Earnings of Note
Company/Estimate
BSC/2.23
BBY/.33
JBL/.26
KBH/2.10
Splits
APPB 3-for-2
DVA 3-for-2
HSY 2-for-1
Economic Data
Housing Starts for May estimated at 1950K versus 1969K in April.
Building Permits for May estimated at 1970K versus 2006K in April.
Industrial Production for May estimated +.8% versus +.8% in April.
Capacity Utilization for May estimated at 77.5% versus 76.9% in April.
Fed's Beige Book
Recommendations
Goldman Sachs reiterated Outperform on IGT, SLB, AMGN, CVD and DNA.
Late-Night News
Asian indices are higher on strength in Japan as investor optimism increased following a fall in U.S. interest rates. China's prices are under control and the country is capable of avoiding "severe" inflation, the official Xinhua news agency reported, citing a report by the National Bureau of Statistics. IBM and Microsoft have given support to moves to compel companies to count stock options as expenses that reduce earnings, the Financial Times reported. Iran plans to start an oil-trading market for OPEC and Middle-East producers, the Guardian reported. Nortel and Nokia may get an order worth $881 million form Bharat Sanchar Nigam Ltd., the Business Line reported. Mandalay Resort Group's board accepted MGM Mirage's $71/share takeover bid, the Wall Street Journal reported. K2 will pay about $200 million for three ski brands in a push to compete with large apparel companies like Nike and Adidas, the Wall Street Journal reported. China's central bank said it won't yield to pressure from trading partners to stop fixing the value of the yuan to the dollar, Bloomberg reported.
Late-Night Trading
Asian Indices -.50% to +1.50% on average.
S&P 500 indicated +.07%.
NASDAQ 100 indicated +.07%.
BOTTOM LINE: I expect U.S. stocks to open modestly higher tomorrow on a better-than-expected industrial production report, strength in Asia and strong corporate earnings reports. The Portfolio is 75% net long heading into tomorrow.
Wednesday, June 16, 2004
Tuesday, June 15, 2004
Tuesday Close
S&P 500 1,132.01 +.60%
NASDAQ 1,995.60 +1.30%
Leading Sectors
Iron/Steel +3.65%
Oil Service +2.84%
Nanotechnology +1.86%
Lagging Sectors
Gaming +.03%
Broadcasting -.18%
I-Banks -1.17%
Other
Crude Oil 37.64 +.59%
Natural Gas 6.33 +.41%
Gold 389.10 +.10%
Base Metals 104.94 +1.16%
U.S. Dollar 89.09 -.95%
10-Yr. T-note Yield 4.67% -3.98%
VIX 15.05 -6.35%
Put/Call .75 -47.55%
NYSE Arms .93 -25.0%
After-hours Movers
SNTS +32.57% after saying the FDA approved its Rapinex heartburn drug for sale in the U.S.
SAFM +4.96% after saying it was added to the S&P 600 Index.
ELY -20.35% after lowering 2Q and 04 guidance.
HLR -5.71% after saying it overstated the circulation at the Chicago Sun-Times for several years.
Recommendations
Goldman Sachs reiterated Outperform on SYMC.
After-hours News
U.S. stocks finished higher today as interest rates plunged, consumer confidence rose and Greenspan made positive comments with respect to inflation. After the close, Google agreed to buy a stake in Chinese search engine Baidu.com, the Financial Times said. A person claiming to be the military leader of al-Qaeda in Saudi Arabia threatened to kill a kidnapped American if all of the members of the terrorist organization being held as prisoners aren't released, Fox News reported. Inflation is "not likely to be a serious concern" and the Fed can stick to its plan for measured increases in the benchmark interest rate unless that changes, Fed Chairman Greenspan said. Dow Chemical is raising prices for polyethylene in the U.S. as demand for the world's most widely used plastic surges, Bloomberg said. Oracle said fourth-quarter profit met expectations of $990 million on increased demand for its database software, Bloomberg reported. U.S. 10-year Treasury notes rose by the most since January 01 after a measure of consumer prices increased less than some traders expected, Bloomberg said.
BOTTOM LINE: The Portfolio was lower today as my tech shorts rose more than my basic material and industrial longs. I added a few more tech longs in the afternoon, bringing the Portfolio's market exposure to 75% net long. One of my new longs is VRTSE and I am using a $27 stop-loss on this position. Today's advance was a little disappointing, considering the magnitude of the drop in interest rates. However, I believe that investors' relatively muted reaction was due to anxiety over coming events in the next few weeks. Any market weakness due to a likely above-expectations PPI reading, Fed rate hike, violence during the handover of power to Iraq or end of the quarter repositioning should be used by long-term investors to add to favorite long positions. A recent survey showed that 57% of Americans believe that the U.S. economy has lost jobs over the last 6 months, when in reality it has gained 1.2 million jobs. This is further evidence that the media's extreme focus on negativity is masking many very positive developments and affecting consumer attitudes.
