BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Semi longs, Retail longs and Computer longs. I have not traded today, thus leaving the Portfolio 75% net long. The tone of the market is slightly positive as the advance/decline line is modestly higher, sector performance is mixed and volume is above average. The bearish sentiment regarding bonds right now is elevated. Moreover, a strong employment report on Friday is widely anticipated. While a modest sell-off in bonds is likely, an extreme negative reaction to a strong employment report appears unlikely. A below-expectations report would likely lead to a vigorous bond rally. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, lower long-term rates and optimism in the tech sector.
Wednesday, April 05, 2006
Stocks Modestly Higher into Final Hour as Long-term Rates Fall and Fed "Pause" Speculation Rises
Today's Headlines
Bloomberg:
- Saks Inc.(SKS) and Federated Department Stores Inc.(FD) are betting dresses are coming back.
- Walt Disney Co.(DIS) in June will start selling wireless phone service that gives parents control over children’s usage.
- Congress is likely to approve measures this year to tighten security at US ports, including requiring the installation of radiation and nuclear detectors.
- Ten-year Treasuries advanced after a Federal Reserve official suggested US interest-rate increases are nearing an end.
- US mortgage applications posted their strongest gain last week in more than two months, as both home purchases and refinancing rose.
- Apple Computer(AAPL) introduced software that will let its newest computers run Microsoft’s(MSFT) Windows XP Programs.
Wall Street Journal:
- A Montana geologist who bought up oil field leases when others predicted wells would go dry has sparked an energy production revival in the state.
- Fidelity Investments, already a household name among mutual-fund managers, is pushing into pension funds and endowments to boost its earnings.
- Pay By Touch, Microbia Inc. and other startup technology companies are increasingly turning to hedge funds as investors, rather than private-equity or venture-capital firms.
- Tribune Co.(TRB) and other US publishers face a growing threat from free dailies.
- General Electric’s(GE) NBC Universal and Publicis Groupe SA’s Starcom media-buying unit are testing whether television viewers pay more attention to ads aired during shorter commercial breaks.
NY Times:
- Many American families are trying to have dinner together, a ritual which has declined for decades, citing a survey.
- Toll Brothers(TOL), the largest US builder of luxury homes, is entering the real-estate market in NYC with five projects under development.
- Saks Inc.(SKS) and Federated Department Stores Inc.(FD) are betting dresses are coming back.
- Walt Disney Co.(DIS) in June will start selling wireless phone service that gives parents control over children’s usage.
- Congress is likely to approve measures this year to tighten security at US ports, including requiring the installation of radiation and nuclear detectors.
- Ten-year Treasuries advanced after a Federal Reserve official suggested US interest-rate increases are nearing an end.
- US mortgage applications posted their strongest gain last week in more than two months, as both home purchases and refinancing rose.
- Apple Computer(AAPL) introduced software that will let its newest computers run Microsoft’s(MSFT) Windows XP Programs.
Wall Street Journal:
- A Montana geologist who bought up oil field leases when others predicted wells would go dry has sparked an energy production revival in the state.
- Fidelity Investments, already a household name among mutual-fund managers, is pushing into pension funds and endowments to boost its earnings.
- Pay By Touch, Microbia Inc. and other startup technology companies are increasingly turning to hedge funds as investors, rather than private-equity or venture-capital firms.
- Tribune Co.(TRB) and other US publishers face a growing threat from free dailies.
- General Electric’s(GE) NBC Universal and Publicis Groupe SA’s Starcom media-buying unit are testing whether television viewers pay more attention to ads aired during shorter commercial breaks.
NY Times:
- Many American families are trying to have dinner together, a ritual which has declined for decades, citing a survey.
- Toll Brothers(TOL), the largest US builder of luxury homes, is entering the real-estate market in NYC with five projects under development.
ISM Non-Manufacturing Strong, Prices Paid Falls Again
- ISM Non-Manufacturing for March rose to 60.5 versus estimates of 59.0 and a reading of 60.1 in February.
BOTTOM LINE: Cash-rich companies and consumers cheered by brighter job prospects kept US service industries expanding last month, fueling economic growth heading into the second quarter, Bloomberg reported. The new orders component of the index rose to 59.5 from 56.2 the prior month. The employment gauge fell to 54.6 from a reading of 58.2 in February. The prices paid component of the index fell to 60.5 from 64.8 the prior month. This component has now dropped 22.8% from Sept. 05 highs. I expect ISM Non-Manufacturing to fall back to more average levels over the coming months and the prices paid component to continue to decelerate.
Tuesday, April 04, 2006
Wednesday Watch
Late-Night Headlines
Bloomberg:
- Hyundai Heavy Industries, the world’s largest shipbuilder, got a 15% discount on steel plates from Japanese steelmakers including Nippon Steel Corp.
- Japanese stocks rose, with the Topix index headed for its best level in more than 14 years. Exporters such as Matsushita Electric Industrial and Honda Motor paced gains after US Fed officials said inflation in the world’s biggest economy is under control and crude oil prices dropped, prompting a rally in US shares.
