BOTTOM LINE: An index of US leading indicators released today pointed to a slower pace of economic growth in the next three to six months. Rising consumer sentiment and money supply contributed the most to the index. The risks of a significant economic slowdown or unacceptable inflation are “quite small” at this point, the Fed’s Poole said this morning. According to a poll released today by the National Association of Business Economics, executives expect US economic growth to rise between 3-4% during the first half of this year. I continue to believe US growth is slowing to around long-term average levels of 3%, which should allow the Fed to stop raising rates this quarter and be a positive for stocks.
Monday, January 23, 2006
Leading Indicators Rise Slightly
- Leading Indicators for December rose .1% versus estimates of a .2% increase and an upwardly revised .9% gain in November.
Sunday, January 22, 2006
Monday Watch
Weekend Headlines
Bloomberg:
- Iran expects OPEC to reject its proposal to cut oil output at the Jan. 31 meeting in Vienna, an oil official said.
- Morgan Stanley, eager to expand its asset-management unit, may buy or form a new company with bond investor BlackRock Inc. to become the largest money manager among US securities firms.
- Music sales through mobile phones, maturing to full songs from tinny ring tones, are forming a growing part of the digital downloads that industry executives are counting on to make up for flagging sales of compact discs.
- President Bush said tax cuts passed in his first term have helped create a strong US economy and called on Congress to make them permanent and address rising health costs that crimp small businesses.
- The Palestinian Authority’s ruling Fatah party may have a narrow lead over Hamas ahead of Jan. 25 legislative elections that could be critical for Israeli-Palestinian relations and the prospect of achieving peace.
- Starbucks Corp.(SBUX), seeking to expand its entertainment business at a time of music industry “chaos,” plans to move beyond compact disc sales and CD burning to allow customers to transfer songs onto MP3 portable music players.
- Tens of thousands of opponents of Venezuelan President Hugo Chavez protested in the streets of Caracas, demanding fair elections and a rolling back of policies they said are intended to turn the South American country into a communist state.
- China probably overtook France as the world’s fifth-largest economy in 2005 as a record trade surplus and surging investment drove the fourth straight year of more than 9% growth.
Wall Street Journal:
- The FDA criticized the way safety concerns about approved medical devices are handled and is proposing changes to the system.
NY Times:
- Microsoft Corp.(MSFT) co-founder Paul G. Allen, who made billions on personal computer software, is creating jobs and housing in Seattle, aiming to turn his hometown into an urban center.
- The bidding war for medical-device maker Guidant Corp.(GDT) is a sign that companies are focusing on a market that’s expected to “grow by double digits for years to come.”
- The Pakistani army’s campaign against al-Qaeda and other terrorist groups in the country’s border areas adjacent to Afghanistan is faltering, citing unidentified Pakistani officials.
- The US Congress is weighing a budget bill that would provide $3.75 billion in new college aid over five years, as well as increase federal oversight of high-school education.
- Shifting habits in the way youngsters read the news, watch television and shop are forcing advertising companies to find new ways to reach them, as people born after 1980 make tailor-made media choices.
Financial Times:
- 2929 Entertainment, a Dallas based company founded by Internet entrepreneurs Todd Wagner and Mark Cuban, will release the first film to be distributed simultaneously in cinemas and by video-on-demand this weekend.
- Carl Icahn may submit a full list of alternative directors including a CEO for Time Warner(TWX) as part of the billionaire shareholder’s fight for control of the company.
- A United Nations internal review of its peacekeeping activities found “substantial evidence of abuse” in procurement operations that led to “financial losses,” citing a copy of the document seen by the newspaper.
- Toshiba Corp. will acquire British Nuclear Fuels Plc’s Westinghouse Electric power-plant unit for almost $5 billion.
- The value of worldwide hotel property sales reached $44.5 billion last year, an increase of 63% on the previous year.
Sunday Telegraph:
- Pixar(PIXR), maker of animated films “Finding Nemo” and “Toy Story”, may approve a $7 billion buyout by Walt Disney(DIS) tomorrow.
