Bottom Line: Crude prices have remained higher for longer than I expected. As the effects of the record-setting hurricanes diminish at the end of this month and more supply hits U.S. shores, oil should begin heading to around $40/bbl.
Sunday, October 10, 2004
Chart of the Week
Inflation-adjusted Price of Oil
Bottom Line: Crude prices have remained higher for longer than I expected. As the effects of the record-setting hurricanes diminish at the end of this month and more supply hits U.S. shores, oil should begin heading to around $40/bbl.
Bottom Line: Crude prices have remained higher for longer than I expected. As the effects of the record-setting hurricanes diminish at the end of this month and more supply hits U.S. shores, oil should begin heading to around $40/bbl.
Monday Watch
Earnings of Note
Company/Estimate
IFIN/.51
JBHT/.55
MDC/2.73
TSCO/.22
Splits
None of note.
Economic Data
None of note.
Weekend Recommendations
Forbes on Fox had guests that were positive on SLB and COST. Barron's had positive comments on HD and negative comments on NEW and AAPL.
Weekend News
Followers of Shiite Muslim cleric Moqtada al-Sadr reached an agreement with the Iraqi interim government to end attacks in Baghdad's Sadr City district, AFP reported. The FDA considers it unlikely that enough flu vaccinations will be available for use this winter after a bacterial contamination at Chiron's U.K. plant that makes the vaccine, the NY Times said. The report by Charles Duelfer, the top U.S. arms inspector in Iraq, that said French companies and high-ranking government officials profited from former Iraqi dictator Saddam Hussein's efforts to buy weapons and influence policy through the UN oil-for-food program has damaged U.S.-French relations, the NY Times reported. Defense Secretary Rumsfeld said the U.S. may start pulling troops out of Iraq after the country's national elections in January, Reuters reported. The U.S. Chamber of Commerce will target Democratic VP nominee John Edwards in a new ad campaign that seeks to portray the former trial lawyer as contributing to a crisis in U.S. medical care, Time magazine reported. Howard Stern, host of the top-rated radio show for young men in NY and LA, may earn about $65 million annually with Sirius Satellite Radio, Barron's reported. New York City employment will rise by about 50,000 jobs this year, the first increase since the stock market bubble burst in early 2000, Crain's New York said. Merck KGaA is selling more of its Erbitux colon-cancer treatment than it expected, CEO Scheuble told Financial Times Deutschland newspaper. Merck & Co. may avoid costly legal damages related to the Vioxx painkiller, because lawyers will have a hard time proving that the drug harmed the health of users, the Star-Ledger reported. The U.S. Environmental Protection Agency has had success in convincing oil companies to cut pollution levels, as 41% of refiners agreed to settlements with the agency over the past four years, the NY Times reported. Major U.S. pharmaceutical companies "without question" are a group that would see intense regulatory pressure under a Kerry presidency, Morgan Stanley analyst Rubin told the NY Times. Negotiators for both chambers of the U.S. Congress approved $11.6 billion in aid for hurricane victims in Florida and other eastern states, Bloomberg said. Afghans turned out in "massive" numbers for the nation's first direct presidential election, a UN spokesman said. French President Chirac told his Chinese counterpart Hu Jintao he wants to end the European Union's 15-year embargo on arms sales to China, introduced after troops killed student demonstrators in Tiananmen Square in 1989, Bloomberg reported. Australian Prime Minister Howard, one of the United States' strongest allies in the Iraq war, won a stunning fourth term in office with an increased majority after pledging to extend 13 years of economic growth, keep interest rates low and cut taxes, Bloomberg reported. Howard's government may also become the first since 1981 to control the upper house Senate, which would allow him to pass previously stalled legislation, Bloomberg said.
Late-Night Trading
Asian indices are quietly mixed, unch. to +.25% on average.
S&P 500 indicated +.22%.
NASDAQ 100 indicated +.38%
BOTTOM LINE: I expect U.S. stocks to open modestly higher in the morning on short-covering after Friday's Presidential debate. The Portfolio is 75% net long heading into the week.
