Earnings of Note
Company/Estimate
ACN/.31
ADBE/.42
AMHC/.19
KMX/.31
CCL/.35
SLR/.00
RHAT/.04
TIBX/.05
WGO/.46
ISLE/.27
Splits
None of note.
Economic Data
Producer Price Index for May estimated +.6% versus +.7% in April.
PPI Ex Food & Energy for May estimated +.2% versus +.2% in April.
Initial Jobless Claims for last week estimated at 340K versus 352K prior week.
Leading Indicators for May estimated +.4% versus +.1% in April.
Philly Fed. for June estimated at 25.5 versus 23.8 in May.
Recommendations
Goldman Sachs says the stars are aligning for the lodging companies as all signs are pointing in the same positive direction. Goldman reiterated Outperform on SYMC.
Late-Night News
Asian indices are mixed as strength in Taiwan is being offset by weakness in China. Lazard LLC, the world's largest closely held investment bank, has been approached by other banks proposing an IPO that could value Lazard at more than $3 billion, the Financial Times reported. The U.S. government may propose tariffs tomorrow on certain bedroom furniture imported from China after a group of U.S. makers said factories in China have sold goods at below-market prices, the Asian Wall Street Journal said. Inflation remains "under good control" and central bankers are not too late in starting to raise interest rates to head off price increases, Federal Reserve Bank of Richmond President Broaddus said. Senator Kerry will break from his campaign to meet in Washington with potential running mates today and tomorrow, Bloomberg reported. Bacardi Ltd., in a push to broaden its U.S. presence, is nearing an agreement to buy Sidney Frank Importing Co.'s Grey Goose vodka business for more than $2 billion, the Wall Street Journal said. Internet pharmacies outside the U.S. and Canada shipped fake versions of Pfizer's Viagra impotence drug, Roche Holding's Accutane acne treatment and Purdue Pharma's OxyContin painkiller to the U.S., Bloomberg reported.
Late-Night Trading
Asian Indices -1.0% to +1.0% on average.
S&P 500 indicated -.11%.
NASDAQ 100 indicated -.27%.
BOTTOM LINE: I expect U.S. stocks to open moderately weaker tomorrow as interest rates rise after the release of several key economic reports. The PPI, Initial Jobless Claims, Leading Indicators and Philly Fed. will likely all come in higher-than-expected. The rise in initial jobless claims I foresee is only temporary and will not offset evidence of economic strength elsewhere. Relatively low Put/Call, ARMS and VIX readings from today and weakness in my short-term trading indicators also leads me to expect a weaker morning for stocks. The Portfolio is 25% net long heading into tomorrow.
Thursday, June 17, 2004
Wednesday, June 16, 2004
Wednesday Close
S&P 500 1,133.60 +.14%
NASDAQ 1,998.24 +.13%
Leading Sectors
Oil Service +2.70%
Energy +1.85%
Biotech +1.29%
Lagging Sectors
Software -.58%
Broadcasting -.94%
Homebuilders -.97%
Other
Crude Oil 37.65 unch.
Natural Gas 6.52 +.57%
Gold 385.60 +.10%
Base Metals 105.36 +.40%
U.S. Dollar 90.01 +1.03%
10-Yr. T-note Yield 4.72% +1.02%
VIX 14.79 -1.73%
Put/Call .66 -12.0%
NYSE Arms .96 +3.23%
After-hours Movers
JBL -10.01% after meeting 3Q estimates and lowering 4Q forecast.
CHIR -3.21% after saying it intends to raise approximately $350 million gross proceeds through an offering of 30-year convertible debtentures.
Recommendations
Goldman reiterated Underperform on BSC. Goldman reiterated Attractive view on Gold sector.
After-hours News
U.S. stocks finished slightly higher today on low volume as investors continue to show apprehension ahead of several market-moving events. After the close, Moqtada al-Sadr told his Mahdi Army fighters to leave the holy cities of Najaf and Karbala and go home, the NY Times reported. President Reagan will be featured on a postage stamp in February, Bloomberg reported. The U.S. dollar rose today on the heels of reports showing the strongest industrial production in 6 years and a strong housing market. Ford Motor increased its second-quarter earnings forecast to .45-.50/share from .30-35/share, Bloomberg reported. Delta Air, which may seek bankruptcy protection, expects spending on jet fuel to rise 35% this year, CEO Grinstein said.
