Monday, June 19, 2006
Sunday, June 18, 2006
Monday Watch
Weekend Headlines
Bloomberg:
- Lord Browne, CEO of oil giant BP Plc, believes that despite claims to the contrary, the world is not running out of oil, and argues that the price of oil is being pushed higher by such “unfounded” claims. Browne forecasts that oil prices could fall as low as $25-$30/bbl. in the long-term, while falling to around $40 in the near-term.
- Global spare oil production capacity may double within 3 years, helping reduce the “fear premium” that is helping boost oil prices, according to BP Plc, Europe’s largest oil company.
- Indian stocks may be too expensive even after plunging from records set last month, and many of the region’s analysts say the market will fail to extend the biggest two-day rally in two years.
- Australian Prime Minister John Howard will not withdraw troops when Iraqi soldiers take over security in southern Iraq, as they are needed for backup.
- Eni SpA and Union Fenosa SA, partners in a liquefied natural gas plan on Egypt’s Mediterranean coast, will spend $1.5 billion to add a second production line and increase sales of the fuel to the US and Europe.
- Asian companies sold a record amount of new stock in the first five months of this year and paid the lowest fees ever as investment banks including Goldman Sachs(GS), Citigroup(C) and UBS AG(UBS) fought for new clients.
- Most Americans would regard an immediate pullout of US troops form Iraq as an “unmitigated disaster,” White House spokesman Tony Snow said, rejecting calls from Democrats for the Bush administration to set a timetable for withdrawal. According to a recent USA Today/Gallup poll, only 17% of Americans want an immediate US withdrawal.
- Bank of China Ltd., the nation’s second-biggest lender by assets, plans to sell as much as $3.9 billion of stock in the nation’s biggest domestic share sale.
- China’s stocks and bonds may fall after the government ordered banks to increase reserves to help curb an investment boom in real estate and factories in the country.
- Goldman Sachs(GS) named Gary Cohn and Jon Winkelried its new co-presidents and chief operating officers, giving Lloyd Blankfein deputies with experience in both trading and investment banking.
- The US dollar rose to an eight-week high against the yen and climbed versus the euro on speculation Federal Reserve Bank of Atlanta President Jack Guynn in a speech today will be upbeat about US economic growth.
- The yen fell to a record agasint the euro on concern lawmakers will put pressure on Bank of Japan Governor Fukui to resign over his investment in a fund founded by Yoshiaki Murakami, who was jailed for insider trading.
Wall Street Journal:
- Nokia Oyj(NOK) and Siemens AG agreed to combine their equipment units in a deal worth about $31.6 billion.
NY Times:
- General Electric(GE) is investing in its domestic appliance business to win customers who have traditionally gone after more stylish, high-end brands.
- Mississippi has benefited from an increase in oilfield activity as companies seek to take advantage of higher oil prices by drilling for new wells or restarting abandoned wells.
- Mexico’s deportations and detentions rose 74% to 240,000 in the past four years, almost half from illegal entries across its southern border with Guatemala.
- US National Guard troops are beginning to arrive in the four states bordering Mexico to help bolster security as the Border Patrol seeks to hire more agents to prevent illegal border crossings.
- Board members of the ACLU are discussing proposals aimed at prohibiting members from criticizing the organization’s policies and operations.
- Altria Group(MO) Senior VP Parrish said the company may push one more time next year for US FDA regulation of tobacco.
San Francisco Chronicle:
- Gap Inc.(GPS) is poised to introduce a new line of clothing at its flagship Gap division next month as the company strives to revive quality and sales.
Newsweek:
- A team of al-Qaeda terrorists planned a 2003 cyanide attack on the New York subway system that was called off by the terrorist group’s No. 2 leader, citing government officials and a new book by author Ron Suskind.
Barron’s:
- NetRatings(NTRT), a company that measures audiences on the Internet, may be taken private, possibly at a premium to its current share price.
Reuters:
- Investors ignore warnings in volatile markets.
Sunday Times:
- NYSE Group’s(NYX) merger with Euronext NV, the Paris-based European stock exchange, may fall apart amid European political opposition and declining stock markets.
London-based Times:
- London may become the focal point of Google’s(GOOG) next growth phase as the Internet search engine expands its mobile division, citing senior executives at the company.
Daily Graphic:
- Golden Star Resources Ltd. expects to boost gold production by 50% to 300,000 ounces this year, citing company spokesman Magnus Adjah-Kodjoe.