- The US dollar declined for a third day against the yen on speculation the Fed is getting close to ending a 21-month policy of raising interest rates.
- The US economy will expand this year at about the same pace as 2005 and inflation will stay in check, while employers may add fewer jobs, said Thomas Hoenig, president of the Federal Reserve Bank of Kansas City.
Xinhua News Agency:
- Some 50,000 US companies have invested $50 billion in China since the two nations normalized ties in 1979.
South China Morning Post:
- Las Vegas Sands(LVS) is considering a Hong Kong real estate investment trust listing for the shopping mall of its Macau casino.
Edaily:
- LG Electronics of South Korea cut prices of plasma and liquid-crystal display televisions to spur demand ahead of soccer’s World Cup.
Late Buy/Sell Recommendations
- None of note
Night Trading
Asian Indices are +.25% to +.50% on average.
S&P 500 indicated unch.
NASDAQ 100 indicated +.09%.
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/EPS Estimate
- (AYI)/.36
- (BBBY)/.65
- (CBK)/.17
- (BLUD)/.23
- (MON)/1.52
Upcoming Splits
- None of note
Economic Releases
10:00 am EST
- ISM Non-Manufacturing for March is estimated to fall to 59.0 versus a reading of 60.1 in February,
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude build of 1,000,000 barrels. Gasoline inventories are estimated to fall 1,900,000 barrels, and distillate supplies are expected to decrease by 1,400,000 barrels. Refinery utilization is expected to rise .30%.
Bloomberg:
- Hyundai Heavy Industries, the world’s largest shipbuilder, got a 15% discount on steel plates from Japanese steelmakers including Nippon Steel Corp.
- Japanese stocks rose, with the Topix index headed for its best level in more than 14 years. Exporters such as Matsushita Electric Industrial and Honda Motor paced gains after US Fed officials said inflation in the world’s biggest economy is under control and crude oil prices dropped, prompting a rally in US shares.
- The US dollar declined for a third day against the yen on speculation the Fed is getting close to ending a 21-month policy of raising interest rates.
- The US economy will expand this year at about the same pace as 2005 and inflation will stay in check, while employers may add fewer jobs, said Thomas Hoenig, president of the Federal Reserve Bank of Kansas City.
Xinhua News Agency:
- Some 50,000 US companies have invested $50 billion in China since the two nations normalized ties in 1979.
South China Morning Post:
- Las Vegas Sands(LVS) is considering a Hong Kong real estate investment trust listing for the shopping mall of its Macau casino.
Edaily:
- LG Electronics of South Korea cut prices of plasma and liquid-crystal display televisions to spur demand ahead of soccer’s World Cup.
Late Buy/Sell Recommendations
- None of note
Night Trading
Asian Indices are +.25% to +.50% on average.
S&P 500 indicated unch.
NASDAQ 100 indicated +.09%.
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/EPS Estimate
- (AYI)/.36
- (BBBY)/.65
- (CBK)/.17
- (BLUD)/.23
- (MON)/1.52
Upcoming Splits
- None of note
Economic Releases
10:00 am EST
- ISM Non-Manufacturing for March is estimated to fall to 59.0 versus a reading of 60.1 in February,
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude build of 1,000,000 barrels. Gasoline inventories are estimated to fall 1,900,000 barrels, and distillate supplies are expected to decrease by 1,400,000 barrels. Refinery utilization is expected to rise .30%.
BOTTOM LINE: Asian indices are higher, boosted by exporting stocks in the region after US Fed members made more dovish comments. I expect US equities to open modestly lower and to trade higher into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.
Stocks Finish Near Session Highs as Oil Falls and Rates Stabilize
Indices
S&P 500 1,305.93 +.63%
DJIA 11,203.85 +.53%
NASDAQ 2,345.36 +.37%
Russell 2000 762.32 +.41%
Wilshire 5000 13,203.10 +.55%
S&P Barra Growth 613.69 +.51%
S&P Barra Value 689.19 +.74%
Morgan Stanley Consumer 610.05 +.02%
Morgan Stanley Cyclical 826.91 +.71%
Morgan Stanley Technology 553.47 +.59%
Transports 4,681.81 +1.29%
Utilities 394.75 +1.12%
Put/Call .79 +17.91%
NYSE Arms .75 +18.15%
Volatility(VIX) 11.14 -3.72%
ISE Sentiment 166.00 +14.48%
US Dollar 88.83 -.89%
CRB 332.43 -.95%
Futures Spot Prices
Crude Oil 66.32 +.14%
Unleaded Gasoline 190.40 +.45%
Natural Gas 7.05 -.14%
Heating Oil 186.15 +.31%
Gold 591.03 +.12%
Base Metals 179.66 -1.77%
Copper 253.55 unch.