BOTTOM LINE: The Portfolio was slightly lower today and I took profits in a few longs in the afternoon and added a few shorts, leaving the Portfolio with 25% net long market exposure. One of my new shorts is FDS and I am using a stop-loss of $52.25. Apprehension remains high ahead many market-moving events, thus the churning action in the major indices. However, fundamentals are excellent and improving. If tomorrow's core PPI does not exceed expectations, I will change my view that the Fed will raise rates by 50 basis points by June 30 to 25 basis points on June 30. I suspect tomorrow's bond market action will dictate the direction of stock prices one way or the other.
NASDAQ 1,998.24 +.13%
Leading Sectors
Oil Service +2.70%
Energy +1.85%
Biotech +1.29%
Lagging Sectors
Software -.58%
Broadcasting -.94%
Homebuilders -.97%
Other
Crude Oil 37.65 unch.
Natural Gas 6.52 +.57%
Gold 385.60 +.10%
Base Metals 105.36 +.40%
U.S. Dollar 90.01 +1.03%
10-Yr. T-note Yield 4.72% +1.02%
VIX 14.79 -1.73%
Put/Call .66 -12.0%
NYSE Arms .96 +3.23%
After-hours Movers
JBL -10.01% after meeting 3Q estimates and lowering 4Q forecast.
CHIR -3.21% after saying it intends to raise approximately $350 million gross proceeds through an offering of 30-year convertible debtentures.
Recommendations
Goldman reiterated Underperform on BSC. Goldman reiterated Attractive view on Gold sector.
After-hours News
U.S. stocks finished slightly higher today on low volume as investors continue to show apprehension ahead of several market-moving events. After the close, Moqtada al-Sadr told his Mahdi Army fighters to leave the holy cities of Najaf and Karbala and go home, the NY Times reported. President Reagan will be featured on a postage stamp in February, Bloomberg reported. The U.S. dollar rose today on the heels of reports showing the strongest industrial production in 6 years and a strong housing market. Ford Motor increased its second-quarter earnings forecast to .45-.50/share from .30-35/share, Bloomberg reported. Delta Air, which may seek bankruptcy protection, expects spending on jet fuel to rise 35% this year, CEO Grinstein said.
BOTTOM LINE: The Portfolio was slightly lower today and I took profits in a few longs in the afternoon and added a few shorts, leaving the Portfolio with 25% net long market exposure. One of my new shorts is FDS and I am using a stop-loss of $52.25. Apprehension remains high ahead many market-moving events, thus the churning action in the major indices. However, fundamentals are excellent and improving. If tomorrow's core PPI does not exceed expectations, I will change my view that the Fed will raise rates by 50 basis points by June 30 to 25 basis points on June 30. I suspect tomorrow's bond market action will dictate the direction of stock prices one way or the other.
Mid-day Update
S&P 500 1,132.45 +.04%
NASDAQ 1,993.81 -.08%
Leading Sectors
Oil Service +2.35%
Energy +1.68%
Defense +.68%
Lagging Sectors
Software -.60%
Papers -.72%
Semis -.74%
Other
Crude Oil 37.60 +.48%
Natural Gas 6.42 +1.84%
Gold 385.20 -.90%
Base Metals 104.80 -.13%
U.S. Dollar 90.04 +1.07%
10-Yr. T-note Yield 4.72% +.98%
VIX 14.63 -2.79%
Put/Call .60 -20.0%
NYSE Arms 1.01 +8.60%
Market Movers
CYBX +62.1% after FDA panel surprised investors by recommending approval of the company's brain-stimulation device for severe depression.
ELY -19.88% after lowering 2Q and 04 guidance.
IGT +5.0% after reiterating guidance and saying it was buying back all its senior notes due in May 09.
GMAI +25.0% after boosting 4Q and 04 forecast substantially.
SNTS +24.23% after saying the FDA approved its Rapinex heartburn drug for sale in the U.S.
SMTS +12.23% after beating 2Q estimates and raising 04 guidance.
NRD +9.9% on speculation it will be acquired by Cia. Vale do Rio Doce for $4.7 billion.
HLR -9.68% after saying it overstated the circulation at the Chicago Sun-Times for several years.
HEW -8.93% after agreeing to buy Exult for about $6.30/share.
Economic Data
Housing Starts for May came in at 1967K versus estimates of 1950K and an upwardly revised 1981K in April.
Building Permits for May came in at 2077K versus estimates of 1970K and 2006K in April.
Industrial Production for May rose 1.1% versus estimates of a .8% rise and a .8% rise in April.
Capacity Utilization for May came in at 77.8% versus estimates of 77.5% and 77.1% in April.