Company/Estimate
IFIN/.51
JBHT/.55
MDC/2.73
TSCO/.22
Splits
None of note.
Economic Data
None of note.
Weekend Recommendations
Forbes on Fox had guests that were positive on SLB and COST. Barron's had positive comments on HD and negative comments on NEW and AAPL.
Weekend News
Followers of Shiite Muslim cleric Moqtada al-Sadr reached an agreement with the Iraqi interim government to end attacks in Baghdad's Sadr City district, AFP reported. The FDA considers it unlikely that enough flu vaccinations will be available for use this winter after a bacterial contamination at Chiron's U.K. plant that makes the vaccine, the NY Times said. The report by Charles Duelfer, the top U.S. arms inspector in Iraq, that said French companies and high-ranking government officials profited from former Iraqi dictator Saddam Hussein's efforts to buy weapons and influence policy through the UN oil-for-food program has damaged U.S.-French relations, the NY Times reported. Defense Secretary Rumsfeld said the U.S. may start pulling troops out of Iraq after the country's national elections in January, Reuters reported. The U.S. Chamber of Commerce will target Democratic VP nominee John Edwards in a new ad campaign that seeks to portray the former trial lawyer as contributing to a crisis in U.S. medical care, Time magazine reported. Howard Stern, host of the top-rated radio show for young men in NY and LA, may earn about $65 million annually with Sirius Satellite Radio, Barron's reported. New York City employment will rise by about 50,000 jobs this year, the first increase since the stock market bubble burst in early 2000, Crain's New York said. Merck KGaA is selling more of its Erbitux colon-cancer treatment than it expected, CEO Scheuble told Financial Times Deutschland newspaper. Merck & Co. may avoid costly legal damages related to the Vioxx painkiller, because lawyers will have a hard time proving that the drug harmed the health of users, the Star-Ledger reported. The U.S. Environmental Protection Agency has had success in convincing oil companies to cut pollution levels, as 41% of refiners agreed to settlements with the agency over the past four years, the NY Times reported. Major U.S. pharmaceutical companies "without question" are a group that would see intense regulatory pressure under a Kerry presidency, Morgan Stanley analyst Rubin told the NY Times. Negotiators for both chambers of the U.S. Congress approved $11.6 billion in aid for hurricane victims in Florida and other eastern states, Bloomberg said. Afghans turned out in "massive" numbers for the nation's first direct presidential election, a UN spokesman said. French President Chirac told his Chinese counterpart Hu Jintao he wants to end the European Union's 15-year embargo on arms sales to China, introduced after troops killed student demonstrators in Tiananmen Square in 1989, Bloomberg reported. Australian Prime Minister Howard, one of the United States' strongest allies in the Iraq war, won a stunning fourth term in office with an increased majority after pledging to extend 13 years of economic growth, keep interest rates low and cut taxes, Bloomberg reported. Howard's government may also become the first since 1981 to control the upper house Senate, which would allow him to pass previously stalled legislation, Bloomberg said.
Late-Night Trading
Asian indices are quietly mixed, unch. to +.25% on average.
S&P 500 indicated +.22%.
NASDAQ 100 indicated +.38%
BOTTOM LINE: I expect U.S. stocks to open modestly higher in the morning on short-covering after Friday's Presidential debate. The Portfolio is 75% net long heading into the week.
Weekly Outlook
There are a number of important economic reports and significant corporate earnings reports scheduled for release this week. Economic reports include Trade Balance, Import Price Index, Initial Jobless Claims, Monthly Budget Statement, Producer Price Index, Advance Retail Sales, Empire Manufacturing, Industrial Production, Capacity Utilization, U. of Mich. Consumer Confidence and Business Inventories. Producer Price Index, Advance Retail Sales, Industrial Production and Consumer Confidence all have market-moving potential.