10-year US Treasury Yield 4.86% +.04%
Leading Sectors
Oil Service +1.68%
I-Banks +1.62%
Internet +1.46%
Lagging Sectors
REITs -.68%
Networking -.82%
Broadcasting -1.49%
Evening Review
Detailed Market Summary
Market Gauges
Daily ETF Performance
Style Performance
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Economic Calendar
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Movers
Real-time/After-hours Stock Quote
In Play
Afternoon Recommendations
Piper Jaffray:
- Rated ALXN Outperform, target $51.
- Rated CBST Outperform, target $30.
- Rated IDIX Underperform, target $9.
- Rated CELG Outperform, target $50.
Afternoon/Evening Headlines
Bloomberg:
- The cash on US corporate balance sheets is near levels that followed stock market plunges – not rallies – making equities today crash-proof, said Citigroup Investment Research’s Tobias Levkovich.
- Wal-Mart Stores(WMT) will open more than 50 locations in areas of higher unemployment and crime in the next two years.
- A record number of candidates plan to take the Chartered Financial Analyst exams as surging profits at investment banks boost hiring and attract more job seekers to the financial services industry.
- The US economy is expanding this year at a “solid pace” and will withstand a slowdown in the housing market, said Jeffrey Lacker, president of the Fed Bank of Richmond. “Growth is proceeding on a solid pace this year, and inflation is low and stable,” he said.
CNBC:
- Biomet(BMET) has hired Morgan Stanley to explore alternatives that may include a possible sale of the company.
Nikkei English News:
- NEC Corp. agreed to jointly develop and manufacture data-storage devices with EMC Corp.(EMC).
S&P 500 1,305.93 +.63%
DJIA 11,203.85 +.53%
NASDAQ 2,345.36 +.37%
Russell 2000 762.32 +.41%
Wilshire 5000 13,203.10 +.55%
S&P Barra Growth 613.69 +.51%
S&P Barra Value 689.19 +.74%
Morgan Stanley Consumer 610.05 +.02%
Morgan Stanley Cyclical 826.91 +.71%
Morgan Stanley Technology 553.47 +.59%
Transports 4,681.81 +1.29%
Utilities 394.75 +1.12%
Put/Call .79 +17.91%
NYSE Arms .75 +18.15%
Volatility(VIX) 11.14 -3.72%
ISE Sentiment 166.00 +14.48%
US Dollar 88.83 -.89%
CRB 332.43 -.95%
Futures Spot Prices
Crude Oil 66.32 +.14%
Unleaded Gasoline 190.40 +.45%
Natural Gas 7.05 -.14%
Heating Oil 186.15 +.31%
Gold 591.03 +.12%
Base Metals 179.66 -1.77%
Copper 253.55 unch.
10-year US Treasury Yield 4.86% +.04%
Leading Sectors
Oil Service +1.68%
I-Banks +1.62%
Internet +1.46%
Lagging Sectors
REITs -.68%
Networking -.82%
Broadcasting -1.49%
Evening Review
Detailed Market Summary
Market Gauges
Daily ETF Performance
Style Performance
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Economic Calendar
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Movers
Real-time/After-hours Stock Quote
In Play
Afternoon Recommendations
Piper Jaffray:
- Rated ALXN Outperform, target $51.
- Rated CBST Outperform, target $30.
- Rated IDIX Underperform, target $9.
- Rated CELG Outperform, target $50.
Afternoon/Evening Headlines
Bloomberg:
- The cash on US corporate balance sheets is near levels that followed stock market plunges – not rallies – making equities today crash-proof, said Citigroup Investment Research’s Tobias Levkovich.
- Wal-Mart Stores(WMT) will open more than 50 locations in areas of higher unemployment and crime in the next two years.
- A record number of candidates plan to take the Chartered Financial Analyst exams as surging profits at investment banks boost hiring and attract more job seekers to the financial services industry.
- The US economy is expanding this year at a “solid pace” and will withstand a slowdown in the housing market, said Jeffrey Lacker, president of the Fed Bank of Richmond. “Growth is proceeding on a solid pace this year, and inflation is low and stable,” he said.
CNBC:
- Biomet(BMET) has hired Morgan Stanley to explore alternatives that may include a possible sale of the company.
Nikkei English News:
- NEC Corp. agreed to jointly develop and manufacture data-storage devices with EMC Corp.(EMC).
BOTTOM LINE: The Portfolio finished slightly higher today as gains in my Retail longs, Internet longs and Biotech longs. I did not trade in the final hour, thus leaving the Portfolio 75% net long. The tone of the market was slightly positive today as the advance/decline line finished almost unchanged, sector performance was positive and volume was above-average. Measures of investor anxiety were mixed into the close. Overall, today's market performance was mildly bullish. However, breadth was poor throughout the day. As well, the 10-year T-note finished near session lows and oil rebounded off session lows. On the positive side, the bears were once again unable to capitalize on downside momentum. The CRB Index declined 1% today despite the fall in the U.S. dollar, which is a negative for commodities. I still expect stocks to consolidate recent gains further before another substantial push higher. There may even be a short period of weakness in the broad market as investors begin anticipating slower economic growth, thus rotating out of more cyclical sectors.
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