Recommendations
Goldman Sachs remains cautious on REITS. Goldman upgraded CRE to Outperform. Goldman reiterated Outperform on KRI, BBY, GLW, IGT, FON and SLB. Goldman reiterated Underperform on SCS. Citi SmithBarney reiterated Buy on JNPR ahead of quarter, target $32.50. Citi said to Buy COGN ahead of quarter, target $39. Citi's recent Corporate Travel Managers Survey shows a solid recovery in business travel demand as 57% surveyed expect 05 travel spending to exceed 04. Citi reiterated Buy on IGT, target $50. COX raised to Sector Outperform at CIBC, target $36. KMI rated Buy at Banc of America, target $66.50. STR rated Buy at Banc of America, target $42. SRE rated Buy at Banc of America, target $36.50. ATG rated Buy at Banc of America, target $32.50. WMB rated Sell at Banc of America, target $8. PGL rated Sell at Banc of America, target $35. Q added to Focus List at JP Morgan, target $6.
Mid-day News
U.S. stocks are slightly lower today on a rise in interest rates after a report showed the fastest U.S. industrial production in 6 years. The percentage of commercial real-estate owners with terrorism insurance rose in the first quarter to the highest level since the U.S. Congress passed the Terrorism Risk Insurance Act in 02, the Wall Street Journal reported. Lennar Corp. CEO Miller told CNBC that interest rates would have to increase 200-300 basis points before the homebuilding industry would be concerned. A World Health Organization panel concluded that formaldehyde, which is used in adhesives and binders for wood, causes cancer, the LA Times reported. UN employees don't know how to report internal corruption relating to the scandal-ridden Iraqi oil-for-food program or fear reprisals if they do, the NY Times reported. U.S. gasoline prices should fall throughout the summer on increased production from OPEC and lower crude oil prices, Reuters said. Oil futures are barely rising even after the Energy Dept. reported that U.S. oil inventories increased less than expected and violence in Iraq halted production, Bloomberg reported. British scientists have applied for the first license in Europe to undertake research that would involve cloning human embryos and using the stem cells to treat diabetes, Bloomberg reported. Microsoft lost a contract for programs to run 14,000 PCs for the Munich city government to the free Linux software, Bloomberg said. U.S. Treasury notes are falling as reports showed builders broke ground on more houses than forecast in May and industrial production rose at the fastest pace in 6 years, Bloomberg reported.
BOTTOM LINE: The Portfolio is slightly lower today as my industrial and software longs are falling more than my Chinese ADR and semiconductor shorts. I exited a couple of longs this morning as they hit stop-losses, thus bringing the Portfolio's market exposure to 50% net long. I expect stocks to rise modestly into the afternoon as interest rates stabilize and investors focus on the very strong economic reports.
NASDAQ 1,993.81 -.08%
Leading Sectors
Oil Service +2.35%
Energy +1.68%
Defense +.68%
Lagging Sectors
Software -.60%
Papers -.72%
Semis -.74%
Other
Crude Oil 37.60 +.48%
Natural Gas 6.42 +1.84%
Gold 385.20 -.90%
Base Metals 104.80 -.13%
U.S. Dollar 90.04 +1.07%
10-Yr. T-note Yield 4.72% +.98%
VIX 14.63 -2.79%
Put/Call .60 -20.0%
NYSE Arms 1.01 +8.60%
Market Movers
CYBX +62.1% after FDA panel surprised investors by recommending approval of the company's brain-stimulation device for severe depression.
ELY -19.88% after lowering 2Q and 04 guidance.
IGT +5.0% after reiterating guidance and saying it was buying back all its senior notes due in May 09.
GMAI +25.0% after boosting 4Q and 04 forecast substantially.
SNTS +24.23% after saying the FDA approved its Rapinex heartburn drug for sale in the U.S.
SMTS +12.23% after beating 2Q estimates and raising 04 guidance.
NRD +9.9% on speculation it will be acquired by Cia. Vale do Rio Doce for $4.7 billion.
HLR -9.68% after saying it overstated the circulation at the Chicago Sun-Times for several years.
HEW -8.93% after agreeing to buy Exult for about $6.30/share.
Economic Data
Housing Starts for May came in at 1967K versus estimates of 1950K and an upwardly revised 1981K in April.
Building Permits for May came in at 2077K versus estimates of 1970K and 2006K in April.
Industrial Production for May rose 1.1% versus estimates of a .8% rise and a .8% rise in April.
Capacity Utilization for May came in at 77.8% versus estimates of 77.5% and 77.1% in April.
