S&P 500 1,130.30 -.42%
NASDAQ 1,974.38 -.62%
Leading Sectors
Nanotechnology +2.58%
Utilities +.59%
Tobacco +.36%
Lagging Sectors
Oil Service -1.0%
Internet -1.17%
HMO's -2.10%
Other
Crude Oil 37.75 -.05%
Natural Gas 6.31 -.46%
Gold 394.40 -.03%
Base Metals 109.83 +.46%
U.S. Dollar 89.26 +.01%
10-Yr. T-note Yield 4.68% -.46%
VIX 15.26 +1.80%
Put/Call .76 -7.32%
NYSE Arms 1.31 +63.75%
After-hours Movers
GLYN +49.6% after Dick's Sporting Goods(DKS) agreed to buy it for $305 million is cash.
TBUS +22.5% after announcing it received an order for security-related equipment that will be used during the Olympic Games.
DKS +6.99% after saying GLYN acquisition will boost 04 earnings.
PLMO +19.7% after beating 4Q estimates and raising 1Q forecast substantially.
LABS +4.74% after saying it will be added to the S&P SmallCap 600.
Recommendations
TheStreet.com has a positive column on BBBY saying its sell-off is overdone. Goldman Sachs raised their long-term growth rate forecast for AVP to 15-17%, reiterated Outperform.
After-hours News
U.S. stocks finished slightly lower today on weakness in healthcare and energy shares. After the close, InterActiveCorp expects to make more acquisitions, Chairman and CEO Barry Diller said in an interview with CNBC. Erectile dysfunction in diabetic men may be a warning of "silent" heart disease, according to a study in the June 22 online version of the Circulation Journal. General Electric and Honeywell International reached separate agreements to provide equipment to Chinese companies and will sign the contracts tomorrow at a ceremony in Beijing with U.S. Commerce Secretary Donald Evans, Bloomberg reported. Cablevision, the largest cable-tv operator in the New York area, began offering a $90-a-month package of TV, telephone and Web-access service to lure customers from satellite and phone competitors, Bloomberg reported. California Governor Schwarzenegger signed new casino agreements with five Indian tribes to provide $1 billion to the state next year, meeting a campaign promise to tap gabling money to fill budget deficits, Bloomberg reported. The U.S. Senate killed an attempt by Democrats to give journalists access to the arrival of coffins carrying war dead home from Iraq, Bloomberg reported. The U.S. and the European Union agreed on terms for EU construction of its Galileo satellite navigation system, boosting a technology market that could grow to $300 billion by 2020 and benefiting companies such as Trimble Navigation and Garmin Ltd, Bloomberg reported.
BOTTOM LINE: The Portfolio finished near its highs for the day on strength in my base metal, security and telecom equipment longs and weakness in my Chinese ADR and software shorts. I added a few new healthcare IT and Oil Service shorts in the afternoon, leaving the Portfolio with 75% net long market exposure. One of my new shorts is PTEN and I am using a $33.25 stop-loss on this position. A number of stocks experienced eye-popping gains today, notwithstanding the market's overall quietly weak performance. This is positive for market psychology as it appears that good news is beginning to be rewarded again in a substantial fashion. NVEC, TASR and PLMO were a few of the highly-shorted companies that reported great news today and rose significantly. If my Portfolio were positioned substantially short right now I would be very worried over this type of action. As well, interest rates and energy prices continue to head lower which makes me more confident that the market is consolidating before a significant move up within the next few weeks.
Monday, June 21, 2004
Mid-day Update
S&P 500 1,136.11 +.10%
NASDAQ 1,9990.84 +.21%
Leading Sectors
Nanotechnology +2.90%
Utilities +1.02%
Semis +.91%
Lagging Sectors
Oil Service -.68%
Telecom -.78%
HMO's -1.17%
Other
Crude Oil 37.80 -3.08%
Natural Gas 6.33 -3.07%
Gold 394.20 -.38%
Base Metals 109.83 +.46%
U.S. Dollar 89.28 +.22%
10-Yr. T-note Yield 4.68% -.55%
VIX 15.03 +.27%
Put/Call .68 -17.07%
NYSE Arms 1.02 +27.50%
Market Movers
BFD +26.0% after announcing its acquisition by Banknorth for $195 million.
