Indices
S&P 500 1,283.72 +1.76%
DJIA 10,907.21 +2.25%
NASDAQ 2,304.23 +2.51%
Russell 2000 732.22 +3.92%
S&P Equity Long/Short Index 1,144.75 +.82%
S&P Barra Growth 611.84 +1.30%
S&P Barra Value 667.74 +2.25%
Morgan Stanley Consumer 599.00 +.60%
Morgan Stanley Cyclical 798.74 +4.30%
Morgan Stanley Technology 542.84 +1.94%
Transports 4,309.71 +3.64%
Utilities 416.07 -1.24%
S&P 500 Cum A/D Line 8,416 +7.0%
Bloomberg Crude Oil % Bulls 58.0 -2.55%
Put/Call .78 -26.42%
NYSE Arms .91 -56.67%
Volatility(VIX) 11.97 -17.79%
ISE Sentiment 198.00 +11.86%
AAII % Bulls 30.77 -38.46%
AAII % Bears 33.33 +29.04%
US Dollar 89.32 +.43%
CRB 346.96 +.52%
ECRI Weekly Leading Index 138.30 +.36%
Futures Spot Prices
Crude Oil 67.76 -1.30%
Unleaded Gasoline 173.64 -4.67%
Natural Gas 8.51 -10.87%
Heating Oil 180.69 -3.37%
Gold 558.90 +.02%
Base Metals 168.86 +5.15%
Copper 223.20 +5.23%
10-year US Treasury Yield 4.51% +3.68%
Average 30-year Mortgage Rate 6.12% +.33%
Leading Sectors
Steel +19.56%
Semis +7.48%
I-Banks +4.92%
Gold & Silver +4.75%
Telecom +3.92%
Lagging Sectors
Foods -.05%
Disk Drives -.58%
Broadcasting -.85%
Utilities -1.24%
Networking -1.41%
One-Week High-Volume Gainers
One-Week High-Volume Losers
*5-Day % Change
Friday, January 27, 2006
Stocks Higher Heading into Final Hour on Decline in Long-term Rates and Short-covering
BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Semi longs, Medical longs, Software longs and Biotech longs. I added to my AAPL long and VLO short this morning, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is higher, sector performance is mostly positive and volume is heavy. Measures of investor anxiety are mixed. As far as I can tell George Soros has been bearish on the global economy, specifically the U.S., for some time. However, according to Gurufocus.com, his two largest sector weightings at the beginning of the fourth quarter of last year were Consumer Services at 20.3% and Technology at 17.3%. Moreover, a long QQQQ position is his third largest individual long position. This doesn't seem to correspond with his very bearish statements. I expect US stocks to trade modestly higher into the close from current levels on short-covering, “catch-up buying” and lower long-term rates.
Today's Headlines
Bloomberg:
- OPEC may maintain output near a 25-year high as attacks against Nigeria’s oil industry and concern about a dispute with Iran keep prices high.
- Google(GOOG) co-founder Sergey Brin said his Internet company will fight the US government for as long as it takes to avoid handing over information on user searches.
- Iran said the UN was being “manipulated for political purposes” in its first official observance today of the memory of the Holocaust.
- The US dollar is rising against the euro ad yen after new home sales exceeded expectations.
- Crude oil is rising for a second day on fears that a standoff over Iran’s nuclear research may cause disruptions to supply.
CNBC:
- The FDA has approved Pfizer’s(PFE) Exubera inhaled insulin drug for sale, Pfizer CEO McKinnell said.
Wall Street Journal:
- Television networks are mixing advertising with entertainment in children’s shows in a way that it’s hard to distinguish one from the other.
- US companies may soon be moving to restate earnings to avoid problems with accounting for financial instruments that they use to minimize risk.
- Intel Corp.(INTC), Hewlett-Packard(HPQ) and seven other computer makers said they pledged to keep investing in the Itanium computer chip, which is far outsold by x86-design chips.
- The potentially deadly “blackworm” computer virus may activate Feb.3 and start destroying data on computers it has reached.
- President Bush plans to nominate Kevin Warsh, an adviser on domestic finance and capital markets, and may name Randall Kroszner, of the Univeristy of Chicago’s Graduate School of Business, to the board of the Federal Reserve.
NY Times:
- US banks, credit unions and money management firms are seeking to benefit by offering health savings accounts, the centerpiece of President Bush’s plans for healthcare.
- Atlantic Sea Island Group proposed building a $1 billion liquefied natural gas terminal on a 53-acre man-made island between Long Island and New Jersey.
- Most US airlines may begin to see a return to profitability during the next two years as a smaller number of available seats has enabled them to raise ticket prices and fly more full planes.
- NYC taxes on co-op and condo buildings with four to 10 apartments fell by an average of $1,800 per unit.
AFP:
- Iran promised to allow UN nuclear inspectors access to the former Lavizan military site in the capital Tehran, citing unidentified diplomats. The pledge, a key concession to investigators studying Iran’s nuclear program, was made in a letter faxed to Ollie Heinonen, deputy director for safeguards at the UN’s IAEA in Vienna.