Recommendations
Goldman Sachs remains cautious on REITS. Goldman upgraded CRE to Outperform. Goldman reiterated Outperform on KRI, BBY, GLW, IGT, FON and SLB. Goldman reiterated Underperform on SCS. Citi SmithBarney reiterated Buy on JNPR ahead of quarter, target $32.50. Citi said to Buy COGN ahead of quarter, target $39. Citi's recent Corporate Travel Managers Survey shows a solid recovery in business travel demand as 57% surveyed expect 05 travel spending to exceed 04. Citi reiterated Buy on IGT, target $50. COX raised to Sector Outperform at CIBC, target $36. KMI rated Buy at Banc of America, target $66.50. STR rated Buy at Banc of America, target $42. SRE rated Buy at Banc of America, target $36.50. ATG rated Buy at Banc of America, target $32.50. WMB rated Sell at Banc of America, target $8. PGL rated Sell at Banc of America, target $35. Q added to Focus List at JP Morgan, target $6.
Mid-day News
U.S. stocks are slightly lower today on a rise in interest rates after a report showed the fastest U.S. industrial production in 6 years. The percentage of commercial real-estate owners with terrorism insurance rose in the first quarter to the highest level since the U.S. Congress passed the Terrorism Risk Insurance Act in 02, the Wall Street Journal reported. Lennar Corp. CEO Miller told CNBC that interest rates would have to increase 200-300 basis points before the homebuilding industry would be concerned. A World Health Organization panel concluded that formaldehyde, which is used in adhesives and binders for wood, causes cancer, the LA Times reported. UN employees don't know how to report internal corruption relating to the scandal-ridden Iraqi oil-for-food program or fear reprisals if they do, the NY Times reported. U.S. gasoline prices should fall throughout the summer on increased production from OPEC and lower crude oil prices, Reuters said. Oil futures are barely rising even after the Energy Dept. reported that U.S. oil inventories increased less than expected and violence in Iraq halted production, Bloomberg reported. British scientists have applied for the first license in Europe to undertake research that would involve cloning human embryos and using the stem cells to treat diabetes, Bloomberg reported. Microsoft lost a contract for programs to run 14,000 PCs for the Munich city government to the free Linux software, Bloomberg said. U.S. Treasury notes are falling as reports showed builders broke ground on more houses than forecast in May and industrial production rose at the fastest pace in 6 years, Bloomberg reported.
BOTTOM LINE: The Portfolio is slightly lower today as my industrial and software longs are falling more than my Chinese ADR and semiconductor shorts. I exited a couple of longs this morning as they hit stop-losses, thus bringing the Portfolio's market exposure to 50% net long. I expect stocks to rise modestly into the afternoon as interest rates stabilize and investors focus on the very strong economic reports.
Wednesday Watch
Earnings of Note
Company/Estimate
BSC/2.23
BBY/.33
JBL/.26
KBH/2.10
Splits
APPB 3-for-2
DVA 3-for-2
HSY 2-for-1
Economic Data
Housing Starts for May estimated at 1950K versus 1969K in April.
Building Permits for May estimated at 1970K versus 2006K in April.
Industrial Production for May estimated +.8% versus +.8% in April.
Capacity Utilization for May estimated at 77.5% versus 76.9% in April.
Fed's Beige Book
Recommendations
Goldman Sachs reiterated Outperform on IGT, SLB, AMGN, CVD and DNA.
Late-Night News
Asian indices are higher on strength in Japan as investor optimism increased following a fall in U.S. interest rates. China's prices are under control and the country is capable of avoiding "severe" inflation, the official Xinhua news agency reported, citing a report by the National Bureau of Statistics. IBM and Microsoft have given support to moves to compel companies to count stock options as expenses that reduce earnings, the Financial Times reported. Iran plans to start an oil-trading market for OPEC and Middle-East producers, the Guardian reported. Nortel and Nokia may get an order worth $881 million form Bharat Sanchar Nigam Ltd., the Business Line reported. Mandalay Resort Group's board accepted MGM Mirage's $71/share takeover bid, the Wall Street Journal reported. K2 will pay about $200 million for three ski brands in a push to compete with large apparel companies like Nike and Adidas, the Wall Street Journal reported. China's central bank said it won't yield to pressure from trading partners to stop fixing the value of the yuan to the dollar, Bloomberg reported.
Late-Night Trading
Asian Indices -.50% to +1.50% on average.
S&P 500 indicated +.07%.
NASDAQ 100 indicated +.07%.