NVEC +30.9% after saying the U.S. Patent and Trademark Office issued the company a patent for an innovation type of MRAM.
OXM +18.78% after saying it agreed to buy Ben Sherman Ltd. for $146 million in cash.
TASR +17.58% after increasing it annual revenue growth forecast from 100% to 150% for 04.
SOTR +13.62% after agreeing to be acquired by Wachovia for $14.3 billion.
CPG +11.7% after agreeing to be acquired by Simon Property Group for $3.5 billion in cash and stock.
BBBB +10.7% on continuing strength after IPO.
IMDC +6.55% after settling a patent lawsuit with Ethicon Endo-Surgery for $17.3 million.
EASI +5.28% after saying it is in full-scale production of its armored cab design for the U.S. Army's Family of Medium Tactical Vehicles.
MIL +5.27% after positive Barron's mention.
LABS -8.58% after saying it plans to sell $90 million in convertible debt.
CYBX -4.67% on profit-taking.
ASKJ -5.1% on insider selling.
SOHU -7.33% on crackdown by Chinese government on online content and YHOO entering Chinese search market.
Economic Data
None of note.
Recommendations
Goldman Sachs reiterated Outperform on SLR, PAYX, KO, PEP, STZ and ATYT. Goldman reiterated Underperform on PBG and RKY. Citi SmithBarney said to Buy MOT, target $25. Citi says their recent Semi Purchasing Manager survey was better than expectations and has positive implications for LLTC, MXIM, INTC, AMD and NSM. Citi reiterated Sell on MU, target $12. ARXX raised to Buy at Deutsche Bank, target $16.
Mid-day News
U.S. stocks are quietly higher today as investors continue to fear making big bets ahead of several market-moving events over the next couple of weeks. Iran seized three British navy vessels that reportedly entered the country's territorial waters, Agence France-Presse said. U.S. officials have been spending about $2.5 billion in Iraqi oil revenue on programs such as police cars and uniforms, as well as repairing schools, the NY Times reported. Abiomed, the maker of the experimental artificial heart, expects to become profitable by March 31 and to have annual revenue of $500 million by 2011, the Boston Globe reported. The leaders of the largest labor unions in the U.S. are considering reducing the number of unions to 15 from 65 to better focus their organizing and bargaining efforts, the LA Times reported. The AFL-CIO is undertaking its earliest and largest "get-out-the-vote" campaign ever for Democratic presidential contender John Kerry, the Washington Post reported. Geely Group this year plans to become the first Chinese automaker to sell cars in the U.S., Automotive News reported. Wal-Mart said June's sales are rising around the low end of its recent forecast, Bloomberg reported. Motorola expects to raise as much as $2.73 billion in an IPO of its Freescale Semiconductor unit, Bloomberg said. A privately funded and constructed spaceship was launched today from California's Mojave Desert on a mission to become the first non-governmental craft to leave the Earth's atmosphere, Bloomberg reported. The U.S. SEC is moving ahead with plans to bring hedge funds under greater government oversight over the opposition of most of the $800 billion industry, Bloomberg reported. Crude oil futures are falling as Iraq resumed partial exports through one of two pipelines shut after an attack early last week, Bloomberg said.
BOTTOM LINE: The Portfolio is having a very good day today as my security and telecom equipment longs are rising and short Chinese ADRs are falling. I added a few new technology longs this morning, bringing the Portfolio to 100% net long market exposure. The fundamentals are improving today on an acceleration in merger activity, falling energy prices and declining interest rates. I expect U.S. stocks to rise modestly into the close on short-covering.
NASDAQ 1,9990.84 +.21%
Leading Sectors
Nanotechnology +2.90%
Utilities +1.02%
Semis +.91%
Lagging Sectors
Oil Service -.68%
Telecom -.78%
HMO's -1.17%
Other
Crude Oil 37.80 -3.08%
Natural Gas 6.33 -3.07%
Gold 394.20 -.38%
Base Metals 109.83 +.46%
U.S. Dollar 89.28 +.22%
10-Yr. T-note Yield 4.68% -.55%
VIX 15.03 +.27%
Put/Call .68 -17.07%
NYSE Arms 1.02 +27.50%
Market Movers
BFD +26.0% after announcing its acquisition by Banknorth for $195 million.