Tractor Supply(TSCO), JB Hunt Transport(JBHT), Fastenal(FAST), Gannett Co.(GCI), Intel Corp.(INTC), Johnson & Johnson(JNJ), Merrill Lynch(MER), Apple Computer(AAPL), Yahoo!(YHOO), Harley-Davidson(HDI), Lam Research(LRCX), Bank of America(BAC), Citigroup(C), General Motors(GM), Juniper Networks(JNPR), Southwest Airlines(LUV), UnitedHealth Group(UNH) and Veritas Software(VRTS) are some of the more important companies that release quarterly earnings this week. There are also some other events that have market-moving potential. The Advanced Energy and Fuel Cell Conference, Fed's Bernanke speaking, Fed's Geithner speaking and Fed's Kohn speaking could also impact trading this week.
Bottom Line: I expect U.S. stocks to finish the week mixed-to-lower as worries over earnings and profit-taking offset better economic reports. A further rise by Senator Kerry in the polls or another move higher in oil prices would likely send stocks lower for the week. I continue to believe the major indices are consolidating recent gains before another more significant move higher, beginning in the later part of the month. My short-term trading indicators are still giving Buy signals and the Portfolio is 75% net long heading into the week.
Tractor Supply(TSCO), JB Hunt Transport(JBHT), Fastenal(FAST), Gannett Co.(GCI), Intel Corp.(INTC), Johnson & Johnson(JNJ), Merrill Lynch(MER), Apple Computer(AAPL), Yahoo!(YHOO), Harley-Davidson(HDI), Lam Research(LRCX), Bank of America(BAC), Citigroup(C), General Motors(GM), Juniper Networks(JNPR), Southwest Airlines(LUV), UnitedHealth Group(UNH) and Veritas Software(VRTS) are some of the more important companies that release quarterly earnings this week. There are also some other events that have market-moving potential. The Advanced Energy and Fuel Cell Conference, Fed's Bernanke speaking, Fed's Geithner speaking and Fed's Kohn speaking could also impact trading this week.
Bottom Line: I expect U.S. stocks to finish the week mixed-to-lower as worries over earnings and profit-taking offset better economic reports. A further rise by Senator Kerry in the polls or another move higher in oil prices would likely send stocks lower for the week. I continue to believe the major indices are consolidating recent gains before another more significant move higher, beginning in the later part of the month. My short-term trading indicators are still giving Buy signals and the Portfolio is 75% net long heading into the week.
Market Week in Review
S&P 500 1,122.14 -.83%
Click here for the Weekly Wrap by Briefing.com
Bottom Line: Market action last week was mostly negative as healthcare and homebuilding stocks led the major indices lower. As well, commodity prices rose further, which will likely generate higher inflation readings in the future. Healthcare-related stocks will remain under pressure until the election is resolved and more information is available on the important COX-2 inhibitor class of drugs. In my opinion, the selling in the homebuilding stocks was overdone. These stocks have beaten the Bears brains in for so long that any signs of a slowdown are called a "collapse" or "bursting of the bubble." While I do think fundamentals for homebuilders are decelerating, sales will remain good by historic standards and low valuations in the group should prevent a major sell-off. On the positive side, volume on the major indices declined last week and measures of investor anxiety mostly rose. Finally, the S&P 500 broke above its downtrend line that had been in place since early March.
Click here for the Weekly Wrap by Briefing.com
Bottom Line: Market action last week was mostly negative as healthcare and homebuilding stocks led the major indices lower. As well, commodity prices rose further, which will likely generate higher inflation readings in the future. Healthcare-related stocks will remain under pressure until the election is resolved and more information is available on the important COX-2 inhibitor class of drugs. In my opinion, the selling in the homebuilding stocks was overdone. These stocks have beaten the Bears brains in for so long that any signs of a slowdown are called a "collapse" or "bursting of the bubble." While I do think fundamentals for homebuilders are decelerating, sales will remain good by historic standards and low valuations in the group should prevent a major sell-off. On the positive side, volume on the major indices declined last week and measures of investor anxiety mostly rose. Finally, the S&P 500 broke above its downtrend line that had been in place since early March.