BOTTOM LINE: I expect U.S. stocks to open modestly higher tomorrow on a better-than-expected industrial production report, strength in Asia and strong corporate earnings reports. The Portfolio is 75% net long heading into tomorrow.
Company/Estimate
BSC/2.23
BBY/.33
JBL/.26
KBH/2.10
Splits
APPB 3-for-2
DVA 3-for-2
HSY 2-for-1
Economic Data
Housing Starts for May estimated at 1950K versus 1969K in April.
Building Permits for May estimated at 1970K versus 2006K in April.
Industrial Production for May estimated +.8% versus +.8% in April.
Capacity Utilization for May estimated at 77.5% versus 76.9% in April.
Fed's Beige Book
Recommendations
Goldman Sachs reiterated Outperform on IGT, SLB, AMGN, CVD and DNA.
Late-Night News
Asian indices are higher on strength in Japan as investor optimism increased following a fall in U.S. interest rates. China's prices are under control and the country is capable of avoiding "severe" inflation, the official Xinhua news agency reported, citing a report by the National Bureau of Statistics. IBM and Microsoft have given support to moves to compel companies to count stock options as expenses that reduce earnings, the Financial Times reported. Iran plans to start an oil-trading market for OPEC and Middle-East producers, the Guardian reported. Nortel and Nokia may get an order worth $881 million form Bharat Sanchar Nigam Ltd., the Business Line reported. Mandalay Resort Group's board accepted MGM Mirage's $71/share takeover bid, the Wall Street Journal reported. K2 will pay about $200 million for three ski brands in a push to compete with large apparel companies like Nike and Adidas, the Wall Street Journal reported. China's central bank said it won't yield to pressure from trading partners to stop fixing the value of the yuan to the dollar, Bloomberg reported.
Late-Night Trading
Asian Indices -.50% to +1.50% on average.
S&P 500 indicated +.07%.
NASDAQ 100 indicated +.07%.
BOTTOM LINE: I expect U.S. stocks to open modestly higher tomorrow on a better-than-expected industrial production report, strength in Asia and strong corporate earnings reports. The Portfolio is 75% net long heading into tomorrow.
Tuesday, June 15, 2004
Tuesday Close
S&P 500 1,132.01 +.60%
NASDAQ 1,995.60 +1.30%
Leading Sectors
Iron/Steel +3.65%
Oil Service +2.84%
Nanotechnology +1.86%
Lagging Sectors
Gaming +.03%
Broadcasting -.18%
I-Banks -1.17%
Other
Crude Oil 37.64 +.59%
Natural Gas 6.33 +.41%
Gold 389.10 +.10%
Base Metals 104.94 +1.16%
U.S. Dollar 89.09 -.95%
10-Yr. T-note Yield 4.67% -3.98%
VIX 15.05 -6.35%
Put/Call .75 -47.55%
NYSE Arms .93 -25.0%
After-hours Movers
SNTS +32.57% after saying the FDA approved its Rapinex heartburn drug for sale in the U.S.
SAFM +4.96% after saying it was added to the S&P 600 Index.
ELY -20.35% after lowering 2Q and 04 guidance.
HLR -5.71% after saying it overstated the circulation at the Chicago Sun-Times for several years.
Recommendations
Goldman Sachs reiterated Outperform on SYMC.
After-hours News
U.S. stocks finished higher today as interest rates plunged, consumer confidence rose and Greenspan made positive comments with respect to inflation. After the close, Google agreed to buy a stake in Chinese search engine Baidu.com, the Financial Times said. A person claiming to be the military leader of al-Qaeda in Saudi Arabia threatened to kill a kidnapped American if all of the members of the terrorist organization being held as prisoners aren't released, Fox News reported. Inflation is "not likely to be a serious concern" and the Fed can stick to its plan for measured increases in the benchmark interest rate unless that changes, Fed Chairman Greenspan said. Dow Chemical is raising prices for polyethylene in the U.S. as demand for the world's most widely used plastic surges, Bloomberg said. Oracle said fourth-quarter profit met expectations of $990 million on increased demand for its database software, Bloomberg reported. U.S. 10-year Treasury notes rose by the most since January 01 after a measure of consumer prices increased less than some traders expected, Bloomberg said.