NVEC +30.9% after saying the U.S. Patent and Trademark Office issued the company a patent for an innovation type of MRAM.
OXM +18.78% after saying it agreed to buy Ben Sherman Ltd. for $146 million in cash.
TASR +17.58% after increasing it annual revenue growth forecast from 100% to 150% for 04.
SOTR +13.62% after agreeing to be acquired by Wachovia for $14.3 billion.
CPG +11.7% after agreeing to be acquired by Simon Property Group for $3.5 billion in cash and stock.
BBBB +10.7% on continuing strength after IPO.
IMDC +6.55% after settling a patent lawsuit with Ethicon Endo-Surgery for $17.3 million.
EASI +5.28% after saying it is in full-scale production of its armored cab design for the U.S. Army's Family of Medium Tactical Vehicles.
MIL +5.27% after positive Barron's mention.
LABS -8.58% after saying it plans to sell $90 million in convertible debt.
CYBX -4.67% on profit-taking.
ASKJ -5.1% on insider selling.
SOHU -7.33% on crackdown by Chinese government on online content and YHOO entering Chinese search market.
Economic Data
None of note.
Recommendations
Goldman Sachs reiterated Outperform on SLR, PAYX, KO, PEP, STZ and ATYT. Goldman reiterated Underperform on PBG and RKY. Citi SmithBarney said to Buy MOT, target $25. Citi says their recent Semi Purchasing Manager survey was better than expectations and has positive implications for LLTC, MXIM, INTC, AMD and NSM. Citi reiterated Sell on MU, target $12. ARXX raised to Buy at Deutsche Bank, target $16.
Mid-day News
U.S. stocks are quietly higher today as investors continue to fear making big bets ahead of several market-moving events over the next couple of weeks. Iran seized three British navy vessels that reportedly entered the country's territorial waters, Agence France-Presse said. U.S. officials have been spending about $2.5 billion in Iraqi oil revenue on programs such as police cars and uniforms, as well as repairing schools, the NY Times reported. Abiomed, the maker of the experimental artificial heart, expects to become profitable by March 31 and to have annual revenue of $500 million by 2011, the Boston Globe reported. The leaders of the largest labor unions in the U.S. are considering reducing the number of unions to 15 from 65 to better focus their organizing and bargaining efforts, the LA Times reported. The AFL-CIO is undertaking its earliest and largest "get-out-the-vote" campaign ever for Democratic presidential contender John Kerry, the Washington Post reported. Geely Group this year plans to become the first Chinese automaker to sell cars in the U.S., Automotive News reported. Wal-Mart said June's sales are rising around the low end of its recent forecast, Bloomberg reported. Motorola expects to raise as much as $2.73 billion in an IPO of its Freescale Semiconductor unit, Bloomberg said. A privately funded and constructed spaceship was launched today from California's Mojave Desert on a mission to become the first non-governmental craft to leave the Earth's atmosphere, Bloomberg reported. The U.S. SEC is moving ahead with plans to bring hedge funds under greater government oversight over the opposition of most of the $800 billion industry, Bloomberg reported. Crude oil futures are falling as Iraq resumed partial exports through one of two pipelines shut after an attack early last week, Bloomberg said.
BOTTOM LINE: The Portfolio is having a very good day today as my security and telecom equipment longs are rising and short Chinese ADRs are falling. I added a few new technology longs this morning, bringing the Portfolio to 100% net long market exposure. The fundamentals are improving today on an acceleration in merger activity, falling energy prices and declining interest rates. I expect U.S. stocks to rise modestly into the close on short-covering.
Monday Watch
Earnings of Note
Company/Estimate
PDG/.00
WAG/.32
APOG/.08
WWE/.19
Splits
CACH 3-for-2
PG 2-for-1
WGR 2-for-1
Economic Data
None of note.
