BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Networking longs and Computer longs. I added to my (EEM) short and added (IWM)/(QQQQ) shorts this morning, thus leaving the Portfolio 75% net long. The tone of the market is slightly positive as the advance/decline line is modestly higher, most sectors are higher and volume is above average. Measures of investor anxiety are mixed. Today’s overall market action is mildly bullish given as stocks consolidate yesterday’s sharp rebound. The AAII percentage of Bulls fell to 26.23% this week from 30.77% the prior week. This reading is now at depressed levels. The AAII percentage of Bears fell to 45.08% this week from 50.0% the prior week. This reading remains at elevated levels. I expect bullish sentiment to fall again next week. I continue to believe overall investor sentiment toward U.S. stocks is at levels associated with meaningful market bottoms. I expect stocks to trade modestly higher into the close on short-covering, bargain hunting and lower long-term rates.
Friday, June 09, 2006
Stocks Slightly Higher into Final Hour
Today's Headlines
Bloomberg:
- Crude oil may decline as concern eases that shipments will be disrupted from Iran and Iraq, a Bloomberg survey of analysts showed.
- Asian stocks rebounded from their biggest weekly slide in 16 years.
- Chicago plans to pass Houston, Philadelphia and San Francisco to become the biggest US municipality with citywide wireless Internet access.
- Hedge funds investing in emerging markets lost 4% in May as stock markets from India to Chile slumped.
- Ayman al-Zawahiri, the second in command in the al-Qaeda terrorist organization, called on Palestinians to reject an Arab peace initiative backing a two-state solution to the Israeli-Palestinian conflict.
- The US dollar is headed for its biggest weekly gain since November against the euro as Fed speakers suggested they will raise interest rates this month.
- Crude oil rose for the first time in four days as hurricane season begins.
- Copper is falling, reversing earlier gains, on concern a rise in global interest rates will slow economic growth and curb demand for the metal.
Wall Street Journal:
- Asian energy companies such as Cnooc Ltd. of China may present less competition for global oil resources than many people believe, because they are acquiring assets more slowly than Western companies, citing a Wood Mackenzie Ltd. report.
- Morgan Stanley(MS) plans to start sales of a mutual fund today that will offer investors a fund of 21 different hedge funds.
- Tribune’s(TRB) shares might be boosted as much as 42% if the media company carried out a radical reorganization such as spinning off its television stations.
- Harrah’s Entertainment(HET) has reached multi-year partnerships and sponsorship deal with ESPN Inc. and Miller Brewing.
- The US FDA will start requiring wholesalers to keep track of who handles the drugs they sell.
- Investors should review their allocations to emerging-market mutual funds, in view of the big share declines in those markets in recent days.
NY Times:
- The military operation that culminated in the killing of Abu Musab al-Zarqawi was a joint-intelligence effort with Jordanian security services and initially involved US ground forces.
TheDeal.com:
- True Religion Apparel(TRLG) has hired Goldman, Sachs(GS) to advise on a possible sale of the company.
Financial Times:
- News Corp.’s(NWS/A) sale of part of its stake in Phoenix Satellite Television Holdings Ltd., its most successful Chinese venture, shows Chairman Rupert Murdoch is realizing that China is an unfavorable country for foreign media projects.
Mysteel.com:
- China’s exports of steel products rose 65% in May from a year ago to 3.5 million metric tons.
- Crude oil may decline as concern eases that shipments will be disrupted from Iran and Iraq, a Bloomberg survey of analysts showed.
- Asian stocks rebounded from their biggest weekly slide in 16 years.
- Chicago plans to pass Houston, Philadelphia and San Francisco to become the biggest US municipality with citywide wireless Internet access.
- Hedge funds investing in emerging markets lost 4% in May as stock markets from India to Chile slumped.
- Ayman al-Zawahiri, the second in command in the al-Qaeda terrorist organization, called on Palestinians to reject an Arab peace initiative backing a two-state solution to the Israeli-Palestinian conflict.
- The US dollar is headed for its biggest weekly gain since November against the euro as Fed speakers suggested they will raise interest rates this month.
- Crude oil rose for the first time in four days as hurricane season begins.
- Copper is falling, reversing earlier gains, on concern a rise in global interest rates will slow economic growth and curb demand for the metal.
Wall Street Journal:
- Asian energy companies such as Cnooc Ltd. of China may present less competition for global oil resources than many people believe, because they are acquiring assets more slowly than Western companies, citing a Wood Mackenzie Ltd. report.
