Earnings of Note
Company/Estimate
CAMP/.08
Splits
CTSH 2-for-1
Economic Data
Current Account Balance for 1Q estimated at -$141.0B versus -$127.5B in 4Q.
Recommendations
Goldman Sachs reaffirmed Attractive view on the Drug Wholesalers and Outperform rating on MCK. Goldman reiterated Outperform on SLR and TRB. Goldman reiterated bullish stance on aluminum stocks, favorite is AA. Goldman said JBL issues are company-specific. Goldman also said that they would increase exposure to copper stocks ahead of strong 2Q earnings reports, favorites are FCX and PD. TKO may benefit from overseas demand for its Internet-access technology, Business Week said.
Late-Night News
Asian indices are lower on rising energy prices, concerns over slowing growth in China and U.S. Fed rate hikes. Foamex Intl.(FMXI) may sell stakes of the company to two chemical makers, Business Week reported. Wal-Mart may reduce shelf space for home entertainment products, hurting producers such as HIT Entertainment, the London-based Times said. Boeing, facing discrimination lawsuits by female workers, may have engaged in a systematic campaign to hide evidence and take advantage of attorney-client privilege, Business Week reported. Vice President Cheney told CNBC that there "clearly was a relationship" between Iraq and al-Qaeda and "the evidence is overwhelming." He also said the evidence involves a whole series of high-level contacts between Osam bin Laden and Iraqi intelligence officials going back to the early 90's. Iraq's interim government may impose martial law when it takes over power on June 30 to help stabilize the country, the Financial Times reported. President Bush and Senator Kerry would have two moderated debates, beginning Sept. 30, and one town-hall style meeting, according to plans released by the Commission on Presidential Debates, Bloomberg said. Almost 90,000 Afghans are registering each day for September's presidential and national assembly elections, the UN said. Dell President Rollins plans to cut computer-printer prices in half and shave as much as 20% from the cost of printer supplies as he challenges Hewlett-Packard in its most-profitable market, Bloomberg reported.
Late-Night Trading
Asian Indices -2.25% to -1.75% on average.
S&P 500 indicated -.34%.
NASDAQ 100 indicated -.58%.
BOTTOM LINE: I expect U.S. stocks to open lower in the morning on weakness in Asia and rising oil prices. The Portfolio is 50% net long heading into tomorrow. I believe the current weakness in technology shares is unwarranted. Earnings estimates are too low for many technology stocks for the second half of the year and I expect their outperformance to begin in the third quarter. INTC, DELL, MSFT, CSCO, YHOO, MOT, QCOM, IBM, VRTS, EMC, AMAT, TXN, ACN, BRCM, IBM and ADP all having improving fundamentals and will likely beat earnings expectations for the second half. While a few of these tech market leaders have excessive valuations, many do not.
Friday, June 18, 2004
Thursday, June 17, 2004
Thursday Close
S&P 500 1,132.03 -.13%
NASDAQ 1,983.67 -.73%
Leading Sectors
Homebuilders +1.68%
Commodity +1.30%
Oil Service +.89%
Lagging Sectors
Networking -1.84%
Disk Drives -1.94%
Semis -3.38%
Other
Crude Oil 38.80 -.03%
Natural Gas 6.54 -.61%
Gold 389.40 -.03%
Base Metals 106.79 +1.36%
U.S. Dollar 89.60 -.49%
10-Yr. T-note Yield 4.68% -.97%
VIX 15.15 +2.43%
Put/Call .78 +18.18%
NYSE Arms 1.08 +12.50%
After-hours Movers
AMHC +9.58% after beating 3Q estimates and raising 04 forecast.
CHTT +5.06% after beating 2Q estimates and raising 04 guidance.
SPEC +13.33% after beating 2Q estimates and raising 3Q forecast.
RHAT -8.62% after missing 1Q revenue estimates, but meeting profit forecast.
Recommendations
Goldman Sachs reiterated Underperform on TSG. Jim Cramer, of TheStreet.com, said on CNBC he thinks QLTI may be a good buy at current levels.
After-hours News
U.S. stocks finished slightly lower today as oil rose on violence in Iraq and technology shares weakened on worries over slowing growth. After the close, Vodafone Group Plc said it has signed an agreement with the UN Foundation worth $27.54 million to fund UN projects on Aids, measles and global heritage site preservation, the Financial Times said. Yanzhou Coal has bought a coke plant from German coal miner RAG AG which it plans to dismantle and take back to China, the Financial Times said. Crude oil rose for a second day on concern that unrest will reduce shipments from the Middle East as sabotage to pipelines halted Iraqi exports from two Persian Gulf terminals, Bloomberg reported. Apple Computer and BMW are developing a device that will let users listen to songs from their iPod music players through the radios of BMWs and Minis, Bloomberg said. The benchmark 10-year T-note rose today after the prices-paid component of the Philly Fed. Index fell, Bloomberg reported.