Saturday, October 09, 2004
Economic Week in Review
ECRI Weekly Leading Index 131.80 +.30%
Factory Orders for August fell .1% versus estimates of a .1% gain and an upwardly revised 1.7% increase in July. Bookings for products other than transportation equipment rose 1.3%, the biggest advance since March, Bloomberg said. "The manufacturing sector is doing quite well." said Stephen Stanley, chief economist at RBS Greenwich Capital. "We did have a soft patch in June, but we've recovered," and there's no sign of business spending weakness. Overall orders were restrained last month by a drop in bookings for commercial aircraft, which doubled in July. Through August, factory orders were up 12% compared with the same period in 2003, Bloomberg reported.
ISM Non-Manufacturing for September came in at 56.7 versus estimates of 59.0 and a reading of 58.2 in August. The gauge has now shown service sector expansion for 18 straight months, Bloomberg said. The effects of the record-setting hurricanes likely dampened an otherwise stronger report, Bloomberg reported. The survey's employment index rose to 54.6, the highest level since June. Lee Scott, CEO of Wal-Mart, told analysts and investors recently that he is "optimistic about sales in the November/December holiday season and expects a strong finish to the year." The index of prices paid, a measure of costs for purchased materials and services, fell to 67.1 last month, the lowest since March.
Initial Jobless Claims plunged to 335K last week versus estimates of 355K and 372K the prior week. Continuing Claims were 2864K versus estimates of 2875K and 2865K prior. Monster Worldwide, the NY-based operator of the biggest Internet job service, said earlier that its index of online job postings rose to the highest level since its inception last year, Bloomberg reported. "As the employment data arrive over the next several months, we may very well see the job numbers snap back," said Federal Reserve Bank of Cleveland President Pianalto. Claims in recent week have been difficult to interpret because of the effects of Hurricanes Charley, Frances, Ivan and Jeanne, which caused billons of dollars of damage while disrupting business substantially in some southern states, Bloomberg said.
Consumer Credit for August fell $2.4B versus estimates of a $6.0B rise and an increase of $11.2B in July. The decline in borrowing, which left total outstanding consumer debt at $2.4 trillion, coincided with a pause in consumer spending during August after the biggest jump in almost two years.
The Unemployment Rate for September was 5.4% versus estimates of 5.4% and 5.4% in August. Average Hourly Earnings rose .2% in September versus estimates of a .3% increase and a .3% gain in August. Change in Non-farm Payrolls for September was 96K versus estimates of 148K and a 128K gain in August. Change in Manufacturing Payrolls for September was -18K versus a 10K estimate and a 4K gain in August. The effects of the hurricanes likely dampened otherwise more positive numbers. Robert Gay, chief strategist at Commerzbank Capital Markets, said 1.89 million people in the household survey said they worked fewer hours because of bad weather. As well, the Labor Dept. said the economy likely gained an additional 236,000 jobs that weren't originally reported during the 12 months ended in March 2004. The U.S. economy has now created almost 2 million new jobs over the last 13 months, Bloomberg reported.
Wholesale Inventories for August rose .9% versus estimates of a .8% gain and a 1.5% rise in July. The report suggests wholesalers remain optimistic about the prospects for U.S. economic growth and are building inventories in anticipation of increased orders from customers, Bloomberg reported. "The fact that sales rose too means this was planned inventory growth, and that's good growth," said Wesley Beal, an economist at IDEAglobal in New York.