Sunday Times:
- Vodafone Group Plc(VOD) investors may have asked the world’s largest mobile-phone operator to sell US unit Verizon Wireless(VZ), to raise as much as $44 billion, citing unidentified shareholders.
Economic Daily News:
- AU Optronics(AUO) has obtained orders to produce television panel displays for Japanese makers such as Toshiba Corp. and Matsushita Electric Industrial.
NDTV:
- King Abdullah of Saudi Arabia said the price of oil is too high and is damaging developing countries, citing an interview with the monarch of the world’s largest oil exporter.
Asharq al-Awsat:
- Kuwait Real Estate Company and state-owned Kurdistan Development Corp. plan to develop property in the northern part of Iraq this year.
Weekend Recommendations
Barron's:
- Had positive comments on (SNE), (XMSR) and (MOSY).
Goldman Sachs:
- Reiterated Outperform on (SLB), (DIS) and (GE).
Night Trading
Asian indices are -1.50% to -1.0% on average.
S&P 500 indicated +.09%.
NASDAQ 100 indicated -.06%.
Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Before the Bell CNBC Video(bottom right)
Global Commentary
Asian Indices
European Indices
Top 20 Business Stories
In Play
Bond Ticker
Daily Stock Events
Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule
Earnings of Note
Company/Estimate
(AXP).59
(ACF).46
(AV).12
(BAC)1.02
(ET).29
(ETN)1.36
(ENR)1.61
(F).01
(PPC).39
(SEBL).11
(TXN).42
Upcoming Splits
- None of note
Economic Releases
10:00 am EST
- Leading Indicators for December are estimated to rise .2% versus a .5% increase in November.
Bloomberg:
- Iran expects OPEC to reject its proposal to cut oil output at the Jan. 31 meeting in Vienna, an oil official said.
- Morgan Stanley, eager to expand its asset-management unit, may buy or form a new company with bond investor BlackRock Inc. to become the largest money manager among US securities firms.
- Music sales through mobile phones, maturing to full songs from tinny ring tones, are forming a growing part of the digital downloads that industry executives are counting on to make up for flagging sales of compact discs.
- President Bush said tax cuts passed in his first term have helped create a strong US economy and called on Congress to make them permanent and address rising health costs that crimp small businesses.
- The Palestinian Authority’s ruling Fatah party may have a narrow lead over Hamas ahead of Jan. 25 legislative elections that could be critical for Israeli-Palestinian relations and the prospect of achieving peace.
- Starbucks Corp.(SBUX), seeking to expand its entertainment business at a time of music industry “chaos,” plans to move beyond compact disc sales and CD burning to allow customers to transfer songs onto MP3 portable music players.
- Tens of thousands of opponents of Venezuelan President Hugo Chavez protested in the streets of Caracas, demanding fair elections and a rolling back of policies they said are intended to turn the South American country into a communist state.
- China probably overtook France as the world’s fifth-largest economy in 2005 as a record trade surplus and surging investment drove the fourth straight year of more than 9% growth.
Wall Street Journal:
- The FDA criticized the way safety concerns about approved medical devices are handled and is proposing changes to the system.
NY Times:
- Microsoft Corp.(MSFT) co-founder Paul G. Allen, who made billions on personal computer software, is creating jobs and housing in Seattle, aiming to turn his hometown into an urban center.
- The bidding war for medical-device maker Guidant Corp.(GDT) is a sign that companies are focusing on a market that’s expected to “grow by double digits for years to come.”
- The Pakistani army’s campaign against al-Qaeda and other terrorist groups in the country’s border areas adjacent to Afghanistan is faltering, citing unidentified Pakistani officials.
- The US Congress is weighing a budget bill that would provide $3.75 billion in new college aid over five years, as well as increase federal oversight of high-school education.
- Shifting habits in the way youngsters read the news, watch television and shop are forcing advertising companies to find new ways to reach them, as people born after 1980 make tailor-made media choices.
Financial Times:
- 2929 Entertainment, a Dallas based company founded by Internet entrepreneurs Todd Wagner and Mark Cuban, will release the first film to be distributed simultaneously in cinemas and by video-on-demand this weekend.