BOTTOM LINE: The Portfolio finished the day unchanged as my falling shorts offset my declining longs. I did not trade in the afternoon, thus leaving the Portfolio with 50% net long market exposure. Stocks will likely remain neutral to slightly lower ahead of the handover of power to Iraq, end of the quarter repositioning, Russell re-balancing and Fed rate hike.
NASDAQ 1,983.67 -.73%
Leading Sectors
Homebuilders +1.68%
Commodity +1.30%
Oil Service +.89%
Lagging Sectors
Networking -1.84%
Disk Drives -1.94%
Semis -3.38%
Other
Crude Oil 38.80 -.03%
Natural Gas 6.54 -.61%
Gold 389.40 -.03%
Base Metals 106.79 +1.36%
U.S. Dollar 89.60 -.49%
10-Yr. T-note Yield 4.68% -.97%
VIX 15.15 +2.43%
Put/Call .78 +18.18%
NYSE Arms 1.08 +12.50%
After-hours Movers
AMHC +9.58% after beating 3Q estimates and raising 04 forecast.
CHTT +5.06% after beating 2Q estimates and raising 04 guidance.
SPEC +13.33% after beating 2Q estimates and raising 3Q forecast.
RHAT -8.62% after missing 1Q revenue estimates, but meeting profit forecast.
Recommendations
Goldman Sachs reiterated Underperform on TSG. Jim Cramer, of TheStreet.com, said on CNBC he thinks QLTI may be a good buy at current levels.
After-hours News
U.S. stocks finished slightly lower today as oil rose on violence in Iraq and technology shares weakened on worries over slowing growth. After the close, Vodafone Group Plc said it has signed an agreement with the UN Foundation worth $27.54 million to fund UN projects on Aids, measles and global heritage site preservation, the Financial Times said. Yanzhou Coal has bought a coke plant from German coal miner RAG AG which it plans to dismantle and take back to China, the Financial Times said. Crude oil rose for a second day on concern that unrest will reduce shipments from the Middle East as sabotage to pipelines halted Iraqi exports from two Persian Gulf terminals, Bloomberg reported. Apple Computer and BMW are developing a device that will let users listen to songs from their iPod music players through the radios of BMWs and Minis, Bloomberg said. The benchmark 10-year T-note rose today after the prices-paid component of the Philly Fed. Index fell, Bloomberg reported.
BOTTOM LINE: The Portfolio finished the day unchanged as my falling shorts offset my declining longs. I did not trade in the afternoon, thus leaving the Portfolio with 50% net long market exposure. Stocks will likely remain neutral to slightly lower ahead of the handover of power to Iraq, end of the quarter repositioning, Russell re-balancing and Fed rate hike.
Mid-day Update
S&P 500 1,132.58 -.09%
NASDAQ 1,986.83 -.57%
Leading Sectors
Homebuilders +1.90%
Commodity +1.34%
Oil Service +.83%
Lagging Sectors
Internet -1.1%%
Networking -1.53%
Semis -2.99%
Other
Crude Oil 38.42 +2.05%
Natural Gas 6.50 +.25%
Gold 388.20 +.78%
Base Metals 106.79 +1.36%
U.S. Dollar 89.62 -.47%
10-Yr. T-note Yield 4.70% -.46%
VIX 15.25 +3.11%
Put/Call .75 +13.64%
NYSE Arms .97 +1.04%
Market Movers
ACN +5.3% after saying it sees consulting pricing recovery, growth of 10-15%, considering modest dividend and 05 revenue in the bag.
JBL -15.79% after meeting 3Q estimates and lowering 4Q forecast.
CYBX +10.97% on continued optimism over FDA approval of its brain-stimulation device and rumors of BSX takeover.
WGO +13.19% after beating 3Q estimates substantially.
LEG +10.25% after boosting 2Q/04 forecast.
MBT +10.0% after strong 1Q earnings and upgrade to Buy at Aton, target $148.
SYNA +6.47% after CSFB Outperform rating, target $25.
LSS +8.2% after raising 2Q forecast substantially.
NTY -23.83% after announcing disappointing April and May sales.
Economic Data
Producer Price Index for May +.8% versus expectations of +.6% and +.7% in April.
PPI Ex Food & Energy +.3% versus expectations of +.2% and +.2% in April.
Initial Jobless Claims for last week fell to 336K versus estimates of 340K and 351K prior week.
Continuing Claims were 2895K versus a downwardly revised 2864K prior.