NASDAQ 1,995.60 +1.30%
Leading Sectors
Iron/Steel +3.65%
Oil Service +2.84%
Nanotechnology +1.86%
Lagging Sectors
Gaming +.03%
Broadcasting -.18%
I-Banks -1.17%
Other
Crude Oil 37.64 +.59%
Natural Gas 6.33 +.41%
Gold 389.10 +.10%
Base Metals 104.94 +1.16%
U.S. Dollar 89.09 -.95%
10-Yr. T-note Yield 4.67% -3.98%
VIX 15.05 -6.35%
Put/Call .75 -47.55%
NYSE Arms .93 -25.0%
After-hours Movers
SNTS +32.57% after saying the FDA approved its Rapinex heartburn drug for sale in the U.S.
SAFM +4.96% after saying it was added to the S&P 600 Index.
ELY -20.35% after lowering 2Q and 04 guidance.
HLR -5.71% after saying it overstated the circulation at the Chicago Sun-Times for several years.
Recommendations
Goldman Sachs reiterated Outperform on SYMC.
After-hours News
U.S. stocks finished higher today as interest rates plunged, consumer confidence rose and Greenspan made positive comments with respect to inflation. After the close, Google agreed to buy a stake in Chinese search engine Baidu.com, the Financial Times said. A person claiming to be the military leader of al-Qaeda in Saudi Arabia threatened to kill a kidnapped American if all of the members of the terrorist organization being held as prisoners aren't released, Fox News reported. Inflation is "not likely to be a serious concern" and the Fed can stick to its plan for measured increases in the benchmark interest rate unless that changes, Fed Chairman Greenspan said. Dow Chemical is raising prices for polyethylene in the U.S. as demand for the world's most widely used plastic surges, Bloomberg said. Oracle said fourth-quarter profit met expectations of $990 million on increased demand for its database software, Bloomberg reported. U.S. 10-year Treasury notes rose by the most since January 01 after a measure of consumer prices increased less than some traders expected, Bloomberg said.
BOTTOM LINE: The Portfolio was lower today as my tech shorts rose more than my basic material and industrial longs. I added a few more tech longs in the afternoon, bringing the Portfolio's market exposure to 75% net long. One of my new longs is VRTSE and I am using a $27 stop-loss on this position. Today's advance was a little disappointing, considering the magnitude of the drop in interest rates. However, I believe that investors' relatively muted reaction was due to anxiety over coming events in the next few weeks. Any market weakness due to a likely above-expectations PPI reading, Fed rate hike, violence during the handover of power to Iraq or end of the quarter repositioning should be used by long-term investors to add to favorite long positions. A recent survey showed that 57% of Americans believe that the U.S. economy has lost jobs over the last 6 months, when in reality it has gained 1.2 million jobs. This is further evidence that the media's extreme focus on negativity is masking many very positive developments and affecting consumer attitudes.
Mid-day Update
S&P 500 1,125.12 +.95%
NASDAQ 1,969.24 +1.77%
Leading Sectors
Iron/Steel +3.40%
Oil Service +2.95%
Computer Boxmakers +2.28%
Lagging Sectors
Insurance +.25%
Broadcasting +.22%
Hospitals +.22%
Other
Crude Oil 37.50 -1.0%
Natural Gas 6.32 +1.14%
Gold 389.00 +1.25%
Base Metals 104.94 +1.16%
U.S. Dollar 89.16 -.85%
10-Yr. T-note Yield 4.69% -3.61%
VIX 14.88 -7.41%
Put/Call .70 -51.05%
NYSE Arms .75 -39.52%
Market Movers
SYMC -3.77% after MSFT said it will sell a separate program to protect customers' computers from viruses, competing with SYMC.
RHAT -9.14% after meeting 1Q estimates, multiple downgrades and announcing resignation of CFO.
AFFX +12.58% after raising 04 forecast.
FDS +7.96% after meeting 3Q estimates and raising 4Q forecast.
TSG +11.53% after raising 2Q estimates.
NUE +4.14% after substantially boosting 2Q estimates.
CTSH +6.23% after Citi SmithBarney said project pricing stabilized.
HGR -8.53%(halted) after a news report claimed it may have improperly booked sales by filling out fake prescriptions.
AD -6.56% after announcing resignation of CEO and downgrade by AG Edwards to Hold.
Economic Data
Consumer Price Index for May rose .6% versus expectations of a .5% rise and a .2% increase in April.
CPI Ex Food & Energy for May rose .2% versus expectations of .2% and a .3% rise in April.
Business Inventories for April rose .5% versus expectations of .4% and a .7% rise in March.
Empire Manufacturing for June came in at 30.17 versus expectations of 30.5 and a reading of 30.21 in May.
Preliminary U. of Mich. Consumer Confidence for June came in at 95.2 versus expectations of 90.8 and a reading of 90.2 in May.