Weekend Recommendations
Forbes on Fox had guests that were positive on APC, FCX, MMC, AH, DHB and IDNX. Bulls and Bears had guests that were positive on LYG, OXY, HPQ, NMG/A, TARO and mixed on ATYT and STX. Cashin' In had guests that were positive on SU, UPL,NOC and mixed on DEO. Louis Rukeyser's Wall Street had guests that were positive on CVX, CNF, FMC, MET, MSFT, TYC, MRK, AES and EP. Wall St. Week w/Fortune had guests that were positive on FRX, AGN, ELN, HCR, BEV and KIND. Barron's had a positive column on MIL. Barron's mid-year roundtable is positive on stocks for the second half of the year. Goldman Sachs reiterated Outperform on EBAY and raised 2Q estimates. Goldman said FLEX is oversold and to buy for a trade. Goldman reiterated Outperform on ATYT ahead of earnings report. ElectronicNews has a positive article on the semiconductor industry.
Weekend News
China will cut Internet access to unlicensed Internet cafes and strengthen its control over online chat rooms as part of a crackdown on "unhealthy" material on the Web, Xinhua reported. Baghdad's raw sewage began receiving treatment late last month for the first time in as many as 15 years, though officials made no fanfare about it for fear of the treatment plant being bombed, the NY Times reported. Telephone, cable and satellite prices will decline as they compete more with each other and fail to meet their growth goals, Barron's reported. Former President Bill Clinton, in a memoir to be released Tuesday, said his biggest disappointment while in office was his failure to bring Osama bin Laden to justice, Newsweek reported. Clinton lost his temper for several minutes during an interview that is scheduled to run Tuesday with the BBC's David Dimbleby when he was repeatedly questioned about his affair with Monica Lewinsky, the Sunday Telegraph reported. Las Vegas Sands, which operates the Venetian Casino Resort in Nevada, may have a market value of at least $4 billion after an IPO, Barron's reported. Al-Qaeda confirmed the death of the terrorist group's leader in Saudi Arabia, Agence France-Presse reported. Oil supplies resumed to Iraq's southern port of Basra after repairs were completed to a pipeline sabotaged by insurgents last week, the AP said. Exxon Mobil won a contract worth up to $1 billion to boost output from the Upper Zakum offshore oil field by a third over two years, Gulf News reported. Time Warner, whose profit has risen since Parsons became CEO in May 02, still faces U.S. federal accounting probes that began about two years ago, the NY Times reported. Pakistan and Saudi Arabia helped set the stage for the Sept. 11 attacks by cutting deals with Afghanistan's Taliban and Osama bin Laden that allowed the network to flourish, the LA Times reported. U.S. Justice Dept. prosecutors plan to ask a grand jury to return a fraud indictment against Enron's former Chairman Ken Lay, the Houston Chronicle reported. GE will offer financing products direct to consumers under the brand GE Money, the Financial Times reported. Chicago Sun-Times circulation officials set up fake sales accounts and told distributors to throw out newspapers to boost circulation numbers, the Wall Street Journal reported. The American Journal of Psychiatry published a positive study about Forest Lab's Celexa without acknowledging a negative one known to exist, the Wall Street Journal said. U.S. Treasury Secretary Snow said private sector forecasts that the U.S. economy will continue to generate 200,000 to 300,000 jobs a month this year are "reasonable," Bloomberg reported. Copper prices will probably rise for the second week in London and NY as U.S. demand for metal grows and inventories shrink, according to a Bloomberg survey. The South Korean government said it will stick to its plans to deploy 3,000 more troops in Iraq this summer, rejecting an ultimatum from Muslim militants who are threatening to behead a South Korean hostage unless the nation's soldiers are withdrawn, Bloomberg said.
Late-Night Trading
Asian indices are mixed, -.25% to +1.50% on average.
S&P 500 indicated +.27%.
NASDAQ 100 indicated +.51%.
BOTTOM LINE: I expect U.S. stocks to open higher tomorrow as strength in Japan and declining oil prices boost investor sentiment. One of the new longs I added Friday afternoon was PD and I am using a $70 stop-loss on this position. The Portfolio is 75% net long heading into the week.
Company/Estimate
PDG/.00
WAG/.32
APOG/.08
WWE/.19
Splits
CACH 3-for-2
PG 2-for-1
WGR 2-for-1
Economic Data
None of note.
