Portfolio Manager's Commentary on Investing and Trading in the U.S. Financial Markets
Monday, August 04, 2008
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Sunday, August 03, 2008
Monday Watch
Weekend Headlines
Bloomberg:
- The US dollar rose to a one-month high against the euro as the pace of job erosion in the U.S. slowed while a decline in German retail sales indicated economic weakness is spreading to other developed countries. The currency increased for a third week against the euro, its longest stretch of gains since May 2007. The Australian and New Zealand dollars fell against all of the other major currencies as reports showed Australia's manufacturing contracted and business confidence in New Zealand fell.
- President George W. Bush criticized Democrats in Congress for not acting on his proposal to open more domestic land to oil drilling, saying lawmakers should revisit the issue when they return from their August recess. ``Democratic leaders are leaving town without taking any action to ease the burden of high gas prices,'' Bush said in his weekly radio broadcast. ``If Congress does not act, they will owe families across America an explanation for why they're ignoring their concerns.''
- Iranian president Mahmoud Ahmadinejad said his nation is ``serious'' in nuclear talks after an informal deadline for it to reply to an incentives offer in exchange for halting uranium enrichment passed. ``We are serious in nuclear talks and are keen for them to be based on legal principles,'' Ahmadinejad was quoted as saying by the official Islamic Republic Islamic News Agency.
- Orange juice fell to its lowest price since 2005 on speculation that U.S. inventories of frozen concentrate will keep rising as demand slows and the threat of storm damage diminished for Florida's citrus crops. Orange juice plunged 28 percent this year, the second- biggest drop after nickel on the Reuters/Jefferies CRB Index of 19 commodities. Frozen stockpiles of the juice rose 67 percent in June from a year earlier, and retail sales have dropped every month for more than three years, government data show.
- Corn fell, capping the fifth straight weekly drop, and soybeans declined on speculation that rainfall will ease the stress of hot weather and improve crop conditions in the U.S., the world's largest producer and exporters. Corn futures for December delivery fell 22.5 cents, or 3.7 percent, to $5.85 a bushel on the Chicago Board of Trade, the biggest drop since July 17. The price slid 1.9 percent for the week. Most-active futures plunged 20 percent in July, the most in 22 years, and are down 27 percent from a record $7.9925 on June 27.
- Platinum fell the most in four months in New York on speculation that demand from the auto industry, which accounts for most consumption, will drop while output has stabilized. Palladium also declined. Palladium futures for September delivery sank $12.40, or 3.2 percent, to $371.10 an ounce. The price dropped for a sixth consecutive week, declining 3.1 percent. Most-active futures fell 17 percent last month, the biggest such drop since a 22 percent plunge in March.
- European 10-year bonds had the biggest weekly advance in a decade after a German retail sales report added to evidence that economic growth is slowing.
- Alibaba.com Corp., the closely held Chinese Internet company whose biggest shareholder is Yahoo! Inc.(YHOO), is ready for a possible purchase of the U.S. company's stake in it if the shares are offered.
- Wachovia Corp.(WB) jumped to a seven-week high on renewed speculation that Goldman Sachs Group Inc.(GS) may bid for the fourth-largest U.S. bank.
- Democratic presidential contender Barack Obama said he's willing to support an expansion of offshore oil drilling that's part of an $84 billion Senate plan aimed at increasing domestic energy production. Obama, who has opposed more drilling off the nation's coastlines, said that while he ``remains skeptical'' about the idea, he would compromise because the proposal offers a ``careful and responsible'' drilling agenda. It also calls for other measures to wean the country off its dependence on imported oil.
- Saudi Arabian inflation accelerated to a record 10.6 percent in June from 10.4 percent in May, led by a jump in food and housing costs, Saudi Press Agency reported. Food and beverage prices rose 16 percent in June from a year earlier after gaining 15 percent in May, the state-owned news wire said today. Rent, fuel and water was 19 percent more expensive. Inflation accelerated above 10 percent in five of the six Gulf Cooperation Council states as oil-fueled economic growth created shortages of housing and services. The kingdom's M1 money-supply growth, a gauge of future inflation, accelerated to 29 percent in June from 27 percent in May. Saudi commercial bank lending to the private sector, a contributor to money supply, increased 35 percent, after gaining 33 percent in May. Qatar had the highest inflation in the GCC, at 14.8 percent in the first quarter, followed by 13.2 percent in Oman. The U.A.E., which reports inflation annually, said consumer prices rose 11.1 percent last year. Kuwait reported that the inflation rate fell to 11.1 percent in May from 11.4 percent in April.