Recommendations
Goldman Sachs reiterated Outperform on DIS, KO, KRB, CLX, NUE, AET, AMGN and MSFT. Goldman reiterated Underperform on TSG. Citi SmithBarney likes semi-equipment stocks, favorites are LRCX, WFR and DPMI. Citi reiterated Sell on FLSH, target $15. Citi reiterated Buy on VRTSE, target $34. Citi reiterated Buy on JNPR, target $32.50. Citi reiterated Sell on STX, target $10. QLTI raised to Buy at UBS, target $21.50. MAR raised to Buy at Deutsche Bank, target $61. IMDC raised to Buy at Oppenheimer. RHAT raised to Outperform at CSFB, target $25.
Mid-day News
U.S. stocks are rising mid-day on falling interest rates, strong consumer confidence and a fall in a core inflation reading. Yahoo! is expanding the amount of free storage for its e-mail customers in an effort to compete with Google, the NY Times said. Coca-Cola's Asian president said the new C2 cola is selling well after its Japanese introduction, the Wall Street Journal reported. Louisiana-Pacific CEO Suwyn told CNBC that the company is considering a stock buyback, Bloomberg reported. Enron manipulated energy markets and overcharged customers in western U.S. states during the 2000-2001 energy crisis by about $1.1 billion, the AP reported. 30% of U.S. employers plan to add workers in the third quarter, the most since the stock market bubble burst in 2000, according to a Manpower survey. A recent survey by the World Wealth report shows that 2.27 million Americans are now millionaires, the most ever. The survey also said 1 out of every 130 Americans has more than $1 million, even excluding home equity, Bloomberg said. Nucor, the biggest U.S. maker of steel from recycled metal, raised its second-quarter profit forecast because of growing demand in the U.S. and overseas, Bloomberg reported. Israeli Prime Minister Sharon won't be indicted on charges of bribery, Israel's Attorney General Mazuz said. The AARP may support a bill that enables American to import drugs from Canada, where government price controls keep prescription costs lower, Bloomberg reported. The U. of Mich.'s preliminary reading on consumer sentiment in June rose to 95.2, substantially higher than forecasts, as the addition of 1.2 million jobs this year, an improving situation in Iraq, rising incomes and falling gasoline prices is boosting the outlook for most Americans. An inflation report today showed the core CPI rose just .2%, below expectations, propelling government bonds to their best gains in over three months.
BOTTOM LINE: The Portfolio is down today as my tech shorts are rising more than my industrial and basic material longs. I covered a number of retail and homebuilding shorts this morning as they hit stop-losses and added a few technology and financial longs, bringing the Portfolio's market exposure to 50% net long. One of my new longs is CME and I am using a $123.50 stop-loss on this new position. While I correctly anticipated that the consumer sentiment and CPI readings would exceed expectations, I incorrectly judged the extent to which investors were focused on the CPI's core rate. Today's significant fall in interest rates sets the stage for what I believe will be a meaningful move higher for U.S. stocks beginning in the next month. Long-term investors should use any weakness over the next few weeks to add to favorite positions.
NASDAQ 1,969.24 +1.77%
Leading Sectors
Iron/Steel +3.40%
Oil Service +2.95%
Computer Boxmakers +2.28%
Lagging Sectors
Insurance +.25%
Broadcasting +.22%
Hospitals +.22%
Other
Crude Oil 37.50 -1.0%
Natural Gas 6.32 +1.14%
Gold 389.00 +1.25%
Base Metals 104.94 +1.16%
U.S. Dollar 89.16 -.85%
10-Yr. T-note Yield 4.69% -3.61%
VIX 14.88 -7.41%
Put/Call .70 -51.05%
NYSE Arms .75 -39.52%
Market Movers
SYMC -3.77% after MSFT said it will sell a separate program to protect customers' computers from viruses, competing with SYMC.
RHAT -9.14% after meeting 1Q estimates, multiple downgrades and announcing resignation of CFO.
AFFX +12.58% after raising 04 forecast.
FDS +7.96% after meeting 3Q estimates and raising 4Q forecast.
TSG +11.53% after raising 2Q estimates.
NUE +4.14% after substantially boosting 2Q estimates.
CTSH +6.23% after Citi SmithBarney said project pricing stabilized.
HGR -8.53%(halted) after a news report claimed it may have improperly booked sales by filling out fake prescriptions.
AD -6.56% after announcing resignation of CEO and downgrade by AG Edwards to Hold.
Economic Data
Consumer Price Index for May rose .6% versus expectations of a .5% rise and a .2% increase in April.
CPI Ex Food & Energy for May rose .2% versus expectations of .2% and a .3% rise in April.
Business Inventories for April rose .5% versus expectations of .4% and a .7% rise in March.
Empire Manufacturing for June came in at 30.17 versus expectations of 30.5 and a reading of 30.21 in May.
Preliminary U. of Mich. Consumer Confidence for June came in at 95.2 versus expectations of 90.8 and a reading of 90.2 in May.