Xinhua News Agency:
- China plans to increase its use of solar power, biomass power and other forms of renewable energy to 16% of its total supply in the next 15 years.
Tehran Times:
- Iran is likely to sign oil development contracts with China in the “coming days."
Weekend Recommendations
Barron's:
- Had positive comments on (COF), (RIO) and (RTP).
- Had negative comments on (LTRE).
Night Trading
Asian indices are -.75% to -.25% on average.
S&P 500 indicated +.04%
NASDAQ 100 indicated +.16%.
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/Estimate
- (KMX)/.38
- (CC)/.00
Upcoming Splits
- (IFO) 2-for-1
Economic Releases
1:00 pm EST
- The NAHB Housing Market Index for June is estimated at 45 versus a reading of 45 in May.
Bloomberg:
- Lord Browne, CEO of oil giant BP Plc, believes that despite claims to the contrary, the world is not running out of oil, and argues that the price of oil is being pushed higher by such “unfounded” claims. Browne forecasts that oil prices could fall as low as $25-$30/bbl. in the long-term, while falling to around $40 in the near-term.
- Global spare oil production capacity may double within 3 years, helping reduce the “fear premium” that is helping boost oil prices, according to BP Plc, Europe’s largest oil company.
- Indian stocks may be too expensive even after plunging from records set last month, and many of the region’s analysts say the market will fail to extend the biggest two-day rally in two years.
- Australian Prime Minister John Howard will not withdraw troops when Iraqi soldiers take over security in southern Iraq, as they are needed for backup.
- Eni SpA and Union Fenosa SA, partners in a liquefied natural gas plan on Egypt’s Mediterranean coast, will spend $1.5 billion to add a second production line and increase sales of the fuel to the US and Europe.
- Asian companies sold a record amount of new stock in the first five months of this year and paid the lowest fees ever as investment banks including Goldman Sachs(GS), Citigroup(C) and UBS AG(UBS) fought for new clients.
- Most Americans would regard an immediate pullout of US troops form Iraq as an “unmitigated disaster,” White House spokesman Tony Snow said, rejecting calls from Democrats for the Bush administration to set a timetable for withdrawal. According to a recent USA Today/Gallup poll, only 17% of Americans want an immediate US withdrawal.
- Bank of China Ltd., the nation’s second-biggest lender by assets, plans to sell as much as $3.9 billion of stock in the nation’s biggest domestic share sale.
- China’s stocks and bonds may fall after the government ordered banks to increase reserves to help curb an investment boom in real estate and factories in the country.
- Goldman Sachs(GS) named Gary Cohn and Jon Winkelried its new co-presidents and chief operating officers, giving Lloyd Blankfein deputies with experience in both trading and investment banking.
- The US dollar rose to an eight-week high against the yen and climbed versus the euro on speculation Federal Reserve Bank of Atlanta President Jack Guynn in a speech today will be upbeat about US economic growth.
- The yen fell to a record agasint the euro on concern lawmakers will put pressure on Bank of Japan Governor Fukui to resign over his investment in a fund founded by Yoshiaki Murakami, who was jailed for insider trading.
Wall Street Journal:
- Nokia Oyj(NOK) and Siemens AG agreed to combine their equipment units in a deal worth about $31.6 billion.
NY Times:
- General Electric(GE) is investing in its domestic appliance business to win customers who have traditionally gone after more stylish, high-end brands.
- Mississippi has benefited from an increase in oilfield activity as companies seek to take advantage of higher oil prices by drilling for new wells or restarting abandoned wells.
- Mexico’s deportations and detentions rose 74% to 240,000 in the past four years, almost half from illegal entries across its southern border with Guatemala.
- US National Guard troops are beginning to arrive in the four states bordering Mexico to help bolster security as the Border Patrol seeks to hire more agents to prevent illegal border crossings.
- Board members of the ACLU are discussing proposals aimed at prohibiting members from criticizing the organization’s policies and operations.
- Altria Group(MO) Senior VP Parrish said the company may push one more time next year for US FDA regulation of tobacco.
San Francisco Chronicle:
- Gap Inc.(GPS) is poised to introduce a new line of clothing at its flagship Gap division next month as the company strives to revive quality and sales.
Newsweek:
- A team of al-Qaeda terrorists planned a 2003 cyanide attack on the New York subway system that was called off by the terrorist group’s No. 2 leader, citing government officials and a new book by author Ron Suskind.
