buy on FE, target $43. Citi reiterated Buy on RDWR, target $25. BJS, ESV, NBR, NE, SII, SLB raised to Buy at UBS. ALL raised to Overweight at Morgan Stanley, target $53. CYH rated Outperform at Thomas Weisel. EXPD cut to Underweight at Morgan Stanley. NUE raised to Overweight at Prudential, target $50. STA raised to Buy at Bank of America, target $46. GVHR rated Outperform at CSFB, target $33. COST raised to Buy at Merrill Lynch, target $50. ACE rated Underweight at Lehman, target $40. INTX rated Buy at Deutsche Bank, target $26.
Mid-day News
U.S. stocks are modestly higher mid-day on strength in commodity-related shares as a higher-than expected inflation report and rising oil prices are sending those shares higher. Iraqi Prime Minister Allawi said the government would follow the interim constitution the Iraqi Governing Council approved until elections are held next year to appease Kurdish leaders, the NY Times reported. Alzheimer's disease is one of the illnesses least likely to be cured by expanded human embryonic stem cell research, even though support for such study increased following Reagan's death, the Washington Post reported. China National Petroleum plans to buy 1 million tons of pipes in the next 2 years for building a natural gas pipeline, the Tex Report said. Massachusetts Governor Romney's proposal to cut the state's income tax rate to 5% may generate thousands of jobs and boost investment, the Boston Herald said. CNN will hire an executive to overhaul prime time programming, which has trailed Fox News badly in ratings for almost 2 years, the NY Post said. Iraq is ready to re-sell oil to Jordan and revive talks on building a $450 million oil pipeline, al-Rai newspaper reported. Kmart Holding Chairman Lampert may turn Kmart into an investment company as Warren Buffett did with Berkshire Hathaway, the NY Daily News said. FedEx said it probably beat analysts' expectations for the fourth quarter, Bloomberg reported. World oil demand this year will rise the most since 1980 as economic growth leads to higher-than-expected use in Brazil, India, China and the U.S., the IEA said. Iraq's Prime Minister Allawi said those who attack the country's power grid and oil pipelines are "traitors" and "not freedom fighters," and he called on Iraqis to defeat the saboteurs, Bloomberg reported.
BOTTOM LINE: The Portfolio is unchanged today as my longs and shorts are offsetting each other. I took profits in a couple of gaming longs and added a few internet shorts this morning, leaving the Portfolio with 25% net short market exposure. One of my new shorts is YHOO and I am using a $32.50 stop-loss on the position. I expect stocks to fall modestly into the afternoon on concerns over weekend violence in the middle-east, rising oil prices and increasing interest rates.
Thursday Watch
Earnings of Note
Company/Estimate
ALOG/.36
CRMT/.55
MTZ/.14
NSM/.29
Splits
SID 4-for-1
MOGN 2-for-1
Economic Data
Import Price Index for May estimated +.8% versus +.2% in April.
Initial Jobless Claims for last week estimated at 335K versus 339K prior week.
Continuing Claims estimated at 2972K versus 3003K prior.
Recommendations
Goldman Sachs reiterated Outperform on SYMC, MUR, ETN, DVN and Underperform on VRSN.
Late-Night News
Asian indices are mixed as strength in Japan and Australia is offsetting weakness elsewhere. United Microelectronics, the world's no. 2 supplier of made-to-order semiconductors, expects chip prices that started rising this year to continue gaining in the second half because demand exceeds supply, the Commercial Times reported. China will allow domestic institutions to invest in overseas markets for the first time by the end of this month, the Hong Kong Standard reported. China is moving closer to enacting its first telecommunication law, which industry players hope will help clarify policy and ease the government's grip on the sector, the South China Morning Post said. Terrorists killed 10 Chinese construction workers in Afghanistan and injured six others, Xinhua news reported. The G-8 rebuked North Korea and Iran for pursuing nuclear weapons in violation of the international nonproliferation treaty, Bloomberg reported. U.S. prosecutors are investigating an alleged plot by American-Muslim activist Abdurahman Alamoudi to kill Saudi Crown Prince Abdullah, the Wall Street Journal reported. Japanese machinery orders jumped 11.8% in April, exceeding economists' estimates of 2.3%, as companies planned to increase investment in factories and equipment to meet rising overseas demand for electronics goods, Bloomberg reported.