- Carl Icahn may submit a full list of alternative directors including a CEO for Time Warner(TWX) as part of the billionaire shareholder’s fight for control of the company.
- A United Nations internal review of its peacekeeping activities found “substantial evidence of abuse” in procurement operations that led to “financial losses,” citing a copy of the document seen by the newspaper.
- Toshiba Corp. will acquire British Nuclear Fuels Plc’s Westinghouse Electric power-plant unit for almost $5 billion.
- The value of worldwide hotel property sales reached $44.5 billion last year, an increase of 63% on the previous year.
Sunday Telegraph:
- Pixar(PIXR), maker of animated films “Finding Nemo” and “Toy Story”, may approve a $7 billion buyout by Walt Disney(DIS) tomorrow.
Sunday Times:
- Vodafone Group Plc(VOD) investors may have asked the world’s largest mobile-phone operator to sell US unit Verizon Wireless(VZ), to raise as much as $44 billion, citing unidentified shareholders.
Economic Daily News:
- AU Optronics(AUO) has obtained orders to produce television panel displays for Japanese makers such as Toshiba Corp. and Matsushita Electric Industrial.
NDTV:
- King Abdullah of Saudi Arabia said the price of oil is too high and is damaging developing countries, citing an interview with the monarch of the world’s largest oil exporter.
Asharq al-Awsat:
- Kuwait Real Estate Company and state-owned Kurdistan Development Corp. plan to develop property in the northern part of Iraq this year.
Weekend Recommendations
Barron's:
- Had positive comments on (SNE), (XMSR) and (MOSY).
Goldman Sachs:
- Reiterated Outperform on (SLB), (DIS) and (GE).
Night Trading
Asian indices are -1.50% to -1.0% on average.
S&P 500 indicated +.09%.
NASDAQ 100 indicated -.06%.
Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Before the Bell CNBC Video(bottom right)
Global Commentary
Asian Indices
European Indices
Top 20 Business Stories
In Play
Bond Ticker
Daily Stock Events
Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule
Earnings of Note
Company/Estimate
(AXP).59
(ACF).46
(AV).12
(BAC)1.02
(ET).29
(ETN)1.36
(ENR)1.61
(F).01
(PPC).39
(SEBL).11
(TXN).42
Upcoming Splits
- None of note
Economic Releases
10:00 am EST
- Leading Indicators for December are estimated to rise .2% versus a .5% increase in November.
BOTTOM LINE: Asian Indices are lower, weighed down by exporting companies in the region after oil rose to a four-month high. I expect US stocks to open lower and to rise into the afternoon, finishing modestly higher. The Portfolio is 50% net long heading into the week.
Weekly Outlook
Click here for The Week Ahead by Reuters
There are some important economic reports and a number of significant corporate earnings reports scheduled for release this week.
