Bloomberg:
- US ethanol prices dropped to the lowest in almost three months, following a plunge in crude oil that’s led to cheaper costs for gasoline.
- Corn futures in Chicago are falling today on speculation that high prices will prompt a bigger jump in plantings than previously expected.
- The European Union’s mandatory targets for using renewable fuels will herald opportunities for “entrepreneurial” farmers, said European Commission President Jose Barroso.
- The 17% drop in oil this month has caused benchmark NY gasoline futures, which are based on wholesale prices, to tumble 14%. Gas station prices usually lag behind futures by four to eight weeks. A corresponding drop for retail gasoline would lower the nationwide average to about $1.95/gallon.
- Schlumberger Ltd., the world’s largest oilfield-services provider, said fourth-quarter profit soared 71% and forecast “significant growth” in 2007 as oil and gas producers work harder to find and tap new deposits.
- General Electric(GE) said fourth-quarter earnings rose 12% on commercial loans, sales of equipment for power plants and a rebound in the NBC Universal media unit.
- Fortress Investment Group LLC, a NY-based hedge fund and private-equity firm, may raise as much as $634.3 million in the first IPO by a US manager of alternative assets.
- Supplements of folic acid, a vitamin found in yeast, organ meats and green, leafy vegetables, improve memory and cognitive functions that decline in old age.
- Crude oil is bouncing $1/bbl. on short-covering, but is set for its fifth weekly decline, after US stockpiles surged and the IEA trimmed forecasts for global demand.
Wall Street Journal:
- Oil companies that have been among investors’ favorites lately, such as Canada’s Suncor Energy(SU), will be hurt if the oil-price slide continues.
- Some hedge-fund investors are worrying that worldwide commodity-trading funds have peaked after strong 2006 returns. The number of hedge funds trading commodities futures has risen 67% in just the last year, with assets growing 71% during that period, citing David Mooney, a fund manager with UK-based New Finance Capital.
NY Times:
- Iran’s supreme leader Ayatollah Ali Khamenei may no longer support President Mahmoud Ahmadinejad. Two newspapers, including the Khamenei-owned Jomhouri-Eslami, have called on the president to stay out of the country’s nuclear plan.
- General Electric Co., E.I. du Pont de Nemours and Co., Alcoa Inc. and Caterpillar are among 10 large US companies that will call on Jan. 22 for a cap on US emissions of carbon dioxide and reductions of 10% to 30% over 15 years.
- Wall Street investment firms control as much as half of US futures contracts for commodities such as cattle, corn, wheat and oil, stakes that are helping drive up prices at the supermarket and gas pump.
AP:
- Men face a 77% higher risk than women of dying in a road accident, according to Carnegie Mellon Univ. research.
al-Hayat:
- Iran is ready for talks with the US, Iraqi President Jalal Talabani said. Iranian officials told Talabani during a November visit to Tehran that they were ready to reach an understanding beneficial to both Iran and the US on issues ranging from Afghanistan to Lebanon.
JANA:
- Libya sold its crude oil this week at an average price of $49.63/bbl.
Friday, January 19, 2007
Consumer Confidence Surges to 36-month High
- Preliminary Univ. of Mich. Consumer Confidence for January rose to 98.0 versus estimates of 92.2 and a reading of 91.7 in December.
BOTTOM LINE: American consumers gained confidence in January, boosting sentiment to the highest level since January 2004, as falling energy prices and steady wage gains made them feel better, Bloomberg said. The Expectations component of the index rose to 88.7, the highest since December 2004, versus 81.2 the prior month. The Current Conditions component, which is a gauge of Americans’ perceptions of their financial situation and whether or not it’s a good time to buy big-ticket items, surged to 112.5 from 108.1 the prior month. The average price of a gallon of gas was $2.20 on Jan. 17, 13 cents lower than at the end of December. Gas is 28% lower than last year’s high of $3.04/gallon in August. I continue to believe every measure of consumer sentiment will make new cycle highs over the coming months as energy prices fall further, long-term rates remain low, inflation decelerates further, wages continue to outpace inflation, stocks rise more, housing stabilizes at high levels and the job market remains healthy.
Thursday, January 18, 2007
Friday Watch
Late-Night Headlines
Bloomberg:
- Hedge-fund inflows plunged 64% in the fourth quarter from the pace of the previous three months as returns trailed market indexes and investors reacted to the collapse of Amaranth Advisors LLC.
- Crude oil is falling for a second day in NY after plunging below $50 a barrel yesterday for the first time since May 2005 following a surge in US oil and fuel stockpiles.