BOTTOM LINE: The Portfolio was lower today as my tech shorts rose more than my basic material and industrial longs. I added a few more tech longs in the afternoon, bringing the Portfolio's market exposure to 75% net long. One of my new longs is VRTSE and I am using a $27 stop-loss on this position. Today's advance was a little disappointing, considering the magnitude of the drop in interest rates. However, I believe that investors' relatively muted reaction was due to anxiety over coming events in the next few weeks. Any market weakness due to a likely above-expectations PPI reading, Fed rate hike, violence during the handover of power to Iraq or end of the quarter repositioning should be used by long-term investors to add to favorite long positions. A recent survey showed that 57% of Americans believe that the U.S. economy has lost jobs over the last 6 months, when in reality it has gained 1.2 million jobs. This is further evidence that the media's extreme focus on negativity is masking many very positive developments and affecting consumer attitudes.
NASDAQ 1,995.60 +1.30%
Leading Sectors
Iron/Steel +3.65%
Oil Service +2.84%
Nanotechnology +1.86%
Lagging Sectors
Gaming +.03%
Broadcasting -.18%
I-Banks -1.17%
Other
Crude Oil 37.64 +.59%
Natural Gas 6.33 +.41%
Gold 389.10 +.10%
Base Metals 104.94 +1.16%
U.S. Dollar 89.09 -.95%
10-Yr. T-note Yield 4.67% -3.98%
VIX 15.05 -6.35%
Put/Call .75 -47.55%
NYSE Arms .93 -25.0%
After-hours Movers
SNTS +32.57% after saying the FDA approved its Rapinex heartburn drug for sale in the U.S.
SAFM +4.96% after saying it was added to the S&P 600 Index.
ELY -20.35% after lowering 2Q and 04 guidance.
HLR -5.71% after saying it overstated the circulation at the Chicago Sun-Times for several years.
Recommendations
Goldman Sachs reiterated Outperform on SYMC.
After-hours News
U.S. stocks finished higher today as interest rates plunged, consumer confidence rose and Greenspan made positive comments with respect to inflation. After the close, Google agreed to buy a stake in Chinese search engine Baidu.com, the Financial Times said. A person claiming to be the military leader of al-Qaeda in Saudi Arabia threatened to kill a kidnapped American if all of the members of the terrorist organization being held as prisoners aren't released, Fox News reported. Inflation is "not likely to be a serious concern" and the Fed can stick to its plan for measured increases in the benchmark interest rate unless that changes, Fed Chairman Greenspan said. Dow Chemical is raising prices for polyethylene in the U.S. as demand for the world's most widely used plastic surges, Bloomberg said. Oracle said fourth-quarter profit met expectations of $990 million on increased demand for its database software, Bloomberg reported. U.S. 10-year Treasury notes rose by the most since January 01 after a measure of consumer prices increased less than some traders expected, Bloomberg said.
BOTTOM LINE: The Portfolio was lower today as my tech shorts rose more than my basic material and industrial longs. I added a few more tech longs in the afternoon, bringing the Portfolio's market exposure to 75% net long. One of my new longs is VRTSE and I am using a $27 stop-loss on this position. Today's advance was a little disappointing, considering the magnitude of the drop in interest rates. However, I believe that investors' relatively muted reaction was due to anxiety over coming events in the next few weeks. Any market weakness due to a likely above-expectations PPI reading, Fed rate hike, violence during the handover of power to Iraq or end of the quarter repositioning should be used by long-term investors to add to favorite long positions. A recent survey showed that 57% of Americans believe that the U.S. economy has lost jobs over the last 6 months, when in reality it has gained 1.2 million jobs. This is further evidence that the media's extreme focus on negativity is masking many very positive developments and affecting consumer attitudes.
Mid-day Update
S&P 500 1,125.12 +.95%
NASDAQ 1,969.24 +1.77%
Leading Sectors
Iron/Steel +3.40%
Oil Service +2.95%
Computer Boxmakers +2.28%
Lagging Sectors
Insurance +.25%
Broadcasting +.22%
Hospitals +.22%
Other
Crude Oil 37.50 -1.0%
Natural Gas 6.32 +1.14%
Gold 389.00 +1.25%
Base Metals 104.94 +1.16%
U.S. Dollar 89.16 -.85%
10-Yr. T-note Yield 4.69% -3.61%
VIX 14.88 -7.41%
Put/Call .70 -51.05%
NYSE Arms .75 -39.52%
Market Movers
SYMC -3.77% after MSFT said it will sell a separate program to protect customers' computers from viruses, competing with SYMC.
RHAT -9.14% after meeting 1Q estimates, multiple downgrades and announcing resignation of CFO.
AFFX +12.58% after raising 04 forecast.
FDS +7.96% after meeting 3Q estimates and raising 4Q forecast.