- Morgan Stanley(MS) plans to start sales of a mutual fund today that will offer investors a fund of 21 different hedge funds.
- Tribune’s(TRB) shares might be boosted as much as 42% if the media company carried out a radical reorganization such as spinning off its television stations.
- Harrah’s Entertainment(HET) has reached multi-year partnerships and sponsorship deal with ESPN Inc. and Miller Brewing.
- The US FDA will start requiring wholesalers to keep track of who handles the drugs they sell.
- Investors should review their allocations to emerging-market mutual funds, in view of the big share declines in those markets in recent days.
NY Times:
- The military operation that culminated in the killing of Abu Musab al-Zarqawi was a joint-intelligence effort with Jordanian security services and initially involved US ground forces.
TheDeal.com:
- True Religion Apparel(TRLG) has hired Goldman, Sachs(GS) to advise on a possible sale of the company.
Financial Times:
- News Corp.’s(NWS/A) sale of part of its stake in Phoenix Satellite Television Holdings Ltd., its most successful Chinese venture, shows Chairman Rupert Murdoch is realizing that China is an unfavorable country for foreign media projects.
Mysteel.com:
- China’s exports of steel products rose 65% in May from a year ago to 3.5 million metric tons.
Trade Deficit Widens Less Than Estimates, Import Prices Jump on Metal Price Increases
- The Trade Deficit for April widened to -$63.4B versus estimates of -$65.0B and -$61.9B in March.
- The Import Price Index for May rose 1.6% versus estimates of a .7% gain and a 2.1% increase in April.
- The Import Price Index for May rose 1.6% versus estimates of a .7% gain and a 2.1% increase in April.
BOTTOM LINE: The US trade deficit widened in April as the cost of imported oil rose and purchases of industrial machinery and automobiles increased, Bloomberg said. The US deficit in oil trade rose to $21 billion from $20 billion the prior month. The rapid growth of the US economy compared with other industrialized nations is the main reason for the large deficit. The US economy will grow 3.4% this year, beating the growth of all other industrialized nations, according to the International Monetary Fund. I expect the trade deficit to only improve modestly over the intermediate-term as US growth, while slowing, continues to outpace the growth of other industrialized nations.
Prices of imported goods into the US rose twice as much as expected in May, led by rising costs for oil and metals, Bloomberg reported. Excluding petroleum, prices rose .6%. As well, excluding petroleum, import prices rose 1.5% over the last 12 months. A 7.8% rise in metals prices was the largest gain since record-keeping began in 1988. The price of imported consumer goods, excluding autos, rose only .3%. Imported prices for autos, parts and engines rose .1%. I expect Import Prices to decelerate meaningfully over the intermediate-term as prices for oil and metals fall substantially from current inflated levels.
Thursday, June 08, 2006
Friday Watch
Late-Night Headlines
Bloomberg:
- Lehman Brothers(LH) advised investors to stop betting on a drop in the US dollar in the next few weeks on speculation the Fed will lift its benchmark interest rate this month.
- The US dollar had its biggest gain against the euro in two months, and reached a six-week high versus the yen, as rising global interest rates sent emerging stock markets into a tailspin.
- The killing of the most-wanted terrorist in Iraq, Abu Musab al-Zarqawi, presents an opportunity for US and Iraqi leaders to rally rival factions toward a peaceful reconciliation, analysts said.
- US stocks rebounded from the worst international equity-market slump in two years after a shift in investor sentiment favored the dollar and American companies whose earnings are less vulnerable to a slowing economy.
- Texas Instruments(TXN) raised its second-quarter sales and profit forecasts as more consumers purchase handsets in India and China.
- Hedge funds focused on Asia had their worst month since September 2002 in May as the region’s stock indices tumbled, suggesting managers need to increase their hedging to weather the current emerging markets stocks sell-off.
Financial Times:
- IMF Chief Economist Raghuram Rajan says incentives for hedge fund managers are the reason for recent falls in risky assets prices.
- Nasdaq Stock Market’s(NDAQ) proposed acquisition of London Stock Exchange Plc may be put on hold until 2007 at the earliest, citing Joe Gawronski, chief operating officer at Rosenblatt Securities.
- General Motors(GM) will “reward” those suppliers who remain loyal to it in times of crisis.