Barron’s:
- NetRatings(NTRT), a company that measures audiences on the Internet, may be taken private, possibly at a premium to its current share price.
Reuters:
- Investors ignore warnings in volatile markets.
Sunday Times:
- NYSE Group’s(NYX) merger with Euronext NV, the Paris-based European stock exchange, may fall apart amid European political opposition and declining stock markets.
London-based Times:
- London may become the focal point of Google’s(GOOG) next growth phase as the Internet search engine expands its mobile division, citing senior executives at the company.
Daily Graphic:
- Golden Star Resources Ltd. expects to boost gold production by 50% to 300,000 ounces this year, citing company spokesman Magnus Adjah-Kodjoe.
Xinhua News Agency:
- China plans to increase its use of solar power, biomass power and other forms of renewable energy to 16% of its total supply in the next 15 years.
Tehran Times:
- Iran is likely to sign oil development contracts with China in the “coming days."
Weekend Recommendations
Barron's:
- Had positive comments on (COF), (RIO) and (RTP).
- Had negative comments on (LTRE).
Night Trading
Asian indices are -.75% to -.25% on average.
S&P 500 indicated +.04%
NASDAQ 100 indicated +.16%.
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/Estimate
- (KMX)/.38
- (CC)/.00
Upcoming Splits
- (IFO) 2-for-1
Economic Releases
1:00 pm EST
- The NAHB Housing Market Index for June is estimated at 45 versus a reading of 45 in May.
BOTTOM LINE: Asian Indices are lower, weighed down by commodity shares in the region. I expect US stocks to open modestly lower and to rise into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the week.
Weekly Outlook
Click here for The Week Ahead by Reuters
There are a few economic reports of note and some significant corporate earnings reports scheduled for release this week.
Economic reports for the week include:
Mon. - NAHB Housing Market Index
Tues. - Housing Starts, Building Permits
Wed. - None of note
Thur. - Initial Jobless Claims, Leading Indicators
Fri. - Durable Goods Orders
Some of the more noteworthy companies that release quarterly earnings this week are:
Mon. - Carmax(KMX), Circuit City Stores(CC)
Tues. - Actuant(ATU), Apollo Group(APOL), Arrow Intl.(ARRO), Factset Research(FDS), JM Smucker(SJM)
Wed. - Bed Bath & Beyond(BBBY), FedEx Corp.(FDX), Jabil Circuit(JBL), Morgan Stanley(MS), Sonic Corp.(SONC)
Thur. - Comverse Technology(CMVT), Del Monte Foods(DLM), Family Dollar(FDO), GTECH Holdings(GTK), Oracle(ORCL), Rite Aid(RAD), Solectron(SLR), Tektronix(TEK)
Fri. - AG Edwards(AGE), Micron Technology(MU)
Other events that have market-moving potential this week include:
Mon. - Prudential Biotech Meetings
Tue. - Piper Jaffray Retail & Financial Services Symposium
Wed. - Morgan Stanley Business and Professional Services Conference
Thur. - Morgan Stanley Business and Professional Services Conference
Fri. - None of note
There are a few economic reports of note and some significant corporate earnings reports scheduled for release this week.
Economic reports for the week include:
Mon. - NAHB Housing Market Index
Tues. - Housing Starts, Building Permits
Wed. - None of note
Thur. - Initial Jobless Claims, Leading Indicators
Fri. - Durable Goods Orders
Some of the more noteworthy companies that release quarterly earnings this week are:
Mon. - Carmax(KMX), Circuit City Stores(CC)
Tues. - Actuant(ATU), Apollo Group(APOL), Arrow Intl.(ARRO), Factset Research(FDS), JM Smucker(SJM)
Wed. - Bed Bath & Beyond(BBBY), FedEx Corp.(FDX), Jabil Circuit(JBL), Morgan Stanley(MS), Sonic Corp.(SONC)
Thur. - Comverse Technology(CMVT), Del Monte Foods(DLM), Family Dollar(FDO), GTECH Holdings(GTK), Oracle(ORCL), Rite Aid(RAD), Solectron(SLR), Tektronix(TEK)
Fri. - AG Edwards(AGE), Micron Technology(MU)
Other events that have market-moving potential this week include:
Mon. - Prudential Biotech Meetings
Tue. - Piper Jaffray Retail & Financial Services Symposium
Wed. - Morgan Stanley Business and Professional Services Conference
Thur. - Morgan Stanley Business and Professional Services Conference
Fri. - None of note
BOTTOM LINE: I expect US stocks to finish the week modestly higher on short-covering, bargain hunting, less irrational pessimism and declining long-term rates. My trading indicators are still giving mostly bearish signals and the Portfolio is 100% net long heading into the week.