TSG +11.53% after raising 2Q estimates.
NUE +4.14% after substantially boosting 2Q estimates.
CTSH +6.23% after Citi SmithBarney said project pricing stabilized.
HGR -8.53%(halted) after a news report claimed it may have improperly booked sales by filling out fake prescriptions.
AD -6.56% after announcing resignation of CEO and downgrade by AG Edwards to Hold.
Economic Data
Consumer Price Index for May rose .6% versus expectations of a .5% rise and a .2% increase in April.
CPI Ex Food & Energy for May rose .2% versus expectations of .2% and a .3% rise in April.
Business Inventories for April rose .5% versus expectations of .4% and a .7% rise in March.
Empire Manufacturing for June came in at 30.17 versus expectations of 30.5 and a reading of 30.21 in May.
Preliminary U. of Mich. Consumer Confidence for June came in at 95.2 versus expectations of 90.8 and a reading of 90.2 in May.
Recommendations
Goldman Sachs reiterated Outperform on DIS, KO, KRB, CLX, NUE, AET, AMGN and MSFT. Goldman reiterated Underperform on TSG. Citi SmithBarney likes semi-equipment stocks, favorites are LRCX, WFR and DPMI. Citi reiterated Sell on FLSH, target $15. Citi reiterated Buy on VRTSE, target $34. Citi reiterated Buy on JNPR, target $32.50. Citi reiterated Sell on STX, target $10. QLTI raised to Buy at UBS, target $21.50. MAR raised to Buy at Deutsche Bank, target $61. IMDC raised to Buy at Oppenheimer. RHAT raised to Outperform at CSFB, target $25.
Mid-day News
U.S. stocks are rising mid-day on falling interest rates, strong consumer confidence and a fall in a core inflation reading. Yahoo! is expanding the amount of free storage for its e-mail customers in an effort to compete with Google, the NY Times said. Coca-Cola's Asian president said the new C2 cola is selling well after its Japanese introduction, the Wall Street Journal reported. Louisiana-Pacific CEO Suwyn told CNBC that the company is considering a stock buyback, Bloomberg reported. Enron manipulated energy markets and overcharged customers in western U.S. states during the 2000-2001 energy crisis by about $1.1 billion, the AP reported. 30% of U.S. employers plan to add workers in the third quarter, the most since the stock market bubble burst in 2000, according to a Manpower survey. A recent survey by the World Wealth report shows that 2.27 million Americans are now millionaires, the most ever. The survey also said 1 out of every 130 Americans has more than $1 million, even excluding home equity, Bloomberg said. Nucor, the biggest U.S. maker of steel from recycled metal, raised its second-quarter profit forecast because of growing demand in the U.S. and overseas, Bloomberg reported. Israeli Prime Minister Sharon won't be indicted on charges of bribery, Israel's Attorney General Mazuz said. The AARP may support a bill that enables American to import drugs from Canada, where government price controls keep prescription costs lower, Bloomberg reported. The U. of Mich.'s preliminary reading on consumer sentiment in June rose to 95.2, substantially higher than forecasts, as the addition of 1.2 million jobs this year, an improving situation in Iraq, rising incomes and falling gasoline prices is boosting the outlook for most Americans. An inflation report today showed the core CPI rose just .2%, below expectations, propelling government bonds to their best gains in over three months.
BOTTOM LINE: The Portfolio is down today as my tech shorts are rising more than my industrial and basic material longs. I covered a number of retail and homebuilding shorts this morning as they hit stop-losses and added a few technology and financial longs, bringing the Portfolio's market exposure to 50% net long. One of my new longs is CME and I am using a $123.50 stop-loss on this new position. While I correctly anticipated that the consumer sentiment and CPI readings would exceed expectations, I incorrectly judged the extent to which investors were focused on the CPI's core rate. Today's significant fall in interest rates sets the stage for what I believe will be a meaningful move higher for U.S. stocks beginning in the next month. Long-term investors should use any weakness over the next few weeks to add to favorite positions.
NASDAQ 1,969.24 +1.77%
Leading Sectors
Iron/Steel +3.40%
Oil Service +2.95%
Computer Boxmakers +2.28%
Lagging Sectors
Insurance +.25%
Broadcasting +.22%
Hospitals +.22%
Other
Crude Oil 37.50 -1.0%
Natural Gas 6.32 +1.14%
Gold 389.00 +1.25%
Base Metals 104.94 +1.16%
U.S. Dollar 89.16 -.85%
10-Yr. T-note Yield 4.69% -3.61%
VIX 14.88 -7.41%
Put/Call .70 -51.05%
NYSE Arms .75 -39.52%
Market Movers
SYMC -3.77% after MSFT said it will sell a separate program to protect customers' computers from viruses, competing with SYMC.