Economic reports for the week include:
Mon. - Leading Indicators
Tues. - Richmond Fed Index
Wed. - Existing Home Sales
Thur. - Durable Goods Orders, Initial Jobless Claims
Fri. - GDP, Personal Consumption, GDP Price Index, New Home Sales
Some of the more noteworthy companies that release quarterly earnings this week are:
Mon. - American Express(AXP), Avaya(AV), Bank of America(BAC), E*Trade(ET), Ford Motor(F), Pilgrim’s Pride(PPC), Texas Instruments(TXN)
Tues. - 3M(MMM), Brinker Intl.(EAT), BJ Services(BJS), Centex Corp.(CTX), CNF Inc.(CNF), Coach Inc.(COH), Computer Assoc.(CA), Corning Inc.(GLW), CSX Corp.(CSX), EMC Corp.(EMC), Golden West Financial(GDW), Imclone Systems(IMCL), Johnson & Johnson(JNJ), Kimberly-Clark(KMB), Legg Mason(LM), Lexmark Intl.(LXK), McDonald’s(MCD), Northrop Grumman(NOC), Ryland Group(RYL), Tidewater Inc.(TDW)
Wed. - Abott Labs(ABT), Altera Corp.(ALTR), Amerada Hess Corp.(AHC), AmerisourceBergen(ABC), Ameritrade Holding(AMTD), Bellsouth Corp.(BLS), Bristol-Myers(BMY), Burlington Resources(BR), Colgate-Palmolive(CL), ConocoPhillips(COP), General Dynamics(GD), HCA Inc.(HCA), Hershey(HSY), Juniper Networks(JNPR), Maxim Integrated(MXIM), Novellus Systems(NVLS), Qualcomm Inc.(QCOM), St Jude Medical(STJ), Varian Medical(VAR)
Thur. - Amgen(AMGN), AT&T(T), Baxter Intl.(BAX), Becton Dickinson(BDX), Broadcom(BRCM), Cardinal Health(CAH), Caterpillar Inc.(CAT), Consolidated Edison(ED), Diebold(DBD), Dow Chemical(DOW), Eli Lilly(LLY), Estee Lauder(EL), General Motors(GM), Honeywell Intl.(HON), Ingersoll-Rand(IR), JDS Uniphase(JDSU), Kla-Tencor(KLAC), Lockheed Martin(LMT), McKesson Corp.(MCK), Microsoft Corp.(MSFT), Peabody Energy(BTU), SanDisk Corp.(SNDK), Sirius Satellite(SIRI), Stryker Corp.(SYK), United Parcel Service(UPS), Verizon Communications(VZ), Western Digital(WDC)
Fri. - Bausch & Lomb(BOL), Chevron Corp.(CVX), Gannett Corp.(GCI), Guidant Corp.(GDT), Halliburton(HAL), ITT Industries(ITT), Massey Energy(MEE), Nucor Corp.(NUE), Procter & Gamble(PG)
Other events that have market-moving potential this week include:
Mon. - None of note
Tue. - AG Edwards Retailing Conference
Wed. - None of note
Thur. - Raymond James Growth Airline Conference
Fri. - None of note
There are some important economic reports and a number of significant corporate earnings reports scheduled for release this week.
Economic reports for the week include:
Mon. - Leading Indicators
Tues. - Richmond Fed Index
Wed. - Existing Home Sales
Thur. - Durable Goods Orders, Initial Jobless Claims
Fri. - GDP, Personal Consumption, GDP Price Index, New Home Sales
Some of the more noteworthy companies that release quarterly earnings this week are:
Mon. - American Express(AXP), Avaya(AV), Bank of America(BAC), E*Trade(ET), Ford Motor(F), Pilgrim’s Pride(PPC), Texas Instruments(TXN)
Tues. - 3M(MMM), Brinker Intl.(EAT), BJ Services(BJS), Centex Corp.(CTX), CNF Inc.(CNF), Coach Inc.(COH), Computer Assoc.(CA), Corning Inc.(GLW), CSX Corp.(CSX), EMC Corp.(EMC), Golden West Financial(GDW), Imclone Systems(IMCL), Johnson & Johnson(JNJ), Kimberly-Clark(KMB), Legg Mason(LM), Lexmark Intl.(LXK), McDonald’s(MCD), Northrop Grumman(NOC), Ryland Group(RYL), Tidewater Inc.(TDW)
Wed. - Abott Labs(ABT), Altera Corp.(ALTR), Amerada Hess Corp.(AHC), AmerisourceBergen(ABC), Ameritrade Holding(AMTD), Bellsouth Corp.(BLS), Bristol-Myers(BMY), Burlington Resources(BR), Colgate-Palmolive(CL), ConocoPhillips(COP), General Dynamics(GD), HCA Inc.(HCA), Hershey(HSY), Juniper Networks(JNPR), Maxim Integrated(MXIM), Novellus Systems(NVLS), Qualcomm Inc.(QCOM), St Jude Medical(STJ), Varian Medical(VAR)
Thur. - Amgen(AMGN), AT&T(T), Baxter Intl.(BAX), Becton Dickinson(BDX), Broadcom(BRCM), Cardinal Health(CAH), Caterpillar Inc.(CAT), Consolidated Edison(ED), Diebold(DBD), Dow Chemical(DOW), Eli Lilly(LLY), Estee Lauder(EL), General Motors(GM), Honeywell Intl.(HON), Ingersoll-Rand(IR), JDS Uniphase(JDSU), Kla-Tencor(KLAC), Lockheed Martin(LMT), McKesson Corp.(MCK), Microsoft Corp.(MSFT), Peabody Energy(BTU), SanDisk Corp.(SNDK), Sirius Satellite(SIRI), Stryker Corp.(SYK), United Parcel Service(UPS), Verizon Communications(VZ), Western Digital(WDC)