Recommendations
Goldman Sachs reiterated Outperform on DIS, KO, KRB, CLX, NUE, AET, AMGN and MSFT. Goldman reiterated Underperform on TSG. Citi SmithBarney likes semi-equipment stocks, favorites are LRCX, WFR and DPMI. Citi reiterated Sell on FLSH, target $15. Citi reiterated Buy on VRTSE, target $34. Citi reiterated Buy on JNPR, target $32.50. Citi reiterated Sell on STX, target $10. QLTI raised to Buy at UBS, target $21.50. MAR raised to Buy at Deutsche Bank, target $61. IMDC raised to Buy at Oppenheimer. RHAT raised to Outperform at CSFB, target $25.
Mid-day News
U.S. stocks are rising mid-day on falling interest rates, strong consumer confidence and a fall in a core inflation reading. Yahoo! is expanding the amount of free storage for its e-mail customers in an effort to compete with Google, the NY Times said. Coca-Cola's Asian president said the new C2 cola is selling well after its Japanese introduction, the Wall Street Journal reported. Louisiana-Pacific CEO Suwyn told CNBC that the company is considering a stock buyback, Bloomberg reported. Enron manipulated energy markets and overcharged customers in western U.S. states during the 2000-2001 energy crisis by about $1.1 billion, the AP reported. 30% of U.S. employers plan to add workers in the third quarter, the most since the stock market bubble burst in 2000, according to a Manpower survey. A recent survey by the World Wealth report shows that 2.27 million Americans are now millionaires, the most ever. The survey also said 1 out of every 130 Americans has more than $1 million, even excluding home equity, Bloomberg said. Nucor, the biggest U.S. maker of steel from recycled metal, raised its second-quarter profit forecast because of growing demand in the U.S. and overseas, Bloomberg reported. Israeli Prime Minister Sharon won't be indicted on charges of bribery, Israel's Attorney General Mazuz said. The AARP may support a bill that enables American to import drugs from Canada, where government price controls keep prescription costs lower, Bloomberg reported. The U. of Mich.'s preliminary reading on consumer sentiment in June rose to 95.2, substantially higher than forecasts, as the addition of 1.2 million jobs this year, an improving situation in Iraq, rising incomes and falling gasoline prices is boosting the outlook for most Americans. An inflation report today showed the core CPI rose just .2%, below expectations, propelling government bonds to their best gains in over three months.
BOTTOM LINE: The Portfolio is down today as my tech shorts are rising more than my industrial and basic material longs. I covered a number of retail and homebuilding shorts this morning as they hit stop-losses and added a few technology and financial longs, bringing the Portfolio's market exposure to 50% net long. One of my new longs is CME and I am using a $123.50 stop-loss on this new position. While I correctly anticipated that the consumer sentiment and CPI readings would exceed expectations, I incorrectly judged the extent to which investors were focused on the CPI's core rate. Today's significant fall in interest rates sets the stage for what I believe will be a meaningful move higher for U.S. stocks beginning in the next month. Long-term investors should use any weakness over the next few weeks to add to favorite positions.
Tuesday Watch
Earnings of Note
Company/Estimate
CC/-.07
FDS/.43
LEH/1.91
LEN/1.16
ORCL/.18
PIR/.13
Splits
None of note.
Economic Data
Consumer Price Index for May estimated +.5% versus +.2% in April.
CPI Ex Food & Energy for May estimated +.2% versus +.3% in April.
Business Inventories for April estimated +.4% versus +.7% in March.
Empire Manufacturing for June estimated at 30.50 versus 30.21 in May.
Preliminary Univ. of Mich. Consumer Confidence for June estimated at 90.8 versus 90.2 in May.
NAHB Housing Market Index for June estimated at 68 versus 69 in May.
Recommendations
Goldman Sachs reiterated Outperform on MSFT, ADP, CEN and PAYX.
Late-Night News
Asian indices are quietly mixed ahead of a number of important U.S. economic reports. Steel price rises in the last two years may soon come to an end, the Financial Times said, citing an interview with Arcelor SA CEO Guy Dolle. Saddam Hussein and other detained leaders of his ousted regime will be handed to Iraqi authorities by the U.S. in the next two weeks, the BBC said. China plans to tighten controls on new shopping malls as part of the effort to cool investment and growth in rapidly expanding industries, the Financial Times reported. Manpower's recently released employment survey shows a "much improved" jobs market for the upcoming quarter, the Financial Times said. A letter purportedly written by Abu Musab al-Zarqawi, a terrorist linked to al-Qaeda, says his struggle in Iraq is getting harder because the U.S.-led coalition is tightening its grip, the AP said. A medical journal group that includes the New England Journal of Medicine may require drugmakers to reveal all product trials in order for a drug to be considered for publication, the NY Times said. AT&T will stop offering local service in some states as a court ruling that denies it discounted access to local networks becomes effective, the Wall Street Journal reported. Afghanistan has registered more than 3.5 million voters to take part in the presidential and general elections planned for September, the UN said. Lucent said demand for its products is on the rise in Asia after a three-year slump, Bloomberg reported. Japanese troops will join a UN multinational force planned for Iraq, Bloomberg said.