Reuters:
- Mittal Steel is poised to bid for Arcelor SA.
Middle East Economic Survey:
- Kuwait said the emirate’s crude production capacity will climb 67% by 2020, citing unidentified senior Kuwaiti oil officials.
- OPEC may maintain output near a 25-year high as attacks against Nigeria’s oil industry and concern about a dispute with Iran keep prices high.
- Google(GOOG) co-founder Sergey Brin said his Internet company will fight the US government for as long as it takes to avoid handing over information on user searches.
- Iran said the UN was being “manipulated for political purposes” in its first official observance today of the memory of the Holocaust.
- The US dollar is rising against the euro ad yen after new home sales exceeded expectations.
- Crude oil is rising for a second day on fears that a standoff over Iran’s nuclear research may cause disruptions to supply.
CNBC:
- The FDA has approved Pfizer’s(PFE) Exubera inhaled insulin drug for sale, Pfizer CEO McKinnell said.
Wall Street Journal:
- Television networks are mixing advertising with entertainment in children’s shows in a way that it’s hard to distinguish one from the other.
- US companies may soon be moving to restate earnings to avoid problems with accounting for financial instruments that they use to minimize risk.
- Intel Corp.(INTC), Hewlett-Packard(HPQ) and seven other computer makers said they pledged to keep investing in the Itanium computer chip, which is far outsold by x86-design chips.
- The potentially deadly “blackworm” computer virus may activate Feb.3 and start destroying data on computers it has reached.
- President Bush plans to nominate Kevin Warsh, an adviser on domestic finance and capital markets, and may name Randall Kroszner, of the Univeristy of Chicago’s Graduate School of Business, to the board of the Federal Reserve.
NY Times:
- US banks, credit unions and money management firms are seeking to benefit by offering health savings accounts, the centerpiece of President Bush’s plans for healthcare.
- Atlantic Sea Island Group proposed building a $1 billion liquefied natural gas terminal on a 53-acre man-made island between Long Island and New Jersey.
- Most US airlines may begin to see a return to profitability during the next two years as a smaller number of available seats has enabled them to raise ticket prices and fly more full planes.
- NYC taxes on co-op and condo buildings with four to 10 apartments fell by an average of $1,800 per unit.
AFP:
- Iran promised to allow UN nuclear inspectors access to the former Lavizan military site in the capital Tehran, citing unidentified diplomats. The pledge, a key concession to investigators studying Iran’s nuclear program, was made in a letter faxed to Ollie Heinonen, deputy director for safeguards at the UN’s IAEA in Vienna.
Reuters:
- Mittal Steel is poised to bid for Arcelor SA.
Middle East Economic Survey:
- Kuwait said the emirate’s crude production capacity will climb 67% by 2020, citing unidentified senior Kuwaiti oil officials.
GDP Slows on Hurricane Effects, Inflation Decelerates, New Home Sales Improve
- Advance 4Q GDP rose 1.1% versus estimates of a 2.8% increase and a 4.1% rise in 3Q.
- Advance 4Q Personal Consumption rose 1.1% versus estimates of a .4% increase and a 4.1% rise in 3Q.
- Advance 4Q GDP Price Index rose 3.0% versus estimates of a 2.7% gain and a 3.3% rise in 3Q.
- New Home Sales for December rose to 1269K versus estimates of 1225K and 1233K in November.
- Advance 4Q Personal Consumption rose 1.1% versus estimates of a .4% increase and a 4.1% rise in 3Q.
- Advance 4Q GDP Price Index rose 3.0% versus estimates of a 2.7% gain and a 3.3% rise in 3Q.
- New Home Sales for December rose to 1269K versus estimates of 1225K and 1233K in November.
BOTTOM LINE: The US economy grew at a slower-than-expected 1.1% pace in the fourth quarter as consumers spent less and corporations limited equipment purchases, Bloomberg reported. This snapped the string of 10 straight quarters exceeding 3% growth, the best stretch since 1986. A drop in October car sales weighed on consumer spending during the quarter. The US economy expanded 3.5% for all of 2005, above the long-term average of 3.1% growth. Government spending declined last quarter at a 2.4% annual rate, the biggest drop in 5 years. The core pce, the Fed’s favorite inflation measure, rose 2.2% during the quarter. GDP was weighed down in the fourth quarter by the effects of the hurricanes. I expect GDP to bounce back above 3% this quarter as hurricane rebuilding takes hold, corporate spending accelerates, the job market remains healthy, housing improves, consumer spending bounces back and the Fed stops raising interest rates.
Sales of new US homes unexpectedly increased in December, capping a fifth straight record year for the industry and suggesting job and income growth are keeping the housing market from withering, Bloomberg reported. The median selling price was $221,800, down 3.4% from a year earlier. The supply of new homes on the market remained at 4.9 months’ worth. For the year, the median price of a new home rose 7.4% to $237,300. I expect home sales to continue to improve in January as overall growth slows to more healthy sustainable levels.