Leading Indicators for May +.5% versus estimates of +.4% and +.1% in April.
Philly Fed for June came in at 28.9 versus estimates of 25.3 and 23.8 in May.
Recommendations
Bank of America thinks yen will drop to 115/dollar in 4th quarter on slowing Chinese growth. NTLI rated Overweight at Morgan Stanley, target $80. CZN raised to Overweight at Lehman, target $14.50. Goldman reiterated Outperform on BBY, CAN, KR, GCI, FS, HOT, RE, PFE, AMGN, BIIB and SYMC. Goldman reiterated Underperform on DJ and F. Goldman upgraded CYTC to Outperform, target $30. Citi SmithBarney reiterated Buy on HIG, target $81. Citi reiterated Buy on JBL, target $32. Citi reiterated Buy on UNH, ATH and WLP. Citi reiterated Buy on FON, target $22.
Mid-day News
U.S. stocks are slightly lower today on worries over violence in Iraq and rising oil prices. Accenture plans to hire 8,000 people in the U.S. this year, Bloomberg reported. U.S. Senator McCain will introduce President Bush at a campaign rally tomorrow in Nevada, which may represent a rebuilding of relations strained by the bitter 2000 Republican primary, the Washington Post reported. SpectraSite is considering share buybacks and paying recurring dividends as it moves to buy more of the land under its wireless towers, said CEO Clark. MGM Mirage plans to build a casino in Atlantic City next to the new $1.1 billion Borgata, the Star-Ledger reported. Marriott Intl. plans to spin off a publicly traded REIT, the Washington Post reported. Marvel Enterprises told CNBC it may pay a dividend or offer to buy back stock. A Queens, NY man was arrested by FBI agents over allegations he helped a group of eight men who U.K. authorities believe were planning to blow up train stations, pubs and restaurants in England, the NY Times reported. Iraq will resume exporting oil tomorrow after repairing most of the damage to southern pipelines sabotaged on Monday and Tuesday, Al Arabiya reported. At least 35 Iraqis were killed and 138 injured when a car bomb exploded near an Iraqi army recruitment building in Baghdad, Bloomberg reported. Saudi Arabia yesterday reopened its border with Iraq to commercial traffic for the first time in 14 years, Bloomberg reported. Cisco will probably generate $1 billion in annual sales from VoIP equipment, CEO Chambers told Bloomberg. Intel today will unveil a set of chips it hopes will spur sales by wooing computer buyers with advanced graphics and theater-quality sound, Bloomberg reported. Over half of the Philadelphia region's factories said they were operating at 80% of capacity or higher compared with 29% six months ago, Bloomberg said.
BOTTOM LINE: The Portfolio is slightly higher today as my Chinese ADR and financial shorts are falling more than my technology longs. I took profits in a few homebuilding shorts and added a couple of Russian ADRs this morning, leaving the Portfolio with 50% net long market exposure. One of my new longs is MICC and I am using a stop-loss of $21 on this new position. While the PPI came in higher-than-expected, the Philly Fed Prices Paid Index fell and investors seem to be anticipating an intermediate-term peak in inflation. This is a very positive change in investor psychology with respect to inflation expectations. Just a couple of weeks ago worries that the Fed was behind the curve were rampant. Greenspan has reiterated forcefully numerous times that inflation was not a problem for the foreseeable future, but just recently have investors listened. This has been the market's chief source of anxiety. With the bond market rallying in the face of such strong economic numbers, I am now leaning more towards believing the Fed will raise rates by 25 basis points on June 30th, notwithstanding my belief that 50 would be more appropriate. I continue to believe any market weakness over the next couple of weeks should be used by long-term investors to accumulate shares in favorite long positions.
NASDAQ 1,986.83 -.57%
Leading Sectors
Homebuilders +1.90%
Commodity +1.34%
Oil Service +.83%
Lagging Sectors
Internet -1.1%%
Networking -1.53%
Semis -2.99%
Other
Crude Oil 38.42 +2.05%
Natural Gas 6.50 +.25%
Gold 388.20 +.78%
Base Metals 106.79 +1.36%
U.S. Dollar 89.62 -.47%
10-Yr. T-note Yield 4.70% -.46%
VIX 15.25 +3.11%
Put/Call .75 +13.64%
NYSE Arms .97 +1.04%
Market Movers
ACN +5.3% after saying it sees consulting pricing recovery, growth of 10-15%, considering modest dividend and 05 revenue in the bag.
JBL -15.79% after meeting 3Q estimates and lowering 4Q forecast.
CYBX +10.97% on continued optimism over FDA approval of its brain-stimulation device and rumors of BSX takeover.