- Australia and the US said they are concerned at China test firing a missile into space to destroy an obsolete weather satellite orbiting the Earth.
- Merck & Co.(MRK) was granted a mistrial after a Los Angeles jury couldn’t reach a verdict following six days of deliberations in a case over the heart attacks of two men who used the company’s Vioxx painkiller.
- Copper futures in Shanghai are falling to a nine-month low, after data showed supply of the metal outpacing demand, outweighing signs that the US housing sector may be recovering.
- Tetsu Emori, chief commodities strategist at Mitsui Bussan Futures Ltd., says oil will fall to $40/bbl. on “huge” supplies.
- Venezuela seeks enforcement of oil production quotas among fellow members of OPEC, not a production cut, the country’s oil minister said.
- Madeleine Albright, the former US secretary of state during the Clinton administration, raised $329 million to invest in emerging markets.
- IBM(IBM) said fourth-quarter profit rose 11% on new contracts and acquisitions to bolster the company’s software unit. The shares fell 5% after-hours on disappointing hardware sales.
- Consumer Reports magazine retracted an article that said most infant car seats failed in crash tests, after US auto-safety regulators questioned the results.
- Capital One Financial(COF) said profit rose 39% as loan losses fell. The stock rose .90 in after-hours trading.
- By a margin of 68% to 31%, respondents in a new Bloomberg/LA Times poll said the economy is doing well – the highest percentage since 2001.
- Toyota Motor(TM) recalled more than half a million pickup trucks and sport-utility vehicles in the US due to a steering fault that may have led to 11 accidents.
- The yen’s decline may accelerate as the Bank of Japan damaged its credibility by leaving interest rates on hold, said Toru Umemoto, at Barclays Capital, the most accurate forecaster of the yen last year in Bloomberg surveys.
- China’s tax administrator is trying to downplay a rule that says duties will be based on market value instead of estimates, after its announcement four days ago roiled property stocks on the Shanghai and Shenzhen exchanges.
- The global crude oil market is “adequately supplied” and producers should avoid reducing output further to preserve consuming countries’ stocks, Intl. Energy Agency Executive Director Claude Mandil said.
- Asian gasoline prices may fall further as China, Asia’s largest refiner, fires up new oil-processing plants and increases exports.
Xinhua News Agency:
- Local governments are fabricating inflated data for a national agricultural census to meet preset targets, citing China’s chief statistician.
Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (KLAC), target $65.
- Maintain Buy on (WY), target $85.
Business Week:
- US Airways’(LCC) shares could rise 29% within a year even if the carrier’s $10.5 billion offer for Delta Air Lines is rejected. Credit Suisse’s Daniel McKenzie said the stock could rise to a range of $72 to $76 in 12 months.
- UCBH Holdings(UCBH) is looking to buy in China to fuel growth, citing company Executive VP Jonathan Downing.
Night Trading
Asian Indices are -.75% to +.25% on average.
S&P 500 indicated -.03%.
NASDAQ 100 indicated -.06%.
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
Conference Calendar
Daily Stock Events
Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule
Earnings of Note
Company/EPS Estimate
- (C)/1.00
- (FAST)/.31
- (GE)/.64
- (JCI)/.84
- (KEY)/.73
- (MOT)/.25
- (RF)/.72
- (SLB)/.85
- (STI)/1.46
Upcoming Splits
- (GROW) 2-for-1
Economic Releases
8:30 am EST
- The Preliminary Univ. of Mich. Consumer Confidence reading for January is estimated at 92.0 versus a reading of 91.7 in December.
Bloomberg:
- Hedge-fund inflows plunged 64% in the fourth quarter from the pace of the previous three months as returns trailed market indexes and investors reacted to the collapse of Amaranth Advisors LLC.
- Crude oil is falling for a second day in NY after plunging below $50 a barrel yesterday for the first time since May 2005 following a surge in US oil and fuel stockpiles.
- Australia and the US said they are concerned at China test firing a missile into space to destroy an obsolete weather satellite orbiting the Earth.
- Merck & Co.(MRK) was granted a mistrial after a Los Angeles jury couldn’t reach a verdict following six days of deliberations in a case over the heart attacks of two men who used the company’s Vioxx painkiller.
- Copper futures in Shanghai are falling to a nine-month low, after data showed supply of the metal outpacing demand, outweighing signs that the US housing sector may be recovering.
- Tetsu Emori, chief commodities strategist at Mitsui Bussan Futures Ltd., says oil will fall to $40/bbl. on “huge” supplies.
- Venezuela seeks enforcement of oil production quotas among fellow members of OPEC, not a production cut, the country’s oil minister said.