Weekend Recommendations
Forbes on Fox had guests that were positive on APC, FCX, MMC, AH, DHB and IDNX. Bulls and Bears had guests that were positive on LYG, OXY, HPQ, NMG/A, TARO and mixed on ATYT and STX. Cashin' In had guests that were positive on SU, UPL,NOC and mixed on DEO. Louis Rukeyser's Wall Street had guests that were positive on CVX, CNF, FMC, MET, MSFT, TYC, MRK, AES and EP. Wall St. Week w/Fortune had guests that were positive on FRX, AGN, ELN, HCR, BEV and KIND. Barron's had a positive column on MIL. Barron's mid-year roundtable is positive on stocks for the second half of the year. Goldman Sachs reiterated Outperform on EBAY and raised 2Q estimates. Goldman said FLEX is oversold and to buy for a trade. Goldman reiterated Outperform on ATYT ahead of earnings report. ElectronicNews has a positive article on the semiconductor industry.
Weekend News
China will cut Internet access to unlicensed Internet cafes and strengthen its control over online chat rooms as part of a crackdown on "unhealthy" material on the Web, Xinhua reported. Baghdad's raw sewage began receiving treatment late last month for the first time in as many as 15 years, though officials made no fanfare about it for fear of the treatment plant being bombed, the NY Times reported. Telephone, cable and satellite prices will decline as they compete more with each other and fail to meet their growth goals, Barron's reported. Former President Bill Clinton, in a memoir to be released Tuesday, said his biggest disappointment while in office was his failure to bring Osama bin Laden to justice, Newsweek reported. Clinton lost his temper for several minutes during an interview that is scheduled to run Tuesday with the BBC's David Dimbleby when he was repeatedly questioned about his affair with Monica Lewinsky, the Sunday Telegraph reported. Las Vegas Sands, which operates the Venetian Casino Resort in Nevada, may have a market value of at least $4 billion after an IPO, Barron's reported. Al-Qaeda confirmed the death of the terrorist group's leader in Saudi Arabia, Agence France-Presse reported. Oil supplies resumed to Iraq's southern port of Basra after repairs were completed to a pipeline sabotaged by insurgents last week, the AP said. Exxon Mobil won a contract worth up to $1 billion to boost output from the Upper Zakum offshore oil field by a third over two years, Gulf News reported. Time Warner, whose profit has risen since Parsons became CEO in May 02, still faces U.S. federal accounting probes that began about two years ago, the NY Times reported. Pakistan and Saudi Arabia helped set the stage for the Sept. 11 attacks by cutting deals with Afghanistan's Taliban and Osama bin Laden that allowed the network to flourish, the LA Times reported. U.S. Justice Dept. prosecutors plan to ask a grand jury to return a fraud indictment against Enron's former Chairman Ken Lay, the Houston Chronicle reported. GE will offer financing products direct to consumers under the brand GE Money, the Financial Times reported. Chicago Sun-Times circulation officials set up fake sales accounts and told distributors to throw out newspapers to boost circulation numbers, the Wall Street Journal reported. The American Journal of Psychiatry published a positive study about Forest Lab's Celexa without acknowledging a negative one known to exist, the Wall Street Journal said. U.S. Treasury Secretary Snow said private sector forecasts that the U.S. economy will continue to generate 200,000 to 300,000 jobs a month this year are "reasonable," Bloomberg reported. Copper prices will probably rise for the second week in London and NY as U.S. demand for metal grows and inventories shrink, according to a Bloomberg survey. The South Korean government said it will stick to its plans to deploy 3,000 more troops in Iraq this summer, rejecting an ultimatum from Muslim militants who are threatening to behead a South Korean hostage unless the nation's soldiers are withdrawn, Bloomberg said.
Late-Night Trading
Asian indices are mixed, -.25% to +1.50% on average.
S&P 500 indicated +.27%.
NASDAQ 100 indicated +.51%.
BOTTOM LINE: I expect U.S. stocks to open higher tomorrow as strength in Japan and declining oil prices boost investor sentiment. One of the new longs I added Friday afternoon was PD and I am using a $70 stop-loss on this position. The Portfolio is 75% net long heading into the week.