WGO +13.19% after beating 3Q estimates substantially.
LEG +10.25% after boosting 2Q/04 forecast.
MBT +10.0% after strong 1Q earnings and upgrade to Buy at Aton, target $148.
SYNA +6.47% after CSFB Outperform rating, target $25.
LSS +8.2% after raising 2Q forecast substantially.
NTY -23.83% after announcing disappointing April and May sales.
Economic Data
Producer Price Index for May +.8% versus expectations of +.6% and +.7% in April.
PPI Ex Food & Energy +.3% versus expectations of +.2% and +.2% in April.
Initial Jobless Claims for last week fell to 336K versus estimates of 340K and 351K prior week.
Continuing Claims were 2895K versus a downwardly revised 2864K prior.
Leading Indicators for May +.5% versus estimates of +.4% and +.1% in April.
Philly Fed for June came in at 28.9 versus estimates of 25.3 and 23.8 in May.
Recommendations
Bank of America thinks yen will drop to 115/dollar in 4th quarter on slowing Chinese growth. NTLI rated Overweight at Morgan Stanley, target $80. CZN raised to Overweight at Lehman, target $14.50. Goldman reiterated Outperform on BBY, CAN, KR, GCI, FS, HOT, RE, PFE, AMGN, BIIB and SYMC. Goldman reiterated Underperform on DJ and F. Goldman upgraded CYTC to Outperform, target $30. Citi SmithBarney reiterated Buy on HIG, target $81. Citi reiterated Buy on JBL, target $32. Citi reiterated Buy on UNH, ATH and WLP. Citi reiterated Buy on FON, target $22.
Mid-day News
U.S. stocks are slightly lower today on worries over violence in Iraq and rising oil prices. Accenture plans to hire 8,000 people in the U.S. this year, Bloomberg reported. U.S. Senator McCain will introduce President Bush at a campaign rally tomorrow in Nevada, which may represent a rebuilding of relations strained by the bitter 2000 Republican primary, the Washington Post reported. SpectraSite is considering share buybacks and paying recurring dividends as it moves to buy more of the land under its wireless towers, said CEO Clark. MGM Mirage plans to build a casino in Atlantic City next to the new $1.1 billion Borgata, the Star-Ledger reported. Marriott Intl. plans to spin off a publicly traded REIT, the Washington Post reported. Marvel Enterprises told CNBC it may pay a dividend or offer to buy back stock. A Queens, NY man was arrested by FBI agents over allegations he helped a group of eight men who U.K. authorities believe were planning to blow up train stations, pubs and restaurants in England, the NY Times reported. Iraq will resume exporting oil tomorrow after repairing most of the damage to southern pipelines sabotaged on Monday and Tuesday, Al Arabiya reported. At least 35 Iraqis were killed and 138 injured when a car bomb exploded near an Iraqi army recruitment building in Baghdad, Bloomberg reported. Saudi Arabia yesterday reopened its border with Iraq to commercial traffic for the first time in 14 years, Bloomberg reported. Cisco will probably generate $1 billion in annual sales from VoIP equipment, CEO Chambers told Bloomberg. Intel today will unveil a set of chips it hopes will spur sales by wooing computer buyers with advanced graphics and theater-quality sound, Bloomberg reported. Over half of the Philadelphia region's factories said they were operating at 80% of capacity or higher compared with 29% six months ago, Bloomberg said.
BOTTOM LINE: The Portfolio is slightly higher today as my Chinese ADR and financial shorts are falling more than my technology longs. I took profits in a few homebuilding shorts and added a couple of Russian ADRs this morning, leaving the Portfolio with 50% net long market exposure. One of my new longs is MICC and I am using a stop-loss of $21 on this new position. While the PPI came in higher-than-expected, the Philly Fed Prices Paid Index fell and investors seem to be anticipating an intermediate-term peak in inflation. This is a very positive change in investor psychology with respect to inflation expectations. Just a couple of weeks ago worries that the Fed was behind the curve were rampant. Greenspan has reiterated forcefully numerous times that inflation was not a problem for the foreseeable future, but just recently have investors listened. This has been the market's chief source of anxiety. With the bond market rallying in the face of such strong economic numbers, I am now leaning more towards believing the Fed will raise rates by 25 basis points on June 30th, notwithstanding my belief that 50 would be more appropriate. I continue to believe any market weakness over the next couple of weeks should be used by long-term investors to accumulate shares in favorite long positions.
Thursday Watch
Earnings of Note
Company/Estimate
ACN/.31
ADBE/.42
AMHC/.19
KMX/.31
CCL/.35
SLR/.00
RHAT/.04
TIBX/.05
WGO/.46
ISLE/.27
Splits
None of note.