Late-Night Trading
Asian Indices -1.25% to +.50% on average.
S&P 500 indicated +.19%.
NASDAQ 100 indicated +.41%.
BOTTOM LINE: I expect U.S. stocks to open slightly higher in the morning and then turn modestly weaker later in the day. Oil is down tonight, however interest rates will likely rise again tomorrow. The postponement of the inflation readings and market close Friday have thrown my game-plan off a bit. I may boost market exposure if the major indices can hold gains throughout the day. The Portfolio is currently market neutral.
Company/Estimate
ALOG/.36
CRMT/.55
MTZ/.14
NSM/.29
Splits
SID 4-for-1
MOGN 2-for-1
Economic Data
Import Price Index for May estimated +.8% versus +.2% in April.
Initial Jobless Claims for last week estimated at 335K versus 339K prior week.
Continuing Claims estimated at 2972K versus 3003K prior.
Recommendations
Goldman Sachs reiterated Outperform on SYMC, MUR, ETN, DVN and Underperform on VRSN.
Late-Night News
Asian indices are mixed as strength in Japan and Australia is offsetting weakness elsewhere. United Microelectronics, the world's no. 2 supplier of made-to-order semiconductors, expects chip prices that started rising this year to continue gaining in the second half because demand exceeds supply, the Commercial Times reported. China will allow domestic institutions to invest in overseas markets for the first time by the end of this month, the Hong Kong Standard reported. China is moving closer to enacting its first telecommunication law, which industry players hope will help clarify policy and ease the government's grip on the sector, the South China Morning Post said. Terrorists killed 10 Chinese construction workers in Afghanistan and injured six others, Xinhua news reported. The G-8 rebuked North Korea and Iran for pursuing nuclear weapons in violation of the international nonproliferation treaty, Bloomberg reported. U.S. prosecutors are investigating an alleged plot by American-Muslim activist Abdurahman Alamoudi to kill Saudi Crown Prince Abdullah, the Wall Street Journal reported. Japanese machinery orders jumped 11.8% in April, exceeding economists' estimates of 2.3%, as companies planned to increase investment in factories and equipment to meet rising overseas demand for electronics goods, Bloomberg reported.
Late-Night Trading
Asian Indices -1.25% to +.50% on average.
S&P 500 indicated +.19%.
NASDAQ 100 indicated +.41%.
BOTTOM LINE: I expect U.S. stocks to open slightly higher in the morning and then turn modestly weaker later in the day. Oil is down tonight, however interest rates will likely rise again tomorrow. The postponement of the inflation readings and market close Friday have thrown my game-plan off a bit. I may boost market exposure if the major indices can hold gains throughout the day. The Portfolio is currently market neutral.
Wednesday, June 09, 2004
Wednesday Close
S&P 500 1,131.33 -.95%
NASDAQ 1,990.61 -1.63%
Leading Sectors
Telecom +.56%
Gaming -.12%
Oil Service -.29%
Lagging Sectors
Homebuilders -2.68%
Biotech -2.95%
Semis -3.24%
Other
Crude Oil 37.71 +.45%
Natural Gas 6.10 +.30%
Gold 384.20 -.26%
Base Metals 104.84 -2.11%
U.S. Dollar 89.75 +1.40%
10-Yr. T-note Yield 4.81% +.97%
VIX 15.39 +2.53%
Put/Call .89 +3.49%
NYSE Arms 1.19 +30.77%
After-hours Movers
TGT +5.19% after announcing that May Department Stores agreed to buy its Marshall Field's department stores for $3.24 billion.
NTOP +4.9% after beating 3Q estimates.
MATK -9.79% after missing 2Q estimates lowering guidance.
AMTD -3.42% after lowering 3Q guidance.
Recommendations
Goldman Sachs reiterated Outperform on SRE, ACN, KO, AGN, XRX, USB and Underperform on TWMC.
