Portfolio Manager's Commentary on Investing and Trading in the U.S. Financial Markets
Friday, February 01, 2008
Stocks Rising Again into Final Hour on Gains in Technology, Airline, REIT and Construction Shares
Today's Headlines
Bloomberg:
- OPEC decided to keep oil production targets unchanged at its meeting in Vienna today.
- Crude oil is falling $2.50/bbl., despite OPEC saying it will not increase output, on a rise in the US dollar, less speculation by investment funds, decelerating global demand and record global production.
- Microsoft’s(MSFT) $44.6 billion unsolicited bid to buy Yahoo!(YHOO) signals a revival of mergers and acquisitions as corporate buyers exploit falling stock prices and fill a void left by private-equity firms.
- NY Insurance Superintendent Eric Dinallo is trying to organize a bank-led rescue of Ambac Financial(ABK) to prevent downgrades of the bond insurer that may roil credit markets. Ambac is soaring 16% on the news.
- Deutsche Bank AG,
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- Exxon Mobil(XOM), the world’s largest oil company, said fourth-quarter profit rose 14% amid the biggest increase in crude prices in the 148-year history of the petroleum industry.
Wall Street Journal:
- Societe Generale SA has stopped paying Jerome Kerviel, the trader whose unauthorized bets led to the biggest trading loss in history, yet it hasn’t been able to fire him.
- A Chicago-based hedge fund plans to launch a proxy fight Friday designed to force apartment real-estate investment trust Post Properties(PPS) to consider offers to sell itself.
- Anheuser-Busch(BUD) and
- Billionaire investor Carl Icahn has amassed “a big stake” in JC Penney(JCP), the third-largest US dept.-store chain. Icahn’s stake may be among his top five holdings and be worth hundreds of millions of dollars.
NY Times:
- Law Firm Helped Bundle Home Loans Into Securities.
- Having failed in recent year to impeach President Bush and stop the war in Afghanistan, members of the Berkeley, California City Council approved a resolution that encourages people to nonviolently “impede, passively or actively,” the work of military recruiters.
NY Daily News:
- The laptop Apple’s(AAPL) billion as the “world’s thinnest” could be in stores as early as today.
Non-Farm Payrolls Below Estimates, Unemployment Falls, Confidence Bounces, Manufacturing Expanding, Construction Declines
- The Change in Non-farm Payrolls for January was -17K versus estimates of 70K and an upwardly revised +82K in December.
- The Unemployment Rate for January fell to 4.9% versus estimates of 5.0% and 5.0% in December.
- Average Hourly Earnings for January rose .2% versus estimates of a .3% gain and a .4% rise in December.
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- ISM Manufacturing for January rose to 50.7 versus estimates of 47.3 and a reading of 48.4 in December.
- ISM Prices Paid for January rose to 76.0 versus estimates of 68.0 and a reading of 68.0 in December.
- Construction Spending for December fell 1.1% versus estimates of a .5% decline and a .4% decline in November.
BOTTOM LINE: Non-farm payrolls unexpectedly declined for the first time in more than four years, increasing the odds the Federal Reserve will cut rates another half point next month, Bloomberg reported. However, the unemployment rate unexpectedly fell back to 4.9% from 5.0% the prior month. Moreover, December’s job gains were revised higher from +18,000 to +82,000. Service industries, which include banks, insurance companies, restaurants and retailers, actually added 34,000 workers in January. Government payrolls shrank by 18,000, the first decrease in six months and builders trimmed payrolls by 27,000. Wages rose a healthy 3.7% from year ago levels. Today’s report runs counter to the ADP Employer Services report released Wednesday that showed a 130,000 gain in jobs during January. I expect January non-farm payrolls to be revised higher and a bounce-back in job creation in February.
Confidence among US consumers rose in January from a month earlier, the first increase in six months, as Americans’ sentiment about their economic prospects improved, Bloomberg reported. The Expectations component of the index rose to 68.1 from 65.5 in December. The Current Conditions component, which reflects Americans’ perceptions of their financial situation and whether it is a good time to buy big-ticket items such as cars, rose to 94.4 from 91.0 in December. I expect Consumer Confidence to rise again this month on less economic pessimism, lower interest rates, lower energy prices and a rising stock market.
Manufacturing in the
Bear Radar
Style Underperformer:
Large-cap Value (-.14%)
Sector Underperformers:
Oil Tankers (-2.75%), Software (-2.7%) and Gold (-1.75%)
Stocks Falling on Unusual Volume:
Bull Radar
Style Outperformer:
Mid-cap Growth (+1.01%)
Sector Outperformers:
Steel (+3.2%), Semis (+3.0%) and Construction (+2.5%)
Stocks Rising on Unusual Volume:
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