Bottom Line: Overall, last week's economic data were modestly positive. Recent measures of manufacturing activity continue to show acceleration from a mid-year pause and should strengthen into year-end. The ISM Non-manufacturing Index, a measure of activity in the service sector, should accelerate into year-end as the negative effects of the hurricanes diminish and consumers become more confident. Once again, the mainstream media and the Bears are downplaying the effects of these record-setting storms in an attempt to paint the U.S. economy in a negative light. There are STILL almost 1 million people in Florida without power. While the change in non-farm payrolls was disappointing, hiring activity was definitely suppressed to some extent by the storms. Moreover, other recent surveys and indices continue to point to an improving labor market. Finally, I believe the uncertainty over the course of the U.S. government and the possibility of election-related domestic terrorism is having a much larger impact on hiring activity than is suggested by most pundits and analysts. A recent survey by TEC International shows that 75% of the 5,700 small-to-medium-sized business owners that create 75% of all U.S. jobs favor President Bush for re-election. With a closely contested race for the Presidency and the prospects of having their taxes and regulations increased, these job creators will likely wait until the outcome of the election is clear to significantly alter hiring practices. I view the decline in consumer credit as a positive considering the excessive level of debt consumers have taken on over the years. As well, recent measures of home and car sales remain very strong, suggesting August's decline in consumer credit was just a pause that refreshes rather than a significant decline in consumer spending.
Factory Orders for August fell .1% versus estimates of a .1% gain and an upwardly revised 1.7% increase in July. Bookings for products other than transportation equipment rose 1.3%, the biggest advance since March, Bloomberg said. "The manufacturing sector is doing quite well." said Stephen Stanley, chief economist at RBS Greenwich Capital. "We did have a soft patch in June, but we've recovered," and there's no sign of business spending weakness. Overall orders were restrained last month by a drop in bookings for commercial aircraft, which doubled in July. Through August, factory orders were up 12% compared with the same period in 2003, Bloomberg reported.
ISM Non-Manufacturing for September came in at 56.7 versus estimates of 59.0 and a reading of 58.2 in August. The gauge has now shown service sector expansion for 18 straight months, Bloomberg said. The effects of the record-setting hurricanes likely dampened an otherwise stronger report, Bloomberg reported. The survey's employment index rose to 54.6, the highest level since June. Lee Scott, CEO of Wal-Mart, told analysts and investors recently that he is "optimistic about sales in the November/December holiday season and expects a strong finish to the year." The index of prices paid, a measure of costs for purchased materials and services, fell to 67.1 last month, the lowest since March.
Initial Jobless Claims plunged to 335K last week versus estimates of 355K and 372K the prior week. Continuing Claims were 2864K versus estimates of 2875K and 2865K prior. Monster Worldwide, the NY-based operator of the biggest Internet job service, said earlier that its index of online job postings rose to the highest level since its inception last year, Bloomberg reported. "As the employment data arrive over the next several months, we may very well see the job numbers snap back," said Federal Reserve Bank of Cleveland President Pianalto. Claims in recent week have been difficult to interpret because of the effects of Hurricanes Charley, Frances, Ivan and Jeanne, which caused billons of dollars of damage while disrupting business substantially in some southern states, Bloomberg said.
Consumer Credit for August fell $2.4B versus estimates of a $6.0B rise and an increase of $11.2B in July. The decline in borrowing, which left total outstanding consumer debt at $2.4 trillion, coincided with a pause in consumer spending during August after the biggest jump in almost two years.
The Unemployment Rate for September was 5.4% versus estimates of 5.4% and 5.4% in August. Average Hourly Earnings rose .2% in September versus estimates of a .3% increase and a .3% gain in August. Change in Non-farm Payrolls for September was 96K versus estimates of 148K and a 128K gain in August. Change in Manufacturing Payrolls for September was -18K versus a 10K estimate and a 4K gain in August. The effects of the hurricanes likely dampened otherwise more positive numbers. Robert Gay, chief strategist at Commerzbank Capital Markets, said 1.89 million people in the household survey said they worked fewer hours because of bad weather. As well, the Labor Dept. said the economy likely gained an additional 236,000 jobs that weren't originally reported during the 12 months ended in March 2004. The U.S. economy has now created almost 2 million new jobs over the last 13 months, Bloomberg reported.