After-hours News
U.S. stocks finished lower today as interest rates rose ahead of several key inflation reports. Interest rate-sensitive and high-beta stocks bore the brunt of the selling. After the close, Apple Computer said it will introduce a European version of its iTunes Web site for selling music next week, the International Herald Tribune reported. Dongkuk Steel Mill bought 5,000 tons of pig iron from Russia's Kuznetsky Met Kombinat at $237 a ton, less than the $295 a ton it paid last month, the Tex Report said. AU Optronics, which is boosting capacity at a new plant making flat-panel displays for computers and televisions, is poised to become the world's No. 1 supplier of the displays, displacing two larger rivals, the Commercial Times reported. Accenture may lose a $10 billion contract to work on border security under legislation approved by a House of Representatives committee, Bloomberg reported. Former Symbol Technologies CEO Razmilovic, indicted last week for conspiring to commit accounting fraud, is a fugitive, Bloomberg reported. The Semiconductor Industry Association raised it outlook for chip growth today, predicting that revenue in 04 will jump 28% to $214 billion, Bloomberg said.
BOTTOM LINE: The Portfolio was down today on weakness in my technology, biotechnology and industrial long positions. I took profits in several more longs in the afternoon and put out a couple of new shorts, leaving the Portfolio with market neutral(longs-shorts=0) exposure. One of my new shorts is DITC and I am using a stop-loss of $22.00 on this position. As previously discussed, I expect U.S. stocks to remain neutral to lower for the next couple of weeks. I will look to selectively add to favorite long positions during this time period on any extreme weakness as I expect the rally to resume towards the end of the month or the first of July.
NASDAQ 1,990.61 -1.63%
Leading Sectors
Telecom +.56%
Gaming -.12%
Oil Service -.29%
Lagging Sectors
Homebuilders -2.68%
Biotech -2.95%
Semis -3.24%
Other
Crude Oil 37.71 +.45%
Natural Gas 6.10 +.30%
Gold 384.20 -.26%
Base Metals 104.84 -2.11%
U.S. Dollar 89.75 +1.40%
10-Yr. T-note Yield 4.81% +.97%
VIX 15.39 +2.53%
Put/Call .89 +3.49%
NYSE Arms 1.19 +30.77%
After-hours Movers
TGT +5.19% after announcing that May Department Stores agreed to buy its Marshall Field's department stores for $3.24 billion.
NTOP +4.9% after beating 3Q estimates.
MATK -9.79% after missing 2Q estimates lowering guidance.
AMTD -3.42% after lowering 3Q guidance.
Recommendations
Goldman Sachs reiterated Outperform on SRE, ACN, KO, AGN, XRX, USB and Underperform on TWMC.
After-hours News
U.S. stocks finished lower today as interest rates rose ahead of several key inflation reports. Interest rate-sensitive and high-beta stocks bore the brunt of the selling. After the close, Apple Computer said it will introduce a European version of its iTunes Web site for selling music next week, the International Herald Tribune reported. Dongkuk Steel Mill bought 5,000 tons of pig iron from Russia's Kuznetsky Met Kombinat at $237 a ton, less than the $295 a ton it paid last month, the Tex Report said. AU Optronics, which is boosting capacity at a new plant making flat-panel displays for computers and televisions, is poised to become the world's No. 1 supplier of the displays, displacing two larger rivals, the Commercial Times reported. Accenture may lose a $10 billion contract to work on border security under legislation approved by a House of Representatives committee, Bloomberg reported. Former Symbol Technologies CEO Razmilovic, indicted last week for conspiring to commit accounting fraud, is a fugitive, Bloomberg reported. The Semiconductor Industry Association raised it outlook for chip growth today, predicting that revenue in 04 will jump 28% to $214 billion, Bloomberg said.
BOTTOM LINE: The Portfolio was down today on weakness in my technology, biotechnology and industrial long positions. I took profits in several more longs in the afternoon and put out a couple of new shorts, leaving the Portfolio with market neutral(longs-shorts=0) exposure. One of my new shorts is DITC and I am using a stop-loss of $22.00 on this position. As previously discussed, I expect U.S. stocks to remain neutral to lower for the next couple of weeks. I will look to selectively add to favorite long positions during this time period on any extreme weakness as I expect the rally to resume towards the end of the month or the first of July.