Economic Data
Producer Price Index for May estimated +.6% versus +.7% in April.
PPI Ex Food & Energy for May estimated +.2% versus +.2% in April.
Initial Jobless Claims for last week estimated at 340K versus 352K prior week.
Leading Indicators for May estimated +.4% versus +.1% in April.
Philly Fed. for June estimated at 25.5 versus 23.8 in May.
Recommendations
Goldman Sachs says the stars are aligning for the lodging companies as all signs are pointing in the same positive direction. Goldman reiterated Outperform on SYMC.
Late-Night News
Asian indices are mixed as strength in Taiwan is being offset by weakness in China. Lazard LLC, the world's largest closely held investment bank, has been approached by other banks proposing an IPO that could value Lazard at more than $3 billion, the Financial Times reported. The U.S. government may propose tariffs tomorrow on certain bedroom furniture imported from China after a group of U.S. makers said factories in China have sold goods at below-market prices, the Asian Wall Street Journal said. Inflation remains "under good control" and central bankers are not too late in starting to raise interest rates to head off price increases, Federal Reserve Bank of Richmond President Broaddus said. Senator Kerry will break from his campaign to meet in Washington with potential running mates today and tomorrow, Bloomberg reported. Bacardi Ltd., in a push to broaden its U.S. presence, is nearing an agreement to buy Sidney Frank Importing Co.'s Grey Goose vodka business for more than $2 billion, the Wall Street Journal said. Internet pharmacies outside the U.S. and Canada shipped fake versions of Pfizer's Viagra impotence drug, Roche Holding's Accutane acne treatment and Purdue Pharma's OxyContin painkiller to the U.S., Bloomberg reported.
Late-Night Trading
Asian Indices -1.0% to +1.0% on average.
S&P 500 indicated -.11%.
NASDAQ 100 indicated -.27%.
BOTTOM LINE: I expect U.S. stocks to open moderately weaker tomorrow as interest rates rise after the release of several key economic reports. The PPI, Initial Jobless Claims, Leading Indicators and Philly Fed. will likely all come in higher-than-expected. The rise in initial jobless claims I foresee is only temporary and will not offset evidence of economic strength elsewhere. Relatively low Put/Call, ARMS and VIX readings from today and weakness in my short-term trading indicators also leads me to expect a weaker morning for stocks. The Portfolio is 25% net long heading into tomorrow.
Company/Estimate
ACN/.31
ADBE/.42
AMHC/.19
KMX/.31
CCL/.35
SLR/.00
RHAT/.04
TIBX/.05
WGO/.46
ISLE/.27
Splits
None of note.
Economic Data
Producer Price Index for May estimated +.6% versus +.7% in April.
PPI Ex Food & Energy for May estimated +.2% versus +.2% in April.
Initial Jobless Claims for last week estimated at 340K versus 352K prior week.
Leading Indicators for May estimated +.4% versus +.1% in April.
Philly Fed. for June estimated at 25.5 versus 23.8 in May.
Recommendations
Goldman Sachs says the stars are aligning for the lodging companies as all signs are pointing in the same positive direction. Goldman reiterated Outperform on SYMC.
Late-Night News
Asian indices are mixed as strength in Taiwan is being offset by weakness in China. Lazard LLC, the world's largest closely held investment bank, has been approached by other banks proposing an IPO that could value Lazard at more than $3 billion, the Financial Times reported. The U.S. government may propose tariffs tomorrow on certain bedroom furniture imported from China after a group of U.S. makers said factories in China have sold goods at below-market prices, the Asian Wall Street Journal said. Inflation remains "under good control" and central bankers are not too late in starting to raise interest rates to head off price increases, Federal Reserve Bank of Richmond President Broaddus said. Senator Kerry will break from his campaign to meet in Washington with potential running mates today and tomorrow, Bloomberg reported. Bacardi Ltd., in a push to broaden its U.S. presence, is nearing an agreement to buy Sidney Frank Importing Co.'s Grey Goose vodka business for more than $2 billion, the Wall Street Journal said. Internet pharmacies outside the U.S. and Canada shipped fake versions of Pfizer's Viagra impotence drug, Roche Holding's Accutane acne treatment and Purdue Pharma's OxyContin painkiller to the U.S., Bloomberg reported.
Late-Night Trading
Asian Indices -1.0% to +1.0% on average.
S&P 500 indicated -.11%.
NASDAQ 100 indicated -.27%.