Fri. - Bausch & Lomb(BOL), Chevron Corp.(CVX), Gannett Corp.(GCI), Guidant Corp.(GDT), Halliburton(HAL), ITT Industries(ITT), Massey Energy(MEE), Nucor Corp.(NUE), Procter & Gamble(PG)
Other events that have market-moving potential this week include:
Mon. - None of note
Tue. - AG Edwards Retailing Conference
Wed. - None of note
Thur. - Raymond James Growth Airline Conference
Fri. - None of note
BOTTOM LINE: I expect US stocks to finish the week modestly lower on weaker housing data, worries over Iran’s nuclear ambitions and some disappointment with forward earnings guidance. My trading indicators are now giving mostly bearish signals and the Portfolio is 50% net long heading into the week.
Saturday, January 21, 2006
Market Week in Review
S&P 500 1,261.49 -1.91%*
Click here for the Weekly Wrap by Briefing.com.
*5-day % Change
Click here for the Weekly Wrap by Briefing.com.
BOTTOM LINE: Overall, last week's market performance was negative as increasing worries over Iran, raised terrorism fears, earnings failing to meet elevated expectations and profit-taking pressured stocks. The advance/decline line fell, most sectors declined and volume was above average on the week. Measures of investor anxiety were higher. Moreover, the AAII % Bulls fell to 50.0, but is still above average levels. The average 30-year mortgage rate fell to 6.10% which is only 89 basis points above all-time lows set in June 2003. The benchmark 10-year T-note yield was unchanged on the week as economic data was mostly positive and measures of inflation decelerated further.
Small-caps outperformed again as the Russell 2000 made another all-time high on Thursday. Unleaded Gas futures rebounded as oil rose on Iran/Nigeria worries. However gas prices are still 37% below September highs even as refinery utilization remains below normal as a result of the hurricanes. Natural gas supplies fell slightly more than expected this week. However, supplies are now 16.3% above the 5-year average, approaching an all-time record high for this time of year, even as over 18% of daily Gulf of Mexico production remains shut-in. Natural gas prices have plunged around 41% in 5 weeks. Gold fell on the week, notwithstanding geopolitical concerns, as measures of inflation continued to decelerate and traders took profits.
I still believe prices for many commodities are being driven by fear and record capital inflows into commodity funds, rather than fundamentals. I continue to expect global energy demand destruction, decelerating economic growth and a significant increase in supplies into 2006 to push oil prices substantially lower from current levels. Elevated prices related to Iran only make this outcome more likely. Any temporary spike in energy price due to an attack on Iran or Iranian halt in oil production would likely be less severe and more temporary than most expect as speculators are already pricing in a substantial OPEC production disruption. This scenario would also likely lead to a Fed rate cut.
Earnings growth for the fourth quarter is on pace to rise 13% year-over-year, good by historic standards. Some disappointing guidance is likely just an attempt to lower the bar for companies to exceed estimates this quarter. The ECRI Weekly Leading Index made another cycle high and is forecasting continued healthy US economic activity. While volatility will likely increase going forward, I still expect the S&P 500 to return 15% this year, notwithstanding any temporary weakness related to issues with Iran. High single-digit earnings growth, average economic growth of around 3%, an end to Fed rate hikes, low long-term interest rates, lower energy prices, a healthy labor market, a more sustainable housing market, p/e multiple expansion, a stable dollar, decelerating inflation, increased corporate spending, rising demand for US assets and a lifting of irrational pessimism should provide the catalysts for strong gains this year.