Late-Night Trading
Asian Indices -.50% to +.75% on average.
S&P 500 indicated -.20%.
NASDAQ 100 indicated -.14%.
BOTTOM LINE: I expect U.S. stocks to open weaker in the morning as higher-than-expected consumer confidence and inflation readings send interest rates higher. However, falling energy prices and relatively high Put/Call and ARMS readings from today should help to cushion any fall. A significantly higher-than-expected CPI reading could result in an inter-meeting rate hike within the next few days. I continue to expect a 50 basis point increase in the Fed Funds Rate by June 30th. I will likely cover a few shorts into any extreme weakness in the morning. The Portfolio is 25% net short heading into tomorrow.
Company/Estimate
CC/-.07
FDS/.43
LEH/1.91
LEN/1.16
ORCL/.18
PIR/.13
Splits
None of note.
Economic Data
Consumer Price Index for May estimated +.5% versus +.2% in April.
CPI Ex Food & Energy for May estimated +.2% versus +.3% in April.
Business Inventories for April estimated +.4% versus +.7% in March.
Empire Manufacturing for June estimated at 30.50 versus 30.21 in May.
Preliminary Univ. of Mich. Consumer Confidence for June estimated at 90.8 versus 90.2 in May.
NAHB Housing Market Index for June estimated at 68 versus 69 in May.
Recommendations
Goldman Sachs reiterated Outperform on MSFT, ADP, CEN and PAYX.
Late-Night News
Asian indices are quietly mixed ahead of a number of important U.S. economic reports. Steel price rises in the last two years may soon come to an end, the Financial Times said, citing an interview with Arcelor SA CEO Guy Dolle. Saddam Hussein and other detained leaders of his ousted regime will be handed to Iraqi authorities by the U.S. in the next two weeks, the BBC said. China plans to tighten controls on new shopping malls as part of the effort to cool investment and growth in rapidly expanding industries, the Financial Times reported. Manpower's recently released employment survey shows a "much improved" jobs market for the upcoming quarter, the Financial Times said. A letter purportedly written by Abu Musab al-Zarqawi, a terrorist linked to al-Qaeda, says his struggle in Iraq is getting harder because the U.S.-led coalition is tightening its grip, the AP said. A medical journal group that includes the New England Journal of Medicine may require drugmakers to reveal all product trials in order for a drug to be considered for publication, the NY Times said. AT&T will stop offering local service in some states as a court ruling that denies it discounted access to local networks becomes effective, the Wall Street Journal reported. Afghanistan has registered more than 3.5 million voters to take part in the presidential and general elections planned for September, the UN said. Lucent said demand for its products is on the rise in Asia after a three-year slump, Bloomberg reported. Japanese troops will join a UN multinational force planned for Iraq, Bloomberg said.
Late-Night Trading
Asian Indices -.50% to +.75% on average.
S&P 500 indicated -.20%.
NASDAQ 100 indicated -.14%.
BOTTOM LINE: I expect U.S. stocks to open weaker in the morning as higher-than-expected consumer confidence and inflation readings send interest rates higher. However, falling energy prices and relatively high Put/Call and ARMS readings from today should help to cushion any fall. A significantly higher-than-expected CPI reading could result in an inter-meeting rate hike within the next few days. I continue to expect a 50 basis point increase in the Fed Funds Rate by June 30th. I will likely cover a few shorts into any extreme weakness in the morning. The Portfolio is 25% net short heading into tomorrow.
Monday, June 14, 2004
Monday Close
S&P 500 1,125.29 -.98%
NASDAQ 1,969.99 -1.49%
Leading Sectors
Biotech -.27%
Hospitals -.46%
Airlines -.49%
Lagging Sectors
Semiconductors -2.27%
Homebuilders -2.34%
Disk Drives -3.04%
Other
Crude Oil 37.76 -2.30%
Natural Gas 6.25 +1.17%
Gold 383.70 -.75%
Base Metals 103.74 +.16%
U.S. Dollar 89.94 -.08%
10-Yr. T-note Yield 4.87% +1.47%
VIX 16.07 +6.85%
Put/Call 1.43 +22.22%
NYSE Arms 1.24 +56.96%
After-hours Movers
RHAT -10.58% after saying its CFO resigned.
YELL +4.91% after raising 2Q forecast on broad-based economic growth.
Recommendations
Goldman Sachs reiterated Outperform on IGT, DIS, FS, AET, AGN and HD. TheStreet.com has a positive column on ELN.