Sunday, June 20, 2004
Chart of the Week
Japan's Nikkei-225 Stock Average
Last 12 months
Bottom Line: Japan's Nikkei-225 appears to be breaking out tonight after a 3-week consolidation. The Index will likely break through its recent highs of 12,195 set in April. The Nikkei has returned 27.4% over the last 12 months versus the S&P 500's gain of 16.0%.
Last 12 months
Bottom Line: Japan's Nikkei-225 appears to be breaking out tonight after a 3-week consolidation. The Index will likely break through its recent highs of 12,195 set in April. The Nikkei has returned 27.4% over the last 12 months versus the S&P 500's gain of 16.0%.
Weekly Outlook
There are several important economic reports and a few significant corporate earnings reports scheduled for release this week. Economic reports this week include Durable Goods Orders, Initial Jobless Claims, New Home Sales, Help Wanted Index, Final 1Q GDP, Final Univ. of Mich. Consumer Confidence and Existing Home Sales. Durable Goods Orders and Home Sales both have market-moving potential.
Walgreen(WAG), Goldman Sachs(GS), Morgan Stanley(MWD), FedEx(FDX), Goodyear Tire(GT), Bed, Bath & Beyond(BBBY), Omnivision Technologies(OVTI), Apollo Group(APOL), Paychex(PAYX), Micron Technology(MU), Nike(NKE) and RiteAid(RAD) are some of the more important companies that release quarterly earnings this week. There are also a couple of other events that have market-moving potential. The Bank of America Auto Conference and a speech by the Fed's Santomero could also impact trading this week.
Bottom Line: I expect U.S. stocks to trade neutral-to-higher this week on short-covering and strong corporate earnings reports. It is good to see the AAII % Bulls fell substantially last week following the spike the preceding week. While I think U.S. stocks will move quietly higher this week, I am not ruling out an outsized move in either direction ahead of many market-moving events the following week. My short-term trading indicators are still giving mixed signals and the Portfolio is 75% net long heading into the week.
Walgreen(WAG), Goldman Sachs(GS), Morgan Stanley(MWD), FedEx(FDX), Goodyear Tire(GT), Bed, Bath & Beyond(BBBY), Omnivision Technologies(OVTI), Apollo Group(APOL), Paychex(PAYX), Micron Technology(MU), Nike(NKE) and RiteAid(RAD) are some of the more important companies that release quarterly earnings this week. There are also a couple of other events that have market-moving potential. The Bank of America Auto Conference and a speech by the Fed's Santomero could also impact trading this week.
Bottom Line: I expect U.S. stocks to trade neutral-to-higher this week on short-covering and strong corporate earnings reports. It is good to see the AAII % Bulls fell substantially last week following the spike the preceding week. While I think U.S. stocks will move quietly higher this week, I am not ruling out an outsized move in either direction ahead of many market-moving events the following week. My short-term trading indicators are still giving mixed signals and the Portfolio is 75% net long heading into the week.
Saturday, June 19, 2004
Market Week in Review
S&P 500 1,135.02 -.13%
U.S. stocks finished mixed last week on a slight pick-up in volume as violence in the Middle East offset strong economic reports and falling interest rates. Commodity-related stocks showed relative strength and technology shares lagged throughout the week. Stocks fell on Monday as interest rates rose ahead of key inflation reports. However, bonds rallied sharply on the release of these reports as they showed core inflation remained subdued and expectations for future inflation diminished. A much higher-than-expected reading on consumer confidence and positive comments from Alan Greenspan with respect to inflation also buoyed stocks mid-week. The week ended on a mixed note as rising oil prices and fears over a technology sector slowdown pressured shares on Thursday. However, by Friday investors once again focused on falling interest rates as U.S. stocks ended the week on a positive note.
There were several notable movers last week. Microsoft(MSFT) rose 5.9% on speculation over a massive share buyback and improving fundamentals. General Electric(GE) rose 3.6% on strong economic reports and falling interest rates. Cyberonics(CYBX) rose 101.5% after the FDA recommended approval of the company's brain-stimulation device for severe depression and speculation of a Boston Scientific takeover. Red Hat(RHAT) fell 21.7% after the company reported disappointing 1Q sales and lowered its 2Q forecast. Jabil Circuit(JBL) fell 12.7% after reducing its 04 forecast. Yellow Roadway(YELL) gained 2.3% after raising 2Q estimates on broad-based economic strength. Nucor(NUE) rose 6.7% after boosting its 2Q forecast. Solectron gained 10.6% after beating 3Q estimates and raising 4Q guidance. Finally, Symantec(SYMC) fell 9.5% over concerns of increasing future competition from Microsoft.