Friday Watch
Late-Night Headlines
Bloomberg:
- Sony Corp.(SNE) shares headed for their biggest gain in 15 years, raising the company’s market value by $5 billion, as higher sales of Bravia TVs and Playstation game players helped generate record profit in its third quarter.
- US Senate Republican leaders said they have enough support to end debate on Supreme Court nominee Samuel A. Alito Jr. and confirm him next week as some Democrats staged a last-ditch filibuster to try to derail his confirmation.
Financial Times:
- EMC Corp.(EMC) may raise its full-year growth targets and plans acquisitions in 2006, citing an interview with Chairman and CEO Tucci.
Wall Street Journal:
- North Korea has become one of the leading international producers of counterfeit cigarettes, providing a source of financing for its nuclear weapons program.
Business Week:
- Microsoft(MSFT) is working on plans to develop its own portable digital media device that will challenge the iPod.
London-based Times:
- The “long-term chances of survival of the euro should be questioned,” citing Frits Bolkestein, the former EU Internal Market Commissioner.
Electronic Times:
- Research in Motion Ltd. may start offering its BlackBerry e-mail in South Korea in May through KT Powertel.
Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on (MSFT), (DHR), (T), (MEH), (MCK), (KLAC), (GNW) and (PFE).
- Reiterated Underperform on (FLWS), (UST), (BOW) and (MRO).
Night Trading
Asian Indices are +1.0% to +2.0% on average.
S&P 500 indicated +.27%.
NASDAQ 100 indicated +.74%.
Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Before the Bell CNBC Video(bottom right)
Global Commentary
Asian Indices
European Indices
Top 20 Business Stories
In Play
Bond Ticker
Daily Stock Events
Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule
Earnings of Note
Company/EPS Estimate
(BOL)/1.20
(BDK)/1.90
(CVX)/1.89
(GCI)/1.41
(GDT)/.34
(ITT)/1.41
(MSTR)/1.34
(NUE)/1.88
(OSTK)/-.05
(PG)/.69
(RBK)/.58
(TROW)/.83
Upcoming Splits
- None of note
Economic Releases
8:30 am EST
- Advance 4Q GDP is estimated to rise 2.8% versus a 4.1% increase in 3Q.
- Advance 4Q Personal Consumption is estimated to rise .4% versus a 4.1% gain in 3Q.
- Advance 4Q GDP Price Index is estimated to rise 2.7% versus a 3.3% gain in 3Q.
10:000 am EST
- New Home Sales for December are estimated to fall to 1225K versus 1245K in November.
Bloomberg:
- Sony Corp.(SNE) shares headed for their biggest gain in 15 years, raising the company’s market value by $5 billion, as higher sales of Bravia TVs and Playstation game players helped generate record profit in its third quarter.
- US Senate Republican leaders said they have enough support to end debate on Supreme Court nominee Samuel A. Alito Jr. and confirm him next week as some Democrats staged a last-ditch filibuster to try to derail his confirmation.
Financial Times:
- EMC Corp.(EMC) may raise its full-year growth targets and plans acquisitions in 2006, citing an interview with Chairman and CEO Tucci.
Wall Street Journal:
- North Korea has become one of the leading international producers of counterfeit cigarettes, providing a source of financing for its nuclear weapons program.
Business Week:
- Microsoft(MSFT) is working on plans to develop its own portable digital media device that will challenge the iPod.
London-based Times:
- The “long-term chances of survival of the euro should be questioned,” citing Frits Bolkestein, the former EU Internal Market Commissioner.
Electronic Times:
- Research in Motion Ltd. may start offering its BlackBerry e-mail in South Korea in May through KT Powertel.
Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on (MSFT), (DHR), (T), (MEH), (MCK), (KLAC), (GNW) and (PFE).
- Reiterated Underperform on (FLWS), (UST), (BOW) and (MRO).
Night Trading
Asian Indices are +1.0% to +2.0% on average.
S&P 500 indicated +.27%.
NASDAQ 100 indicated +.74%.
Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Before the Bell CNBC Video(bottom right)
Global Commentary
Asian Indices
European Indices
Top 20 Business Stories
In Play
Bond Ticker
Daily Stock Events
Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule
Earnings of Note
Company/EPS Estimate
(BOL)/1.20
(BDK)/1.90
(CVX)/1.89
(GCI)/1.41
(GDT)/.34
(ITT)/1.41
(MSTR)/1.34
(NUE)/1.88
(OSTK)/-.05
(PG)/.69
(RBK)/.58
(TROW)/.83
Upcoming Splits
- None of note
Economic Releases
8:30 am EST
- Advance 4Q GDP is estimated to rise 2.8% versus a 4.1% increase in 3Q.
- Advance 4Q Personal Consumption is estimated to rise .4% versus a 4.1% gain in 3Q.
- Advance 4Q GDP Price Index is estimated to rise 2.7% versus a 3.3% gain in 3Q.
10:000 am EST
- New Home Sales for December are estimated to fall to 1225K versus 1245K in November.
BOTTOM LINE: Asian indices are sharply higher on gains in US shares and reports of strong economic growth in the region. I expect US equities to open higher and build on gains throughout the day. The Portfolio is 100% net long heading into the day.
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