Saturday, June 17, 2006
Market Week in Review
S&P 500 1,251.54 -.06%*
Click here for the Weekly Wrap by Briefing.com.
*5-day % Change
Click here for the Weekly Wrap by Briefing.com.
BOTTOM LINE: Overall, last week's market performance was mildly bullish. The advance/decline line fell, sector performance was mixed and volume was above average on the week. Measures of investor anxiety were mostly higher. Moreover, the AAII % Bulls is 26.41%, still at depressed levels, while the % Bears is now at the highest level since Feb. 2003. The S&P 500 has rallied 56.6% since that time. Most other measures of investor sentiment are also at levels associated with meaningful market bottoms.
The average 30-year mortgage rate rose to 6.63% which is 142 basis points above all-time lows set in June 2003. I still believe housing is in the process of slowing to more healthy sustainable levels. I still see little evidence of a nationwide “hard landing” for housing at this point.
The benchmark 10-year T-note yield rose 15 basis points on the week as global stock markets stabilized and US economic data were mostly positive. I still believe inflation concerns have peaked for the year as investors continue to anticipate slower economic growth, unit labor costs remain subdued and the mania for commodities continues to reverse course.
The EIA reported this week that gasoline supplies rose substantially above expectations as refinery utilization increased. Unleaded Gasoline futures declined and are now 30.0% below September 2005 highs even as refinery utilization remains below normal as a result of the hurricanes last year, a significant amount of Gulf of Mexico oil production remains shut-in and fears over future production disruptions persist. According to TradeSports.com, the percent chance of a US and/or Israeli strike on Iran this year has fallen to 12.8% from 36% late last year. I continue to believe the elevated level of gas prices related to shortage speculation and crude oil production disruption speculation will further dampen fuel demand over the coming months, sending gas prices back to reasonable levels.
Natural gas inventories rose less than expectations this week, however supplies are still 37.9% above the 5-year average, not far from an all-time record high for this time of year, even as some daily Gulf of Mexico production remains shut-in. Natural gas prices have plunged 54.9% since December 2005 highs. There are finally some signs that industrial demand is picking up for natural gas as companies substitute the commodity for petroleum products.
US oil inventories are still approaching 9-year highs. Since December 2003, global oil demand is down .24%, while global supplies have increased 4.94%. Moreover, worldwide inventories are poised to begin increasing at an accelerated rate over the next year. I continue to believe oil is priced at extremely elevated levels on fear and record speculation by investment funds, not fundamentals. As the fear premium in oil dissipates back to more reasonable levels, global growth slows and supplies continue to rise, crude oil should head meaningfully lower over the intermediate-term. This will likely begin to happen during the next quarter.
Gold fell for the week as the US dollar gained, speculators sold and the situations in Iraq and Iran further improved. The US dollar rose on hawkish Fed comments and more positive US economic data.
Semiconductor stocks outperformed for the week on bargain-hunting, short-covering and more positive analyst commentary. Semiconductor inventory concerns should be alleviated by next quarter. The forward p/e on the S&P 500 has contracted relentlessly over the last few years and now stands at a very reasonable 14.6. The average US stock, as measured by the Value Line Geometric Index(VGY), is up .1% this year. Moreover, the Russell 2000 Index is still up 3.4% year-to-date, notwithstanding the recent correction. In my opinion, the current pullback has provided longer-term investors very attractive opportunities in many stocks that have been punished indiscriminately. However, the most overvalued economically sensitive and emerging market stocks should continue to underperform over the intermediate-term as the manias for those shares subside. I continue to believe a chain reaction of events has begun that will eventually result in a substantial increase in demand for US stocks.
In my opinion, the market is still factoring in way too much bad news at current levels. Problematic inflation, substantially higher long-term rates, a significant US dollar decline, a “hard-landing” in housing, a plunge in consumer spending and ever higher oil prices appear to be mostly factored into stock prices at this point. I view any one of these as unlikely and the occurrence of all as highly unlikely. Over the coming months, a Fed pause, lower commodity prices, decelerating inflation readings, lower long-term rates, increased consumer confidence, increasing demand for US stocks and the realization that economic growth is only slowing should provide the catalysts for another substantial push higher in the major averages through year-end as p/e multiples begin to expand. I still believe the S&P 500 will return a total of around 15% for the year. The ECRI Weekly Leading Index rose again this week and is forecasting healthy, but decelerating, US economic activity.