*5-day % Change
Friday, January 20, 2006
Weekly Scoreboard*
Indices
S&P 500 1,261.49 -1.91%
DJIA 10,667.39 -2.69%
NASDAQ 2,247.70 -2.98%
Russell 2000 704.60 -.31%
S&P Equity Long/Short Index 1,135.47 -.45%
S&P Barra Growth 604.01 -1.88%
S&P Barra Value 653.05 -1.94%
Morgan Stanley Consumer 595.42 -.79%
Morgan Stanley Cyclical 765.79 -3.56%
Morgan Stanley Technology 532.52 -3.80%
Transports 4,158.48 +.24%
Utilities 421.31 +2.06%
S&P 500 Cum A/D Line 7,894 -5.0%
Bloomberg Crude Oil % Bulls 53.0 -11.66%
Put/Call 1.06 +47.22%
NYSE Arms 2.10 +64.06%
Volatility(VIX) 14.56 +30.0%
ISE Sentiment 177.00 -7.81%
AAII % Bulls 50.00 -15.20%
AAII % Bears 25.83 +35.38%
US Dollar 88.96 -.58%
CRB 345.15 +3.12%
ECRI Weekly Leading Index 137.70 +.58%
Futures Spot Prices
Crude Oil 68.48 +6.09%
Unleaded Gasoline 181.70 +5.39%
Natural Gas 9.28 +3.34%
Heating Oil 186.72 +8.62%
Gold 553.80 -.66%
Base Metals 160.59 -.79%
Copper 208.50 -1.30%
10-year US Treasury Yield 4.34 unch.
Average 30-year Mortgage Rate 6.10 -.81%
Leading Sectors
Oil Service +7.64%
Energy +5.01%
Utilities +2.06%
Gold & Silver +1.85%
Steel +1.45%
Lagging Sectors
Banks -3.54%
Wireless -3.63%
Insurance -4.0%
Internet -5.44%
Airlines -6.70%
One-Week High-Volume Gainers
One-Week High-Volume Losers
*5-Day % Change
S&P 500 1,261.49 -1.91%
DJIA 10,667.39 -2.69%
NASDAQ 2,247.70 -2.98%
Russell 2000 704.60 -.31%
S&P Equity Long/Short Index 1,135.47 -.45%
S&P Barra Growth 604.01 -1.88%
S&P Barra Value 653.05 -1.94%
Morgan Stanley Consumer 595.42 -.79%
Morgan Stanley Cyclical 765.79 -3.56%
Morgan Stanley Technology 532.52 -3.80%
Transports 4,158.48 +.24%
Utilities 421.31 +2.06%
S&P 500 Cum A/D Line 7,894 -5.0%
Bloomberg Crude Oil % Bulls 53.0 -11.66%
Put/Call 1.06 +47.22%
NYSE Arms 2.10 +64.06%
Volatility(VIX) 14.56 +30.0%
ISE Sentiment 177.00 -7.81%
AAII % Bulls 50.00 -15.20%
AAII % Bears 25.83 +35.38%
US Dollar 88.96 -.58%
CRB 345.15 +3.12%
ECRI Weekly Leading Index 137.70 +.58%
Futures Spot Prices
Crude Oil 68.48 +6.09%
Unleaded Gasoline 181.70 +5.39%
Natural Gas 9.28 +3.34%
Heating Oil 186.72 +8.62%
Gold 553.80 -.66%
Base Metals 160.59 -.79%
Copper 208.50 -1.30%
10-year US Treasury Yield 4.34 unch.
Average 30-year Mortgage Rate 6.10 -.81%
Leading Sectors
Oil Service +7.64%
Energy +5.01%
Utilities +2.06%
Gold & Silver +1.85%
Steel +1.45%
Lagging Sectors
Banks -3.54%
Wireless -3.63%
Insurance -4.0%
Internet -5.44%
Airlines -6.70%
One-Week High-Volume Gainers
One-Week High-Volume Losers
*5-Day % Change
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