Mid-day Update
S&P 500 1,135.65 -.57%
NASDAQ 2,003.20 -1.00%
Leading Sectors
Telecom +1.97%
Airlines +.38%
Gaming +.18%
Lagging Sectors
Biotech -2.17%
Semis -2.32%
Homebuilders -2.33%
Other
Crude Oil 37.15 -.35%
Natural Gas 6.08 -.57%
Gold 385.10 -1.71%
Base Metals 104.84 -2.11%
U.S. Dollar 89.47 +1.08%
10-Yr. T-note Yield 4.81 +1.01%
VIX 15.09 +.53%
Put/Call .76 -11.63%
NYSE Arms 1.05 +15.38%
Market Movers
IPIX +21.1% after saying its full-360 degree video surveillance systems are deployed at the G-8 Summit.
OVTI -29.03% after lowering 1Q estimates and saying it may restate prior quarter results.
DNA -5.91% after Sanford C. Bernstein downgrade to Market Perform.
DHB +30.6% after saying it was awarded a $239.4 million contract to supply the U.S. Army with the company's new armor that shields arms and shoulders.
BDY +15.3% after saying it has entered into a definitive agreement to acquire the assets of Bioglan Pharmaceuticals, a subsidiary of Quintiles Transnational, for $183 million.
TOM -10.96% after lowering 1Q/05 forecast.
NKTR -11.8% after saying its Exubera NDA won't come until 05.
Economic Data
Wholesale Inventories down .1% in April versus estimates of a .5% rise and a .5% rise in March.
Recommendations
Goldman reiterated Outperform on BIIB, AMLN, GILD, TRMS, CCL, RCL, FS, GDT and IP. Goldman sees PC growth of at least 12% in 04, any upside to this will drive stocks higher. Goldman rated NRG Outperform. Citi SmithBarney said to Buy STT right now, target $62. Citi reiterated Buy on KMB, target $72. Citi reiterated Buy on PCG, target $34. ROCK raised to Sector Outperform at CIBC, target $35. PXD raised to Outperform at CSFB, target $39. SPLS rated Outperform at CSFB, target $34.
Mid-day News
U.S. stocks are falling mid-day as interest rates rise ahead of several key inflation reports. AirTran is better situated than competitors as the cost of jet fuel increases, because it has "hedged" 50% of its fuel for the rest of this year and bought 15% for 05, CEO Leonard told CNBC. President Bush supports stem-cell research with limits, First Lady Laura Bush told CNN. TiVo will unveil Internet-based features that will allow subscribers to download films and music from the Web to their recorders' hard drive, the NY Times reported. Sovereign Bancorp is considering a bid for NY Community Bancorp, the NY Daily News said. The growth in health-care spending in the U.S. fell for the second year in a row in 03, because demand for health services decreased, the AP reported. Disney and three French banks agreed to bail out Euro Disney for the second time in a decade, Bloomberg reported. A government report showed inventories relative to sales dropped to an all-time record low of 1.12 month's supply in April, suggesting companies will have to order more from factories in coming months to catch up with demand, spurring production and adding to growth, Bloomberg reported. The U.S. Justice Department won't ask the Supreme Court to reverse a lower court's decision striking down federal rules that give AT&T and other carriers discounted access to local-telephone companies' networks, Bloomberg said. Crude oil is falling to a 6-week low after the Energy Department reported that U.S. oil and gasoline inventories rose last week. U.S. Treasury notes fell for the third day in four on speculation inflation will accelerate, leading the Fed to boost rates faster than anticipated, Bloomberg reported.
BOTTOM LINE: The Portfolio is down today as my semiconductor, telecom equipment and internet longs are declining. I have taken profits in many longs this morning and added several new shorts, bringing the Portfolio's market exposure to 50% net long. The Portfolio is up substantially for the year and I want to protect profits over the short-term. One of my new shorts is SSYS and I am using a $27.50 stop-loss on the position. I also shorted a few homebuilders. Inflation reports over the next week from the PPI and CPI will likely exceed expectations, further pressuring bonds. Moreover, I expect stocks to trade weaker to neutral as investor anxiety rises over the next 2 weeks ahead of the Fed rate hike, Iraqi handover, end of the quarter and Russell rebalancing. I then expect U.S. stocks to begin another up-leg at the end of the month or beginning of July.