After-hours News
U.S. stocks finished lower today on rising interest rates, weekend violence in the Middle East and profit-taking. After the close, Credit Suisse First Boston, which lost nine members of its technology banking team in February, promised to pay an average of almost $1 million each to about 50 bankers in its California offices, Bloomberg reported. Rick Sherlund, software analyst at Goldman Sachs, said he thinks Microsoft will soon announce a $40 billion share buyback, CNBC reported. Cholesterol-lowering drugs such as Pfizer's Lipitor and Merck's Zocor may reduce glaucoma rates 40% in those with heart disease, according to a study in the June issue of Archives of Ophthalmology, Bloomberg said. Boeing beat Lockheed Martin for a contract worth as much as $3.8 billion to replace the U.S. Navy's fleet of Lockheed-built submarine-hunting planes, Bloomberg reported. Halliburton was "properly awarded" its open-ended contract to repair the Iraqi oil infrastructure, the General Accounting Office concluded in a report issued today. Computer Associates International said it restated revenue for the first three quarters of its 04 fiscal year, Bloomberg said. Munich may become the biggest Microsoft customer to switch to Linux personal-computer software this week, as the city decides whether to remove the Windows operating system from 14,000 municipal computers.
BOTTOM LINE: The Portfolio was modestly higher today as my homebuilding and technology shorts fell more than my industrial and basic material longs. In the afternoon, I took profits in one of my tech shorts and added YZC short. I am using a stop-loss of $52.75 on this position. The Portfolio is still 25% net short. The bond market's reaction to tomorrow's economic reports will likely dictate the direction of U.S. equity indices in the short-run. I expect tomorrow's consumer confidence and inflation readings to exceed expectations, resulting in a further rise in interest rates and pressuring U.S. stocks in the morning.
NASDAQ 1,969.99 -1.49%
Leading Sectors
Biotech -.27%
Hospitals -.46%
Airlines -.49%
Lagging Sectors
Semiconductors -2.27%
Homebuilders -2.34%
Disk Drives -3.04%
Other
Crude Oil 37.76 -2.30%
Natural Gas 6.25 +1.17%
Gold 383.70 -.75%
Base Metals 103.74 +.16%
U.S. Dollar 89.94 -.08%
10-Yr. T-note Yield 4.87% +1.47%
VIX 16.07 +6.85%
Put/Call 1.43 +22.22%
NYSE Arms 1.24 +56.96%
After-hours Movers
RHAT -10.58% after saying its CFO resigned.
YELL +4.91% after raising 2Q forecast on broad-based economic growth.
Recommendations
Goldman Sachs reiterated Outperform on IGT, DIS, FS, AET, AGN and HD. TheStreet.com has a positive column on ELN.
After-hours News
U.S. stocks finished lower today on rising interest rates, weekend violence in the Middle East and profit-taking. After the close, Credit Suisse First Boston, which lost nine members of its technology banking team in February, promised to pay an average of almost $1 million each to about 50 bankers in its California offices, Bloomberg reported. Rick Sherlund, software analyst at Goldman Sachs, said he thinks Microsoft will soon announce a $40 billion share buyback, CNBC reported. Cholesterol-lowering drugs such as Pfizer's Lipitor and Merck's Zocor may reduce glaucoma rates 40% in those with heart disease, according to a study in the June issue of Archives of Ophthalmology, Bloomberg said. Boeing beat Lockheed Martin for a contract worth as much as $3.8 billion to replace the U.S. Navy's fleet of Lockheed-built submarine-hunting planes, Bloomberg reported. Halliburton was "properly awarded" its open-ended contract to repair the Iraqi oil infrastructure, the General Accounting Office concluded in a report issued today. Computer Associates International said it restated revenue for the first three quarters of its 04 fiscal year, Bloomberg said. Munich may become the biggest Microsoft customer to switch to Linux personal-computer software this week, as the city decides whether to remove the Windows operating system from 14,000 municipal computers.
BOTTOM LINE: The Portfolio was modestly higher today as my homebuilding and technology shorts fell more than my industrial and basic material longs. In the afternoon, I took profits in one of my tech shorts and added YZC short. I am using a stop-loss of $52.75 on this position. The Portfolio is still 25% net short. The bond market's reaction to tomorrow's economic reports will likely dictate the direction of U.S. equity indices in the short-run. I expect tomorrow's consumer confidence and inflation readings to exceed expectations, resulting in a further rise in interest rates and pressuring U.S. stocks in the morning.
Mid-day Update
S&P 500 1,125.12 -1.0%
NASDAQ 1,969.24 -1.53%
Leading Sectors
Airlines -.08%
Biotech -.12%
HMO's -.24%
Lagging Sectors
Networking -2.48%
Semis -2.82%
Disk Drives -3.18%
Other
Crude Oil 38.17 -1.29%
Natural Gas 6.25 +1.28%
Gold 384.00 -.62%
Base Metals 103.74 +.16%
U.S. Dollar 89.96 -.06%
10-Yr. T-note Yield 4.85% +1.05%
VIX 16.10 +7.05%
Put/Call 1.21 +3.42%
NYSE Arms 1.46 +84.81%
Market Movers
IPIX +9.15% after saying it had been asked to meet with Olympic organizers regarding the Summer Games in Athens.