- The comeback of tech banker Frank Quattrone.
- New Jersey residents are open to building both windmills and oil rigs off the state's coast to help combat rising energy prices, according to a Monmouth University/Gannett New Jersey poll. Electricity-generating windmills were supported by 82 percent of respondents while drilling for oil near the coast is backed by 56 percent, according to a statement today from the Monmouth University Polling Institute. A majority, 53 percent, of New Jerseyans polled blame stock market speculators for the price of oil, while 14 percent cited higher demand.
- ``The Dark Knight,'' the sequel to ``Batman Begins,'' was the top film for a third weekend at U.S. and Canadian theaters, garnering $43.8 million in ticket sales and possibly challenging the all-time U.S. box-office record.
- China’s Inflation Is Harder to Control Than Web. Suddenly, the new China is looking a lot like the old China.
- Currency traders are beginning to realize that for all its riches in oil, copper and lumber, Canada's economy may not be so different than the U.S. after all. While Canadians celebrated last year as the country's dollar reached parity with its U.S. counterpart for the first time since 1976, traders now predict the currency will fall as much as 17 percent through 2009.
- William Fitzpatrick, who helps manage $1.5 billion at Optique Capital Management, says crude oil may fall below $100. (video)
Wall Street Journal:
- Time Warner Inc.(TWX) has completed the internal work necessary to separate its AOL unit’s dial-up-access business from its advertising and content business. Now it will get serious about plotting the unit’s next steps, including whether to sell one or both of the businesses.
- Strong Productivity Defies Trend And Gives Fed Room to Maneuver. In the six U.S. recessions since 1970, worker productivity, or output per hour, grew a sluggish 0.8%, on average. But since the end of last year, even amid economic weakness, productivity is estimated to have grown an average 2.5% at an annual rate. That defies productivity's usual behavior of going "up in good times and down in bad times," says Georgia State University forecaster Rajeev Dhawan.
MarketWatch.com:
- Bioplastics will be all the rage. New biodegradable materials are replacing petrochemicals in plastic bags.
- Yahoo Inc.'s(YHOO) incumbent directors were re-elected by shareholders on Friday, although a sizeable number of votes were withheld for CEO Jerry Yang and Chairman Roy Bostock in a sign of investor discontent with the Web portal's board.
NY Times:
- Chief of Pets.com Is Back, Minus the Sock Puppet.
- Rising shipping costs spurred by gains in oil prices are likely to force manufacturers to locate factories closer to suppliers and consumers instead of looking for cheap goods abroad. The increase in shipping costs because of the higher price of oil is the equivalent of a 9% trade tariff, citing a May study by CIBC World Markets Inc. Higher shipping costs are likely to affect heavy manufacturing such as steel or furniture, which has led to a decline in Chinese steel exports to the US and a resurgence in home furnishings production in Virginia and North Carolina. Tesla Motors Inc. decided against making electric-vehicle components in Thailand and shipping them to Britain for installation, in favor of production nearer its San Carlos, California, headquarters.
- Billionaire Stephen Wynn, founder and CEO of Wynn Resorts Ltd.(WYNN), said his company didn’t “overreach” with its casino projects, including the planned $2.3 billion resort called Encore in Las Vegas.
- Richard X. Bove is one of the few analysts to predict the housing market blow-up. He is also one of the few whose advice would have made money for investors over the past year.
CBS:
- Al-Qaeda deputy leader Ayman al-Zawahiri may be wounded, citing a letter it obtained from sources in
- As some of Silicon Valley's biggest tech companies - especially chip makers - have recognized the enormous potential in the solar industry, the battle for supremacy is taking on David vs. Goliath proportions.
Business Week:
- The 15 Cars with the Best Gas Mileage.
- 11 cities seeking places to raise wind turbines. A focus on renewable energy is spurring wind energy projects from Anoka to East Grand Forks.
Reuters:
- Chinese and foreign citizens wishing to protest during the Beijing Olympics must apply five days beforehand and not harm China's vaguely defined "national interests", a Games security official said.
- Newborn stock index Bespoke Investment Group is tracking stocks for companies that cater to parents of newborns, a market that could prove a growth spurt for some investors because of a recent mini-baby boom.