*5-day % Change
Friday, June 16, 2006
Weekly Scoreboard*
Indices
S&P 500 1,251.54 -.06%
DJIA 11,014.55 +1.13%
NASDAQ 2,129.95 -.24%
Russell 2000 693.07 -1.19%
Wilshire 5000 12,564.77 -.26%
S&P Equity Long/Short Index 1,150.23 unch.
S&P Barra Growth 580.73 +.21%
S&P Barra Value 668.88 -.33%
Morgan Stanley Consumer 603.98 +.50%
Morgan Stanley Cyclical 803.11 +.39%
Morgan Stanley Technology 489.35 +.78%
Transports 4,636.23 +2.07%
Utilities 410.77 -.35%
S&P 500 Cum A/D Line 6,930.0 -3.0%
Bloomberg Oil % Bulls 40.0 +91.1%
CFTC Oil Large Speculative Longs 173,067 -4.0%
Put/Call 1.25 +23.76%
NYSE Arms 1.23 -10.14%
Volatility(VIX) 17.25 -4.80%
ISE Sentiment 76.0 -27.62%
AAII % Bulls 26.41 +.69%
AAII % Bears 54.98 +21.96%
US Dollar 85.98 +.28%
CRB 339.22 -.26%
ECRI Weekly Leading Index 137.50 +.22%
Futures Spot Prices
Crude Oil 69.83 -.64%
Unleaded Gasoline 203.00 -5.09%
Natural Gas 7.12 +14.95%
Heating Oil 193.24 -5.69%
Gold 582.70 -4.56%
Base Metals 208.10 -1.88%
Copper 321.20 +1.16%
10-year US Treasury Yield 5.12% +3.01%
Average 30-year Mortgage Rate 6.63% +.15%
Leading Sectors
Airlines +4.12%
Telecom +2.32%
Semis +2.11%
Steel +1.38%
Software +.93%
Lagging Sectors
Banks -2.53%
Networking -2.61%
HMOs -2.77%
I-Banks -3.03%
Alternative Energy -3.72%
One-Week High-Volume Gainers
One-Week High-Volume Losers
*5-Day % Change
S&P 500 1,251.54 -.06%
DJIA 11,014.55 +1.13%
NASDAQ 2,129.95 -.24%
Russell 2000 693.07 -1.19%
Wilshire 5000 12,564.77 -.26%
S&P Equity Long/Short Index 1,150.23 unch.
S&P Barra Growth 580.73 +.21%
S&P Barra Value 668.88 -.33%
Morgan Stanley Consumer 603.98 +.50%
Morgan Stanley Cyclical 803.11 +.39%
Morgan Stanley Technology 489.35 +.78%
Transports 4,636.23 +2.07%
Utilities 410.77 -.35%
S&P 500 Cum A/D Line 6,930.0 -3.0%
Bloomberg Oil % Bulls 40.0 +91.1%
CFTC Oil Large Speculative Longs 173,067 -4.0%
Put/Call 1.25 +23.76%
NYSE Arms 1.23 -10.14%
Volatility(VIX) 17.25 -4.80%
ISE Sentiment 76.0 -27.62%
AAII % Bulls 26.41 +.69%
AAII % Bears 54.98 +21.96%
US Dollar 85.98 +.28%
CRB 339.22 -.26%
ECRI Weekly Leading Index 137.50 +.22%
Futures Spot Prices
Crude Oil 69.83 -.64%
Unleaded Gasoline 203.00 -5.09%
Natural Gas 7.12 +14.95%
Heating Oil 193.24 -5.69%
Gold 582.70 -4.56%
Base Metals 208.10 -1.88%
Copper 321.20 +1.16%
10-year US Treasury Yield 5.12% +3.01%
Average 30-year Mortgage Rate 6.63% +.15%
Leading Sectors
Airlines +4.12%
Telecom +2.32%
Semis +2.11%
Steel +1.38%
Software +.93%
Lagging Sectors
Banks -2.53%
Networking -2.61%
HMOs -2.77%
I-Banks -3.03%
Alternative Energy -3.72%
One-Week High-Volume Gainers
One-Week High-Volume Losers
*5-Day % Change
Subscribe to:
Comments (Atom)