BOTTOM LINE: I expect U.S. stocks to open moderately weaker tomorrow as interest rates rise after the release of several key economic reports. The PPI, Initial Jobless Claims, Leading Indicators and Philly Fed. will likely all come in higher-than-expected. The rise in initial jobless claims I foresee is only temporary and will not offset evidence of economic strength elsewhere. Relatively low Put/Call, ARMS and VIX readings from today and weakness in my short-term trading indicators also leads me to expect a weaker morning for stocks. The Portfolio is 25% net long heading into tomorrow.
Wednesday, June 16, 2004
Wednesday Close
S&P 500 1,133.60 +.14%
NASDAQ 1,998.24 +.13%
Leading Sectors
Oil Service +2.70%
Energy +1.85%
Biotech +1.29%
Lagging Sectors
Software -.58%
Broadcasting -.94%
Homebuilders -.97%
Other
Crude Oil 37.65 unch.
Natural Gas 6.52 +.57%
Gold 385.60 +.10%
Base Metals 105.36 +.40%
U.S. Dollar 90.01 +1.03%
10-Yr. T-note Yield 4.72% +1.02%
VIX 14.79 -1.73%
Put/Call .66 -12.0%
NYSE Arms .96 +3.23%
After-hours Movers
JBL -10.01% after meeting 3Q estimates and lowering 4Q forecast.
CHIR -3.21% after saying it intends to raise approximately $350 million gross proceeds through an offering of 30-year convertible debtentures.
Recommendations
Goldman reiterated Underperform on BSC. Goldman reiterated Attractive view on Gold sector.
After-hours News
U.S. stocks finished slightly higher today on low volume as investors continue to show apprehension ahead of several market-moving events. After the close, Moqtada al-Sadr told his Mahdi Army fighters to leave the holy cities of Najaf and Karbala and go home, the NY Times reported. President Reagan will be featured on a postage stamp in February, Bloomberg reported. The U.S. dollar rose today on the heels of reports showing the strongest industrial production in 6 years and a strong housing market. Ford Motor increased its second-quarter earnings forecast to .45-.50/share from .30-35/share, Bloomberg reported. Delta Air, which may seek bankruptcy protection, expects spending on jet fuel to rise 35% this year, CEO Grinstein said.
BOTTOM LINE: The Portfolio was slightly lower today and I took profits in a few longs in the afternoon and added a few shorts, leaving the Portfolio with 25% net long market exposure. One of my new shorts is FDS and I am using a stop-loss of $52.25. Apprehension remains high ahead many market-moving events, thus the churning action in the major indices. However, fundamentals are excellent and improving. If tomorrow's core PPI does not exceed expectations, I will change my view that the Fed will raise rates by 50 basis points by June 30 to 25 basis points on June 30. I suspect tomorrow's bond market action will dictate the direction of stock prices one way or the other.
NASDAQ 1,998.24 +.13%
Leading Sectors
Oil Service +2.70%
Energy +1.85%
Biotech +1.29%
Lagging Sectors
Software -.58%
Broadcasting -.94%
Homebuilders -.97%
Other
Crude Oil 37.65 unch.
Natural Gas 6.52 +.57%
Gold 385.60 +.10%
Base Metals 105.36 +.40%
U.S. Dollar 90.01 +1.03%
10-Yr. T-note Yield 4.72% +1.02%
VIX 14.79 -1.73%
Put/Call .66 -12.0%
NYSE Arms .96 +3.23%
After-hours Movers
JBL -10.01% after meeting 3Q estimates and lowering 4Q forecast.
CHIR -3.21% after saying it intends to raise approximately $350 million gross proceeds through an offering of 30-year convertible debtentures.
Recommendations
Goldman reiterated Underperform on BSC. Goldman reiterated Attractive view on Gold sector.
After-hours News
U.S. stocks finished slightly higher today on low volume as investors continue to show apprehension ahead of several market-moving events. After the close, Moqtada al-Sadr told his Mahdi Army fighters to leave the holy cities of Najaf and Karbala and go home, the NY Times reported. President Reagan will be featured on a postage stamp in February, Bloomberg reported. The U.S. dollar rose today on the heels of reports showing the strongest industrial production in 6 years and a strong housing market. Ford Motor increased its second-quarter earnings forecast to .45-.50/share from .30-35/share, Bloomberg reported. Delta Air, which may seek bankruptcy protection, expects spending on jet fuel to rise 35% this year, CEO Grinstein said.
BOTTOM LINE: The Portfolio was slightly lower today and I took profits in a few longs in the afternoon and added a few shorts, leaving the Portfolio with 25% net long market exposure. One of my new shorts is FDS and I am using a stop-loss of $52.25. Apprehension remains high ahead many market-moving events, thus the churning action in the major indices. However, fundamentals are excellent and improving. If tomorrow's core PPI does not exceed expectations, I will change my view that the Fed will raise rates by 50 basis points by June 30 to 25 basis points on June 30. I suspect tomorrow's bond market action will dictate the direction of stock prices one way or the other.