RHAT -9.14% after meeting 1Q estimates, multiple downgrades and announcing resignation of CFO.
AFFX +12.58% after raising 04 forecast.
FDS +7.96% after meeting 3Q estimates and raising 4Q forecast.
TSG +11.53% after raising 2Q estimates.
NUE +4.14% after substantially boosting 2Q estimates.
CTSH +6.23% after Citi SmithBarney said project pricing stabilized.
HGR -8.53%(halted) after a news report claimed it may have improperly booked sales by filling out fake prescriptions.
AD -6.56% after announcing resignation of CEO and downgrade by AG Edwards to Hold.
Economic Data
Consumer Price Index for May rose .6% versus expectations of a .5% rise and a .2% increase in April.
CPI Ex Food & Energy for May rose .2% versus expectations of .2% and a .3% rise in April.
Business Inventories for April rose .5% versus expectations of .4% and a .7% rise in March.
Empire Manufacturing for June came in at 30.17 versus expectations of 30.5 and a reading of 30.21 in May.
Preliminary U. of Mich. Consumer Confidence for June came in at 95.2 versus expectations of 90.8 and a reading of 90.2 in May.
Recommendations
Goldman Sachs reiterated Outperform on DIS, KO, KRB, CLX, NUE, AET, AMGN and MSFT. Goldman reiterated Underperform on TSG. Citi SmithBarney likes semi-equipment stocks, favorites are LRCX, WFR and DPMI. Citi reiterated Sell on FLSH, target $15. Citi reiterated Buy on VRTSE, target $34. Citi reiterated Buy on JNPR, target $32.50. Citi reiterated Sell on STX, target $10. QLTI raised to Buy at UBS, target $21.50. MAR raised to Buy at Deutsche Bank, target $61. IMDC raised to Buy at Oppenheimer. RHAT raised to Outperform at CSFB, target $25.
Mid-day News
U.S. stocks are rising mid-day on falling interest rates, strong consumer confidence and a fall in a core inflation reading. Yahoo! is expanding the amount of free storage for its e-mail customers in an effort to compete with Google, the NY Times said. Coca-Cola's Asian president said the new C2 cola is selling well after its Japanese introduction, the Wall Street Journal reported. Louisiana-Pacific CEO Suwyn told CNBC that the company is considering a stock buyback, Bloomberg reported. Enron manipulated energy markets and overcharged customers in western U.S. states during the 2000-2001 energy crisis by about $1.1 billion, the AP reported. 30% of U.S. employers plan to add workers in the third quarter, the most since the stock market bubble burst in 2000, according to a Manpower survey. A recent survey by the World Wealth report shows that 2.27 million Americans are now millionaires, the most ever. The survey also said 1 out of every 130 Americans has more than $1 million, even excluding home equity, Bloomberg said. Nucor, the biggest U.S. maker of steel from recycled metal, raised its second-quarter profit forecast because of growing demand in the U.S. and overseas, Bloomberg reported. Israeli Prime Minister Sharon won't be indicted on charges of bribery, Israel's Attorney General Mazuz said. The AARP may support a bill that enables American to import drugs from Canada, where government price controls keep prescription costs lower, Bloomberg reported. The U. of Mich.'s preliminary reading on consumer sentiment in June rose to 95.2, substantially higher than forecasts, as the addition of 1.2 million jobs this year, an improving situation in Iraq, rising incomes and falling gasoline prices is boosting the outlook for most Americans. An inflation report today showed the core CPI rose just .2%, below expectations, propelling government bonds to their best gains in over three months.
BOTTOM LINE: The Portfolio is down today as my tech shorts are rising more than my industrial and basic material longs. I covered a number of retail and homebuilding shorts this morning as they hit stop-losses and added a few technology and financial longs, bringing the Portfolio's market exposure to 50% net long. One of my new longs is CME and I am using a $123.50 stop-loss on this new position. While I correctly anticipated that the consumer sentiment and CPI readings would exceed expectations, I incorrectly judged the extent to which investors were focused on the CPI's core rate. Today's significant fall in interest rates sets the stage for what I believe will be a meaningful move higher for U.S. stocks beginning in the next month. Long-term investors should use any weakness over the next few weeks to add to favorite positions.
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