QLTI -15.6% after saying it agreed to buy ATRX for $855 million in stock and cash to add medications for prostate cancer and acne, ATRX +13.2%.
NDN -27.8% after lowering 2Q estimates substantially and Merrill Lynch downgrade to Sell.
CTRP +20.1% after saying Rakuten, Japan's only publicly traded online shopping mall, will acquire a 21.61% stake for $109 million in cash.
CDWC -6.65% after announcing disappointing May sales and Raymond James downgrade to Outperform.
Economic Data
Trade Balance for April came in at -$48.3B versus expectations of -$45.0B and -$46.6B in March.
Advance Retail Sales for May +1.2% versus expectations of +1.2% and -.6% in April.
Retail Sales Less Autos for May +.7% versus expectations of +.6% and -.1% in April.
Recommendations
XL, MAR, HMT raised to Overweight at JP Morgan. RARE rated Overweight at Prudential, target $32. FON raised to Overweight at CSFB, target $21. Merrill Lynch cut ratings on 25 REITs. MGG raised to Buy at UBS. Goldman Sachs estimates crude oil will average above $30/bbl. through 2010, benefiting XOM, AHC, VLO, SUN, BHI and SLB. Goldman reiterated Attractive view on Drug Wholesaling segment, favorite MCK. Goldman reiterated Outperform on KO, PEP, DNA, EMC, SLR, INTC, ATYT, NT, AMGN and AET. Goldman reiterated Underperform on BVF, HRB and NSM. Citi SmithBarney said June CIO vendor preference survey showed tech spending should accelerate slightly from recent levels. Citi said strongest areas of spending appear to be software(apps, security, storage, database) and network equipment/apps(Gigabit Ethernet, WLAN, VPNs). Citi also said 35-45% of CIOs are starting to use VoIP vs. 26% in 03, as well 40-50% of companies deploying VoIP expect to upgrade their network infrastructure to accommodate it, benefiting CSCO. Citi thinks airline sell-off overdone, favorites are AMR and AAI. Citi said early market-oriented leading inflation measures are already flattening or declining on Fed tightening expectations.
Mid-day News
U.S. stocks are falling mid-day as interest rates rise, prompting investors to lock in recent gains. Taiwan Semiconductor said it raised production at two plants because of increased demand, the Wall Street Journal reported. ABC television's advertisers are balking at the network's rate increases after its ratings dropped in the latest season, the LA Times reported. France and Israel may sign their biggest arms deal since the French declared an embargo on weapons sales to Israel before the 1967 Middle East war, Haaretz reported. Large phone companies such as AT&T, cable companies such as Cablevision and possibly local phone carriers are likely to dominate the growing Internet phone-service market, the NY Times reported. Some Democratic senators and Senate candidates are pressuring John Kerry to choose John Edwards as his running mate, the NY Times reported. U.S. states are benefiting from strong economic growth as 32 expect to post budget surpluses, the LA Times said. Pitney Bowes CEO told CNBC he hasn't seen any weakness in demand as a result of higher rates, Bloomberg reported. Scientists are developing a bomb detector that uses subatomic particles called neutrons to detect highly enriched uranium or plutonium, which may help expose a nuclear device hidden in ship cargo, the San Francisco Chronicle reported. MGM Mirage raised its offer for Mandalay Resort to $4.8 billion after Mandalay rejected a bid last week, Bloomberg said. Ford said prices for its new gasoline-electric Escape, the first sport-utility vehicle to use the fuel-saving technology, will start at $26,380 and get 40 miles per gallon in city driving when the model goes on sale during the second half of the year, Bloomberg reported. Gary Stern, president of the Federal Reserve Bank of Minneapolis, said he sees no threat of rising inflation and the central bank is ready to adjust the pace at which it raises rates should that expectation prove wrong, Bloomberg reported. A Somali national living in the U.S. is charged with plotting with al-Qaeda to blow up a shopping mall in the Columbus, Ohio area, the Justice Department announced.
BOTTOM LINE: The Portfolio is modestly higher today as my homebuilding and tech shorts are falling more than my industrial and basic material longs. I added a few Chinese ADR and retail shorts on the open, thus leaving the Portfolio with 25% net short market exposure. One of my new shorts is URBN and I am using a $58.75 stop-loss on this new position. Tradesports.com is showing the chances of the Fed raising rates by 50 basis points on June 30 doubled over the weekend to 27%. I expect U.S. stocks to weaken modestly into the close on rising interest rates and profit-taking.