Mid-day Update
S&P 500 1,132.45 +.04%
NASDAQ 1,993.81 -.08%
Leading Sectors
Oil Service +2.35%
Energy +1.68%
Defense +.68%
Lagging Sectors
Software -.60%
Papers -.72%
Semis -.74%
Other
Crude Oil 37.60 +.48%
Natural Gas 6.42 +1.84%
Gold 385.20 -.90%
Base Metals 104.80 -.13%
U.S. Dollar 90.04 +1.07%
10-Yr. T-note Yield 4.72% +.98%
VIX 14.63 -2.79%
Put/Call .60 -20.0%
NYSE Arms 1.01 +8.60%
Market Movers
CYBX +62.1% after FDA panel surprised investors by recommending approval of the company's brain-stimulation device for severe depression.
ELY -19.88% after lowering 2Q and 04 guidance.
IGT +5.0% after reiterating guidance and saying it was buying back all its senior notes due in May 09.
GMAI +25.0% after boosting 4Q and 04 forecast substantially.
SNTS +24.23% after saying the FDA approved its Rapinex heartburn drug for sale in the U.S.
SMTS +12.23% after beating 2Q estimates and raising 04 guidance.
NRD +9.9% on speculation it will be acquired by Cia. Vale do Rio Doce for $4.7 billion.
HLR -9.68% after saying it overstated the circulation at the Chicago Sun-Times for several years.
HEW -8.93% after agreeing to buy Exult for about $6.30/share.
Economic Data
Housing Starts for May came in at 1967K versus estimates of 1950K and an upwardly revised 1981K in April.
Building Permits for May came in at 2077K versus estimates of 1970K and 2006K in April.
Industrial Production for May rose 1.1% versus estimates of a .8% rise and a .8% rise in April.
Capacity Utilization for May came in at 77.8% versus estimates of 77.5% and 77.1% in April.
Recommendations
Goldman Sachs remains cautious on REITS. Goldman upgraded CRE to Outperform. Goldman reiterated Outperform on KRI, BBY, GLW, IGT, FON and SLB. Goldman reiterated Underperform on SCS. Citi SmithBarney reiterated Buy on JNPR ahead of quarter, target $32.50. Citi said to Buy COGN ahead of quarter, target $39. Citi's recent Corporate Travel Managers Survey shows a solid recovery in business travel demand as 57% surveyed expect 05 travel spending to exceed 04. Citi reiterated Buy on IGT, target $50. COX raised to Sector Outperform at CIBC, target $36. KMI rated Buy at Banc of America, target $66.50. STR rated Buy at Banc of America, target $42. SRE rated Buy at Banc of America, target $36.50. ATG rated Buy at Banc of America, target $32.50. WMB rated Sell at Banc of America, target $8. PGL rated Sell at Banc of America, target $35. Q added to Focus List at JP Morgan, target $6.
Mid-day News
U.S. stocks are slightly lower today on a rise in interest rates after a report showed the fastest U.S. industrial production in 6 years. The percentage of commercial real-estate owners with terrorism insurance rose in the first quarter to the highest level since the U.S. Congress passed the Terrorism Risk Insurance Act in 02, the Wall Street Journal reported. Lennar Corp. CEO Miller told CNBC that interest rates would have to increase 200-300 basis points before the homebuilding industry would be concerned. A World Health Organization panel concluded that formaldehyde, which is used in adhesives and binders for wood, causes cancer, the LA Times reported. UN employees don't know how to report internal corruption relating to the scandal-ridden Iraqi oil-for-food program or fear reprisals if they do, the NY Times reported. U.S. gasoline prices should fall throughout the summer on increased production from OPEC and lower crude oil prices, Reuters said. Oil futures are barely rising even after the Energy Dept. reported that U.S. oil inventories increased less than expected and violence in Iraq halted production, Bloomberg reported. British scientists have applied for the first license in Europe to undertake research that would involve cloning human embryos and using the stem cells to treat diabetes, Bloomberg reported. Microsoft lost a contract for programs to run 14,000 PCs for the Munich city government to the free Linux software, Bloomberg said. U.S. Treasury notes are falling as reports showed builders broke ground on more houses than forecast in May and industrial production rose at the fastest pace in 6 years, Bloomberg reported.
BOTTOM LINE: The Portfolio is slightly lower today as my industrial and software longs are falling more than my Chinese ADR and semiconductor shorts. I exited a couple of longs this morning as they hit stop-losses, thus bringing the Portfolio's market exposure to 50% net long. I expect stocks to rise modestly into the afternoon as interest rates stabilize and investors focus on the very strong economic reports.