- The fifth tropical depression of the 2008 Atlantic hurricane season formed in the northern Gulf of Mexico on Sunday, and was forecast to pass through key U.S. oil production areas before reaching Texas or Louisiana, the U.S. National Hurricane Center said.
AP:
-
Financial Times:
- A new system to overhaul insider trading investigations is due to be agreed as early as this week in the latest response from US regulators to growing concerns about the extent of illegal activity on global markets. Under the proposed measure, the nine US stock exchanges that now monitor insider dealing will cede their authority to two bodies, the New York Stock Exchange's regulatory arm and the Financial Industry Regulatory Authority, which oversees broker-dealers. People involved in the discussions say this shift to a more centralized system should lead to faster and more efficient oversight of illegal activity at a time when the potential for abuse is becoming more widespread.
- While Russia has transformed itself since 1998, it is still wracked by serious weaknesses. While it has recovered some international influence it is far from re-establishing itself as a superpower.
Nikkei:
- Nippon Oil Corp. plans to produce 10,000 home-use fuel cells a year starting in April, 2009.
Wen Wei
- A banking regulator urged lenders in
- So-called “underground” lending in
Press Trust of
-
Weekend Recommendations
Barron's:
- Made positive comments on (CBI), (WAB), (SFY), (DIS), (BNI) and (EMC).
- Made negative comments on (LVS), (BTU) and (SBUX).
Citigroup:
- Reiterated Buy on (AIZ), target $80.
Night Trading
Asian indices are -1.0% to -.25% on avg.
S&P 500 futures -.05%.
NASDAQ 100 futures -.07%.
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- (DISH)/.60
- (ICE)/1.18
- (HUM)/1.17
- (APC)/1.77
- (HMA)/.11
- (PPS)/.42
- (PBI)/.67
Upcoming Splits
- None of note
Economic Releases
8:30 am EST
- Personal Income for June is estimated to fall .2% versus a 1.9% increase in May.
- Personal Spending for June is estimated to rise .4% versus a .8% gain in May.
- The PCE Core for June is estimated to rise .2% versus a .1% gain in May.
10:00 am EST
- Factory Orders for June are estimated to rise .7% versus a .6% gain in May.
Other Potential Market Movers
- The Challenger Job Cuts report and Pacific Crest Tech Forum could also impact trading today.
Weekly Outlook
Click here for Wall St. Week Ahead by Reuters.
Click here for stocks in focus for Monday by MarketWatch.
There are a few economic reports of note and many significant corporate earnings reports scheduled for release this week.
Economic reports for the week include:
Mon. – Challenger Job Cuts, Personal Income, Personal Spending, PCE Core, Factory Orders
Tues. – ISM Non-Manufacturing, FOMC Rate Decision, weekly retail sales
Wed. – Weekly MBA mortgage applications, weekly EIA energy inventory data
Thur. – Initial Jobless Claims, Pending Home Sales, ICSC Chain Store Sales, Consumer Credit
Fri. – Non-farm Productivity, Unit Labor Costs, Wholesale Inventories
Some of the more noteworthy companies that release quarterly earnings this week are:
Mon. – Disk Network(DISH), IntercontinentalExchange(ICE), Humana(HUM), Pitney Bowes(PBI), Post Properties(PPS), Anadarko Petroleum(APC)