New Zealand Herald:
- Restaurant Brands New Zealand Ltd. is considering opening Starbucks Coffee(SBUX) stores at the nation’s airports and in regional towns as part of a plan to double the franchise’s outlets.
Shanghai Securities News:
- China’s money supply growth accelerated in May and banks almost doubled new yuan lending, suggesting the central ban may take further measures to damp lending.
Late Buy/Sell Recommendations
- Goldman Sachs:
- Rated (MS), (TRAD), (JEF) and (AMTD) Outperform.
- Rated (AGE) Underperform.
Night Trading
Asian Indices are -.75% to +.50% on average.
S&P 500 indicated +.13%.
NASDAQ 100 indicated +.35%.
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
- None of note
Upcoming Splits
- (B) 2-for-1
- (CGI) 2-for-1
- (EXPO) 2-for-1
- (FD) 2-for-1
- (MAR) 2-for-1
- (TRN) 3-for-2
- (BECN) 3-for-2
- (CEDC) 3-for-2
Economic Releases
8:30 pm EST
- The Trade Deficit for April is estimated to widen to -$65.0B versus -$62.0B in March.
- The Import Price Index for May is estimated to rise .7% versus a 2.1% gain in April.
Bloomberg:
- Lehman Brothers(LH) advised investors to stop betting on a drop in the US dollar in the next few weeks on speculation the Fed will lift its benchmark interest rate this month.
- The US dollar had its biggest gain against the euro in two months, and reached a six-week high versus the yen, as rising global interest rates sent emerging stock markets into a tailspin.
- The killing of the most-wanted terrorist in Iraq, Abu Musab al-Zarqawi, presents an opportunity for US and Iraqi leaders to rally rival factions toward a peaceful reconciliation, analysts said.
- US stocks rebounded from the worst international equity-market slump in two years after a shift in investor sentiment favored the dollar and American companies whose earnings are less vulnerable to a slowing economy.
- Texas Instruments(TXN) raised its second-quarter sales and profit forecasts as more consumers purchase handsets in India and China.
- Hedge funds focused on Asia had their worst month since September 2002 in May as the region’s stock indices tumbled, suggesting managers need to increase their hedging to weather the current emerging markets stocks sell-off.
Financial Times:
- IMF Chief Economist Raghuram Rajan says incentives for hedge fund managers are the reason for recent falls in risky assets prices.
- Nasdaq Stock Market’s(NDAQ) proposed acquisition of London Stock Exchange Plc may be put on hold until 2007 at the earliest, citing Joe Gawronski, chief operating officer at Rosenblatt Securities.
- General Motors(GM) will “reward” those suppliers who remain loyal to it in times of crisis.
New Zealand Herald:
- Restaurant Brands New Zealand Ltd. is considering opening Starbucks Coffee(SBUX) stores at the nation’s airports and in regional towns as part of a plan to double the franchise’s outlets.
Shanghai Securities News:
- China’s money supply growth accelerated in May and banks almost doubled new yuan lending, suggesting the central ban may take further measures to damp lending.
Late Buy/Sell Recommendations
- Goldman Sachs:
- Rated (MS), (TRAD), (JEF) and (AMTD) Outperform.
- Rated (AGE) Underperform.
Night Trading
Asian Indices are -.75% to +.50% on average.
S&P 500 indicated +.13%.
NASDAQ 100 indicated +.35%.
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
- None of note
Upcoming Splits
- (B) 2-for-1
- (CGI) 2-for-1
- (EXPO) 2-for-1
- (FD) 2-for-1
- (MAR) 2-for-1
- (TRN) 3-for-2
- (BECN) 3-for-2
- (CEDC) 3-for-2
Economic Releases
8:30 pm EST
- The Trade Deficit for April is estimated to widen to -$65.0B versus -$62.0B in March.
- The Import Price Index for May is estimated to rise .7% versus a 2.1% gain in April.
BOTTOM LINE: Asian indices are slightly higher, boosted by technology stocks in the region after Texas Instruments(TXN) raised its forecast. It appears to me most US stocks have put in place meaningful bottoms. However, I continue to believe commodity, emerging market and deep cyclical stocks will underperform through year-end. I expect US equities to open modestly higher and to build on gains into the afternoon. The Portfolio is 100% net long heading into the day.
***Alert***
I have been unable to post again today as a result of technical problems with Blogger.com. Hopefully they will fix this problem soon. I will try and post the Friday Watch within the next hour.
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