NASDAQ 1,993.81 -.08%
Leading Sectors
Oil Service +2.35%
Energy +1.68%
Defense +.68%
Lagging Sectors
Software -.60%
Papers -.72%
Semis -.74%
Other
Crude Oil 37.60 +.48%
Natural Gas 6.42 +1.84%
Gold 385.20 -.90%
Base Metals 104.80 -.13%
U.S. Dollar 90.04 +1.07%
10-Yr. T-note Yield 4.72% +.98%
VIX 14.63 -2.79%
Put/Call .60 -20.0%
NYSE Arms 1.01 +8.60%
Market Movers
CYBX +62.1% after FDA panel surprised investors by recommending approval of the company's brain-stimulation device for severe depression.
ELY -19.88% after lowering 2Q and 04 guidance.
IGT +5.0% after reiterating guidance and saying it was buying back all its senior notes due in May 09.
GMAI +25.0% after boosting 4Q and 04 forecast substantially.
SNTS +24.23% after saying the FDA approved its Rapinex heartburn drug for sale in the U.S.
SMTS +12.23% after beating 2Q estimates and raising 04 guidance.
NRD +9.9% on speculation it will be acquired by Cia. Vale do Rio Doce for $4.7 billion.
HLR -9.68% after saying it overstated the circulation at the Chicago Sun-Times for several years.
HEW -8.93% after agreeing to buy Exult for about $6.30/share.
Economic Data
Housing Starts for May came in at 1967K versus estimates of 1950K and an upwardly revised 1981K in April.
Building Permits for May came in at 2077K versus estimates of 1970K and 2006K in April.
Industrial Production for May rose 1.1% versus estimates of a .8% rise and a .8% rise in April.
Capacity Utilization for May came in at 77.8% versus estimates of 77.5% and 77.1% in April.
Recommendations
Goldman Sachs remains cautious on REITS. Goldman upgraded CRE to Outperform. Goldman reiterated Outperform on KRI, BBY, GLW, IGT, FON and SLB. Goldman reiterated Underperform on SCS. Citi SmithBarney reiterated Buy on JNPR ahead of quarter, target $32.50. Citi said to Buy COGN ahead of quarter, target $39. Citi's recent Corporate Travel Managers Survey shows a solid recovery in business travel demand as 57% surveyed expect 05 travel spending to exceed 04. Citi reiterated Buy on IGT, target $50. COX raised to Sector Outperform at CIBC, target $36. KMI rated Buy at Banc of America, target $66.50. STR rated Buy at Banc of America, target $42. SRE rated Buy at Banc of America, target $36.50. ATG rated Buy at Banc of America, target $32.50. WMB rated Sell at Banc of America, target $8. PGL rated Sell at Banc of America, target $35. Q added to Focus List at JP Morgan, target $6.
Mid-day News
U.S. stocks are slightly lower today on a rise in interest rates after a report showed the fastest U.S. industrial production in 6 years. The percentage of commercial real-estate owners with terrorism insurance rose in the first quarter to the highest level since the U.S. Congress passed the Terrorism Risk Insurance Act in 02, the Wall Street Journal reported. Lennar Corp. CEO Miller told CNBC that interest rates would have to increase 200-300 basis points before the homebuilding industry would be concerned. A World Health Organization panel concluded that formaldehyde, which is used in adhesives and binders for wood, causes cancer, the LA Times reported. UN employees don't know how to report internal corruption relating to the scandal-ridden Iraqi oil-for-food program or fear reprisals if they do, the NY Times reported. U.S. gasoline prices should fall throughout the summer on increased production from OPEC and lower crude oil prices, Reuters said. Oil futures are barely rising even after the Energy Dept. reported that U.S. oil inventories increased less than expected and violence in Iraq halted production, Bloomberg reported. British scientists have applied for the first license in Europe to undertake research that would involve cloning human embryos and using the stem cells to treat diabetes, Bloomberg reported. Microsoft lost a contract for programs to run 14,000 PCs for the Munich city government to the free Linux software, Bloomberg said. U.S. Treasury notes are falling as reports showed builders broke ground on more houses than forecast in May and industrial production rose at the fastest pace in 6 years, Bloomberg reported.
BOTTOM LINE: The Portfolio is slightly lower today as my industrial and software longs are falling more than my Chinese ADR and semiconductor shorts. I exited a couple of longs this morning as they hit stop-losses, thus bringing the Portfolio's market exposure to 50% net long. I expect stocks to rise modestly into the afternoon as interest rates stabilize and investors focus on the very strong economic reports.
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