Wholesale Inventories for August rose .9% versus estimates of a .8% gain and a 1.5% rise in July. The report suggests wholesalers remain optimistic about the prospects for U.S. economic growth and are building inventories in anticipation of increased orders from customers, Bloomberg reported. "The fact that sales rose too means this was planned inventory growth, and that's good growth," said Wesley Beal, an economist at IDEAglobal in New York.
Bottom Line: Overall, last week's economic data were modestly positive. Recent measures of manufacturing activity continue to show acceleration from a mid-year pause and should strengthen into year-end. The ISM Non-manufacturing Index, a measure of activity in the service sector, should accelerate into year-end as the negative effects of the hurricanes diminish and consumers become more confident. Once again, the mainstream media and the Bears are downplaying the effects of these record-setting storms in an attempt to paint the U.S. economy in a negative light. There are STILL almost 1 million people in Florida without power. While the change in non-farm payrolls was disappointing, hiring activity was definitely suppressed to some extent by the storms. Moreover, other recent surveys and indices continue to point to an improving labor market. Finally, I believe the uncertainty over the course of the U.S. government and the possibility of election-related domestic terrorism is having a much larger impact on hiring activity than is suggested by most pundits and analysts. A recent survey by TEC International shows that 75% of the 5,700 small-to-medium-sized business owners that create 75% of all U.S. jobs favor President Bush for re-election. With a closely contested race for the Presidency and the prospects of having their taxes and regulations increased, these job creators will likely wait until the outcome of the election is clear to significantly alter hiring practices. I view the decline in consumer credit as a positive considering the excessive level of debt consumers have taken on over the years. As well, recent measures of home and car sales remain very strong, suggesting August's decline in consumer credit was just a pause that refreshes rather than a significant decline in consumer spending.
Friday, October 08, 2004
Weekly Scoreboard*
Indices
S&P 500 1,122.14 -.83%
Dow 10,192.65 +10,055.20 -1.35%
NASDAQ 1,919.97 -1.14%
Russell 2000 575.65 -1.60%
S&P Equity Long/Short Index 980.54 +.93%
Put/Call 1.0 +5.26%
NYSE Arms 2.41 +423.91%
Volatility(VIX) 15.05 +18.04%
AAII % Bulls 56.93 +38.62%
US Dollar 87.51 -.15%
CRB 287.60 +.83%
Futures Spot Prices
Gold 424.50 +.78%
Crude Oil 53.31 +6.30%
Unleaded Gasoline 141.20 +4.44%
Natural Gas 7.16 +6.12%
Base Metals 125.40 +4.45%
10-year US Treasury Yield 4.13% -1.43%
Average 30-year Mortgage Rate 5.82% +1.75%
Leading Sectors
Iron/Steel +2.48%
Energy +2.16%
Hospitals +1.63%
Lagging Sectors
Biotech -4.33%
Airlines -4.33%
Homebuilders -8.98%
*% Gain or loss for the week
S&P 500 1,122.14 -.83%
Dow 10,192.65 +10,055.20 -1.35%
NASDAQ 1,919.97 -1.14%
Russell 2000 575.65 -1.60%
S&P Equity Long/Short Index 980.54 +.93%
Put/Call 1.0 +5.26%
NYSE Arms 2.41 +423.91%
Volatility(VIX) 15.05 +18.04%
AAII % Bulls 56.93 +38.62%
US Dollar 87.51 -.15%
CRB 287.60 +.83%
Futures Spot Prices
Gold 424.50 +.78%
Crude Oil 53.31 +6.30%
Unleaded Gasoline 141.20 +4.44%
Natural Gas 7.16 +6.12%
Base Metals 125.40 +4.45%
10-year US Treasury Yield 4.13% -1.43%
Average 30-year Mortgage Rate 5.82% +1.75%
Leading Sectors
Iron/Steel +2.48%
Energy +2.16%
Hospitals +1.63%
Lagging Sectors
Biotech -4.33%
Airlines -4.33%
Homebuilders -8.98%
*% Gain or loss for the week
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