NASDAQ 1,969.24 -1.53%
Leading Sectors
Airlines -.08%
Biotech -.12%
HMO's -.24%
Lagging Sectors
Networking -2.48%
Semis -2.82%
Disk Drives -3.18%
Other
Crude Oil 38.17 -1.29%
Natural Gas 6.25 +1.28%
Gold 384.00 -.62%
Base Metals 103.74 +.16%
U.S. Dollar 89.96 -.06%
10-Yr. T-note Yield 4.85% +1.05%
VIX 16.10 +7.05%
Put/Call 1.21 +3.42%
NYSE Arms 1.46 +84.81%
Market Movers
IPIX +9.15% after saying it had been asked to meet with Olympic organizers regarding the Summer Games in Athens.
QLTI -15.6% after saying it agreed to buy ATRX for $855 million in stock and cash to add medications for prostate cancer and acne, ATRX +13.2%.
NDN -27.8% after lowering 2Q estimates substantially and Merrill Lynch downgrade to Sell.
CTRP +20.1% after saying Rakuten, Japan's only publicly traded online shopping mall, will acquire a 21.61% stake for $109 million in cash.
CDWC -6.65% after announcing disappointing May sales and Raymond James downgrade to Outperform.
Economic Data
Trade Balance for April came in at -$48.3B versus expectations of -$45.0B and -$46.6B in March.
Advance Retail Sales for May +1.2% versus expectations of +1.2% and -.6% in April.
Retail Sales Less Autos for May +.7% versus expectations of +.6% and -.1% in April.
Recommendations
XL, MAR, HMT raised to Overweight at JP Morgan. RARE rated Overweight at Prudential, target $32. FON raised to Overweight at CSFB, target $21. Merrill Lynch cut ratings on 25 REITs. MGG raised to Buy at UBS. Goldman Sachs estimates crude oil will average above $30/bbl. through 2010, benefiting XOM, AHC, VLO, SUN, BHI and SLB. Goldman reiterated Attractive view on Drug Wholesaling segment, favorite MCK. Goldman reiterated Outperform on KO, PEP, DNA, EMC, SLR, INTC, ATYT, NT, AMGN and AET. Goldman reiterated Underperform on BVF, HRB and NSM. Citi SmithBarney said June CIO vendor preference survey showed tech spending should accelerate slightly from recent levels. Citi said strongest areas of spending appear to be software(apps, security, storage, database) and network equipment/apps(Gigabit Ethernet, WLAN, VPNs). Citi also said 35-45% of CIOs are starting to use VoIP vs. 26% in 03, as well 40-50% of companies deploying VoIP expect to upgrade their network infrastructure to accommodate it, benefiting CSCO. Citi thinks airline sell-off overdone, favorites are AMR and AAI. Citi said early market-oriented leading inflation measures are already flattening or declining on Fed tightening expectations.
Mid-day News
U.S. stocks are falling mid-day as interest rates rise, prompting investors to lock in recent gains. Taiwan Semiconductor said it raised production at two plants because of increased demand, the Wall Street Journal reported. ABC television's advertisers are balking at the network's rate increases after its ratings dropped in the latest season, the LA Times reported. France and Israel may sign their biggest arms deal since the French declared an embargo on weapons sales to Israel before the 1967 Middle East war, Haaretz reported. Large phone companies such as AT&T, cable companies such as Cablevision and possibly local phone carriers are likely to dominate the growing Internet phone-service market, the NY Times reported. Some Democratic senators and Senate candidates are pressuring John Kerry to choose John Edwards as his running mate, the NY Times reported. U.S. states are benefiting from strong economic growth as 32 expect to post budget surpluses, the LA Times said. Pitney Bowes CEO told CNBC he hasn't seen any weakness in demand as a result of higher rates, Bloomberg reported. Scientists are developing a bomb detector that uses subatomic particles called neutrons to detect highly enriched uranium or plutonium, which may help expose a nuclear device hidden in ship cargo, the San Francisco Chronicle reported. MGM Mirage raised its offer for Mandalay Resort to $4.8 billion after Mandalay rejected a bid last week, Bloomberg said. Ford said prices for its new gasoline-electric Escape, the first sport-utility vehicle to use the fuel-saving technology, will start at $26,380 and get 40 miles per gallon in city driving when the model goes on sale during the second half of the year, Bloomberg reported. Gary Stern, president of the Federal Reserve Bank of Minneapolis, said he sees no threat of rising inflation and the central bank is ready to adjust the pace at which it raises rates should that expectation prove wrong, Bloomberg reported. A Somali national living in the U.S. is charged with plotting with al-Qaeda to blow up a shopping mall in the Columbus, Ohio area, the Justice Department announced.
BOTTOM LINE: The Portfolio is modestly higher today as my homebuilding and tech shorts are falling more than my industrial and basic material longs. I added a few Chinese ADR and retail shorts on the open, thus leaving the Portfolio with 25% net short market exposure. One of my new shorts is URBN and I am using a $58.75 stop-loss on this new position. Tradesports.com is showing the chances of the Fed raising rates by 50 basis points on June 30 doubled over the weekend to 27%. I expect U.S. stocks to weaken modestly into the close on rising interest rates and profit-taking.
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