Bottom Line: Overall, last week was mildly positive for the bulls. Fundamentals continued to improve and interest rates seem to have stabilized. It is also very positive that market bell-weathers General Electric and Microsoft are acting much better. However, the anxiety in the tech sector in the face of improving business conditions is somewhat concerning. This skepticism is positive for the longer-term health of the sector. I continue to believe tech stocks will outperform in the second half as valuations continue to fall and corporate tech spending accelerates. Oil appears to be headed lower in the intermediate-term as last week's attacks could not move prices up significantly. The outperformance by commodity-related stocks last week tells me that investors are not as concerned about inflation as in recent weeks. This counterintuitive logic is based on the belief that the Fed will not raise rates excessively, thus killing the economic recovery, resulting in a crash in commodity prices. Volume continues to remain light ahead of the Iraqi handover of power, end of the quarter repositioning, Russell rebalancing and Fed rate hike. More pundits and analysts are anticipating an upward move in U.S. stocks at the first of July, which means it is likely a move will begin imminently or later than I currently anticipate. I continue to believe long-term investors should use any excessive weakness over the next few weeks to accumulate shares in favorite stocks.
U.S. stocks finished mixed last week on a slight pick-up in volume as violence in the Middle East offset strong economic reports and falling interest rates. Commodity-related stocks showed relative strength and technology shares lagged throughout the week. Stocks fell on Monday as interest rates rose ahead of key inflation reports. However, bonds rallied sharply on the release of these reports as they showed core inflation remained subdued and expectations for future inflation diminished. A much higher-than-expected reading on consumer confidence and positive comments from Alan Greenspan with respect to inflation also buoyed stocks mid-week. The week ended on a mixed note as rising oil prices and fears over a technology sector slowdown pressured shares on Thursday. However, by Friday investors once again focused on falling interest rates as U.S. stocks ended the week on a positive note.
There were several notable movers last week. Microsoft(MSFT) rose 5.9% on speculation over a massive share buyback and improving fundamentals. General Electric(GE) rose 3.6% on strong economic reports and falling interest rates. Cyberonics(CYBX) rose 101.5% after the FDA recommended approval of the company's brain-stimulation device for severe depression and speculation of a Boston Scientific takeover. Red Hat(RHAT) fell 21.7% after the company reported disappointing 1Q sales and lowered its 2Q forecast. Jabil Circuit(JBL) fell 12.7% after reducing its 04 forecast. Yellow Roadway(YELL) gained 2.3% after raising 2Q estimates on broad-based economic strength. Nucor(NUE) rose 6.7% after boosting its 2Q forecast. Solectron gained 10.6% after beating 3Q estimates and raising 4Q guidance. Finally, Symantec(SYMC) fell 9.5% over concerns of increasing future competition from Microsoft.
Bottom Line: Overall, last week was mildly positive for the bulls. Fundamentals continued to improve and interest rates seem to have stabilized. It is also very positive that market bell-weathers General Electric and Microsoft are acting much better. However, the anxiety in the tech sector in the face of improving business conditions is somewhat concerning. This skepticism is positive for the longer-term health of the sector. I continue to believe tech stocks will outperform in the second half as valuations continue to fall and corporate tech spending accelerates. Oil appears to be headed lower in the intermediate-term as last week's attacks could not move prices up significantly. The outperformance by commodity-related stocks last week tells me that investors are not as concerned about inflation as in recent weeks. This counterintuitive logic is based on the belief that the Fed will not raise rates excessively, thus killing the economic recovery, resulting in a crash in commodity prices. Volume continues to remain light ahead of the Iraqi handover of power, end of the quarter repositioning, Russell rebalancing and Fed rate hike. More pundits and analysts are anticipating an upward move in U.S. stocks at the first of July, which means it is likely a move will begin imminently or later than I currently anticipate. I continue to believe long-term investors should use any excessive weakness over the next few weeks to accumulate shares in favorite stocks.
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