NASDAQ 2,003.20 -1.00%
Leading Sectors
Telecom +1.97%
Airlines +.38%
Gaming +.18%
Lagging Sectors
Biotech -2.17%
Semis -2.32%
Homebuilders -2.33%
Other
Crude Oil 37.15 -.35%
Natural Gas 6.08 -.57%
Gold 385.10 -1.71%
Base Metals 104.84 -2.11%
U.S. Dollar 89.47 +1.08%
10-Yr. T-note Yield 4.81 +1.01%
VIX 15.09 +.53%
Put/Call .76 -11.63%
NYSE Arms 1.05 +15.38%
Market Movers
IPIX +21.1% after saying its full-360 degree video surveillance systems are deployed at the G-8 Summit.
OVTI -29.03% after lowering 1Q estimates and saying it may restate prior quarter results.
DNA -5.91% after Sanford C. Bernstein downgrade to Market Perform.
DHB +30.6% after saying it was awarded a $239.4 million contract to supply the U.S. Army with the company's new armor that shields arms and shoulders.
BDY +15.3% after saying it has entered into a definitive agreement to acquire the assets of Bioglan Pharmaceuticals, a subsidiary of Quintiles Transnational, for $183 million.
TOM -10.96% after lowering 1Q/05 forecast.
NKTR -11.8% after saying its Exubera NDA won't come until 05.
Economic Data
Wholesale Inventories down .1% in April versus estimates of a .5% rise and a .5% rise in March.
Recommendations
Goldman reiterated Outperform on BIIB, AMLN, GILD, TRMS, CCL, RCL, FS, GDT and IP. Goldman sees PC growth of at least 12% in 04, any upside to this will drive stocks higher. Goldman rated NRG Outperform. Citi SmithBarney said to Buy STT right now, target $62. Citi reiterated Buy on KMB, target $72. Citi reiterated Buy on PCG, target $34. ROCK raised to Sector Outperform at CIBC, target $35. PXD raised to Outperform at CSFB, target $39. SPLS rated Outperform at CSFB, target $34.
Mid-day News
U.S. stocks are falling mid-day as interest rates rise ahead of several key inflation reports. AirTran is better situated than competitors as the cost of jet fuel increases, because it has "hedged" 50% of its fuel for the rest of this year and bought 15% for 05, CEO Leonard told CNBC. President Bush supports stem-cell research with limits, First Lady Laura Bush told CNN. TiVo will unveil Internet-based features that will allow subscribers to download films and music from the Web to their recorders' hard drive, the NY Times reported. Sovereign Bancorp is considering a bid for NY Community Bancorp, the NY Daily News said. The growth in health-care spending in the U.S. fell for the second year in a row in 03, because demand for health services decreased, the AP reported. Disney and three French banks agreed to bail out Euro Disney for the second time in a decade, Bloomberg reported. A government report showed inventories relative to sales dropped to an all-time record low of 1.12 month's supply in April, suggesting companies will have to order more from factories in coming months to catch up with demand, spurring production and adding to growth, Bloomberg reported. The U.S. Justice Department won't ask the Supreme Court to reverse a lower court's decision striking down federal rules that give AT&T and other carriers discounted access to local-telephone companies' networks, Bloomberg said. Crude oil is falling to a 6-week low after the Energy Department reported that U.S. oil and gasoline inventories rose last week. U.S. Treasury notes fell for the third day in four on speculation inflation will accelerate, leading the Fed to boost rates faster than anticipated, Bloomberg reported.
BOTTOM LINE: The Portfolio is down today as my semiconductor, telecom equipment and internet longs are declining. I have taken profits in many longs this morning and added several new shorts, bringing the Portfolio's market exposure to 50% net long. The Portfolio is up substantially for the year and I want to protect profits over the short-term. One of my new shorts is SSYS and I am using a $27.50 stop-loss on the position. I also shorted a few homebuilders. Inflation reports over the next week from the PPI and CPI will likely exceed expectations, further pressuring bonds. Moreover, I expect stocks to trade weaker to neutral as investor anxiety rises over the next 2 weeks ahead of the Fed rate hike, Iraqi handover, end of the quarter and Russell rebalancing. I then expect U.S. stocks to begin another up-leg at the end of the month or beginning of July.
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