- Madeleine Albright, the former US secretary of state during the Clinton administration, raised $329 million to invest in emerging markets.
- IBM(IBM) said fourth-quarter profit rose 11% on new contracts and acquisitions to bolster the company’s software unit. The shares fell 5% after-hours on disappointing hardware sales.
- Consumer Reports magazine retracted an article that said most infant car seats failed in crash tests, after US auto-safety regulators questioned the results.
- Capital One Financial(COF) said profit rose 39% as loan losses fell. The stock rose .90 in after-hours trading.
- By a margin of 68% to 31%, respondents in a new Bloomberg/LA Times poll said the economy is doing well – the highest percentage since 2001.
- Toyota Motor(TM) recalled more than half a million pickup trucks and sport-utility vehicles in the US due to a steering fault that may have led to 11 accidents.
- The yen’s decline may accelerate as the Bank of Japan damaged its credibility by leaving interest rates on hold, said Toru Umemoto, at Barclays Capital, the most accurate forecaster of the yen last year in Bloomberg surveys.
- China’s tax administrator is trying to downplay a rule that says duties will be based on market value instead of estimates, after its announcement four days ago roiled property stocks on the Shanghai and Shenzhen exchanges.
- The global crude oil market is “adequately supplied” and producers should avoid reducing output further to preserve consuming countries’ stocks, Intl. Energy Agency Executive Director Claude Mandil said.
- Asian gasoline prices may fall further as China, Asia’s largest refiner, fires up new oil-processing plants and increases exports.
Xinhua News Agency:
- Local governments are fabricating inflated data for a national agricultural census to meet preset targets, citing China’s chief statistician.
Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (KLAC), target $65.
- Maintain Buy on (WY), target $85.
Business Week:
- US Airways’(LCC) shares could rise 29% within a year even if the carrier’s $10.5 billion offer for Delta Air Lines is rejected. Credit Suisse’s Daniel McKenzie said the stock could rise to a range of $72 to $76 in 12 months.
- UCBH Holdings(UCBH) is looking to buy in China to fuel growth, citing company Executive VP Jonathan Downing.
Night Trading
Asian Indices are -.75% to +.25% on average.
S&P 500 indicated -.03%.
NASDAQ 100 indicated -.06%.
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
Conference Calendar
Daily Stock Events
Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule
Earnings of Note
Company/EPS Estimate
- (C)/1.00
- (FAST)/.31
- (GE)/.64
- (JCI)/.84
- (KEY)/.73
- (MOT)/.25
- (RF)/.72
- (SLB)/.85
- (STI)/1.46
Upcoming Splits
- (GROW) 2-for-1
Economic Releases
8:30 am EST
- The Preliminary Univ. of Mich. Consumer Confidence reading for January is estimated at 92.0 versus a reading of 91.7 in December.
BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and technology shares in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.
Stocks Sharply Lower into Final Hour on Weakness in Commodities and Tech
BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Internet longs, Telecom longs and Computer longs. I added (IWM) and (QQQQ) hedges today, thus leaving the Portfolio 75% net long. The tone of the market is very negative as the advance/decline line is substantially lower, sector performance is mostly negative and volume is heavy. Last night, Apple Inc.(AAPL) shattered 1Q estimates. The company then gave its typical conservative forward guidance. Overall tech sector weakness and “disappointing” Mac sales are likely pressuring the stock today. I view any broad market weakness as temporary. As far as the Mac, I am still confident that sales will exceed estimates substantially for the year. Recently, above expectations sales of homes and flat-panel televisions likely left less time and money for shopping for another big-ticket item such as the Mac. I think worries over the iPhone substantially hurting near-term sales of iPods are overdone. I suspect many people, especially those in their 40s/50s, that have never owned an iPod will be interested in the iPhone. As well, the high price will lead many younger consumers to just stick with the iPod. I also expect the iTV will be a much bigger hit than is currently believed. The bottom line, in my opinion, is that the stock is meaningfully cheaper today than it was yesterday due to the stock price decline and significant earnings beat. I continue to believe earnings substantially above expectations for the year and p/e multiple expansion will boost the stock over 50% from current levels this year. The future of the company has never looked brighter. I continue to believe the dozens of negative stories and reports since the options investigation was announced are unwarranted and the result of the fact that Apple Inc. is perceived as a leading US “growth” stock. I still plan to add to my Apple Inc. long on any substantial weakness and it remains my second largest long position. I expect US stocks to trade modestly higher into the close from current levels on short-covering, more economic optimism, lower long-term rates, declining energy prices and bargain-hunting.
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