Tues. – Marvel Entertainment(MVL), Emerson Electric(EMR), MGM Mirage(MGM), DR Horton(DHI), Weyerhaeuser(WY), Grubb & Ellis(GBE), Covidien Ltd(COV), Brinker Intl.(EAT), St. Joe(JOE), Archer-Daniels-Midland(ADM), Duke Energy(DUK), News Corp.(NWS/A), Computer Sciences(CSC), Georgia Gulf(GGC), Papa John’s(PZZA), Forest Oil(FST), Whole Foods(WFMI), Vulcan Materials(VMC), Jack in the Box(JBX), Cisco Systems(CSCO), Rowan Cos(RDC), Sotheby’s(BID), Wendy’s(WEN), Priceline.com(PCLN), Vornado Realty(VNO), Procter & Gamble(PG)
Wed. – Transocean(RIG), Freddie Mac(FRE), Marsh & McLennan(MMC), Time Warner(TWX), Sprint Nextel(S), Qwest Communications(Q), Polo Ralph Lauren(RL), Advance Auto Parts(AAP), El Paso Corp.(EP), Devon Energy(DVN), Foster Wheeler(FWLT), Blackstone Group(BX)
Thur. – Warnaco Group(WRC), Blockbuster(BBI), Williams Cos(WMB), Dynegy(DYN), Sara Lee(SLE), California Pizza Kitchen(CPKI), Hansen Natural(HANS), DirectTV(DTV), Dollar Tree(DLTR), Barr Pharma(BRL), Progressive Corp.(PGR), Deckers Outdoor(DECK), Titanium Metals(TIE), Cardinal Health(CAH)
Fri. – Beazer Homes(BZH), MBIA(MBI), MicroStrategy(MSTR)
Other events that have market-moving potential this week include:
Mon. – Pacific Crest Tech Forum
Tue. – BMO Healthcare Conference, RBC Tech/Media/Communications Conference, Pacific Crest Tech Forum
Wed. – (AXP) analyst meeting, (TXT) analyst call, RBC Tech/Media/Communications Conference, BMO Healthcare Conference
Thur. – Bank of
Fri. – Bank of
Friday, August 01, 2008
Weekly Scoreboard*
Indices
S&P 500 1,260.31 +.20%
DJIA 11,326.32 -.39%
NASDAQ 2,310.96 +.02%
Russell 2000 716.14 +.82%
Wilshire 5000 12,827.05 +.37%
Russell 1000 Growth 537.99 -.31%
Russell 1000 Value 672.47 +.93%
Morgan Stanley Consumer 670.01 +.72%
Morgan Stanley Cyclical 856.51 +1.63%
Morgan Stanley Technology 554.33 +.66%
Transports 4,949.22 -.20%
Utilities 469.53 -2.04%
MSCI Emerging Markets 42.57 +.29%
Sentiment/Internals
NYSE Cumulative A/D Line 43,404 +2.39%
Bloomberg New Highs-Lows Index -372 +4.37%
Bloomberg Crude Oil % Bulls 24.0 +33.3%
CFTC Oil Large Speculative Longs 201,622 +1.82%
Total Put/Call .99 +20.73%
OEX Put/Call .92 +37.31%
ISE Sentiment 82.0 -25.45%
NYSE Arms 1.23 +6.03%
Volatility(VIX) 22.57 -1.48%
G7 Currency Volatility (VXY) 9.44 -3.58%
Smart Money Flow Index 8,007.81 -1.61%
AAII % Bulls 40.0 +11.7%
AAII % Bears 41.2 -6.5%
Futures Spot Prices
Crude Oil 125.15 +1.38%
Reformulated Gasoline 308.52 +1.40%
Natural Gas 9.40 +3.27%
Heating Oil 344.03 -3.29%
Gold 918.80 -2.10%
Base Metals 232.35 -.76%
Copper 359.20 -.69%
Agriculture 410.44 -.49%
Economy
10-year US Treasury Yield 3.93% -16 basis points
10-year TIPS Spread 2.30% -2 basis points
TED Spread 1.14 +7 basis points
N. Amer. Investment Grade Credit Default Swap Index 132.98 -1.56%
Emerging Markets Credit Default Swap Index 247.96 +1.51%
Citi US Economic Surprise Index +26.80 -23.65%
Fed Fund Futures 9.2% chance of 25 hike, 90.8% chance of no move on 8/5
Iraqi 2028 Govt Bonds 74.82 +.17%
4-Wk MA of Jobless Claims 393,000 +2.9%
Average 30-year Mortgage Rate 6.52% -11 basis points
Weekly Mortgage Applications 420,800 -14.05%
Weekly Retail Sales +2.7%
Nationwide Gas $3.90/gallon -.10/gallon
US Cooling Demand Next 7 Days 20.0% above normal
ECRI Weekly Leading Economic Index 128.10 -1.08%
US Dollar Index 73.42 +77%
Baltic Dry Index 8,341 -4.90%
CRB Index 416.02 +.92%
Best Performing Style
Mid-cap Value +1.13%
Worst Performing Style
Large-cap Growth -.31%
Leading Sectors
Papers +8.78%
Banks +6.36%
I-Banks +4.93%
Biotech +3.30%
Gaming +2.84%
Lagging Sectors
Utilities -2.04%
Networking -2.68%
Oil Tankers -3.82%
Gold -6.66%
Coal -8.12%
Stocks Finish Mostly Lower, Weighed Down by Commodity and Utility Shares
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