BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Computer longs, Retail longs and Semi longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is negative as the advance/decline line is substantially lower, every sector is falling and volume is about average. The Johnson Redbook same-store sales index rose 3.9% year over year last week vs. a 3.3% rise the prior week. The long-term average is a gain of around 2.8%. I still see little evidence that a significant decline in consumer spending is beginning, even as investors continue to price this into stocks. As I have said before, mortgage resets were supposed to send consumer spending plunging this year, and they have not. I still expect the back-to-school selling season to exceed expectations. I expect US stocks to trade modestly higher into the close from current levels on bargain hunting and declining energy prices.
Wednesday, September 06, 2006
Stocks Lower into Final Hour on Profit-taking
Today's Headlines
Bloomberg:
- Crude oil in NY is falling again, heading for the lowest close in five months, as concern eased that shipments from Iran, will be curbed because of a dispute about the country’s nuclear program.
- The Fed said companies last month had difficulty passing along higher energy prices to customers as economic growth slowed in some areas, adding to the case for keeping interest rates unchanged.
- GM(GM) will extend warranties to 100,000 miles on 2007 cars and trucks as part of a plan to tout quality and win back buyers lost to Toyota Motor(TM) and other rivals.
- SEC Chairman Cox said regulators will be bringing action against more companies for fraudulent reporting of their stock options grants.
- ASML Holding NV, Europe’s largest maker of semiconductor equipment, raised its forecast for third-quarter machine orders and 2006 sales because of “strong demand” from manufacturers of memory chips.
- Sony Corp.(SNE) delayed the European release of its PlayStation 3 video game console until March and cut its 2006 shipment target in half to 2 million, surrendering holiday sales to Microsoft and Nintendo.
- Fast growing demand has resulted in Taiwan Semiconductor Manufacturing Company(TSM) to extend its shipment time to eight weeks or more.
Wall Street Journal:
- Cisco Systems(CSCO) is beginning a campaign to broaden its image to include consumers and sell services such as Internet phone calling, set-top television boxes, and networked DVD players.
- Eastman Kodak(EK) is to introduce more than 2,000 photo-processing kiosks into Wal-Mart Stores(WMT) as the popularity of instant print, self-service booths grows.
- Amazon.com(AMZN) will offer a movie downloading service, called Amazon Unbox, to match its DVD sales and rental businesses.
NY Times:
- New Boston-area buildings designed as laboratory space for biotechnology research are attracting cash-rich institutional investors.
- A group including Cisco Systems(CSCO), IBM(IBM) and Azulstar Networks will spend between $75 million and $270 million to build a wireless network for Silicon Valley.
Sacramento Bee:
- State Farm Mutual Automobile Insurance Co., California’s largest provider of homeowners’ insurance, will propose cutting its rates there by an average of 10.6% today.
Philadelphia Inquirer:
- A professor emeritus at the Wharton School who was arrested last week in Virginia on child porn allegations now faces charges in Pennsylvania after a search of his campus office turned up illegal photos and videos.
Finanz & Wirtschaft:
- UBS AG CEO Wuffli sees “very good” prospects to expand in wealth management in the US.
Emirates Today:
- Foreign direct investment into the United Arab Emirates will drop by almost half by 2010.
AFP:
- Russia’s foreign minister said the country may support UN sanctions against Iran because of the Islamic Republic’s nuclear program.
- Crude oil in NY is falling again, heading for the lowest close in five months, as concern eased that shipments from Iran, will be curbed because of a dispute about the country’s nuclear program.
- The Fed said companies last month had difficulty passing along higher energy prices to customers as economic growth slowed in some areas, adding to the case for keeping interest rates unchanged.
- GM(GM) will extend warranties to 100,000 miles on 2007 cars and trucks as part of a plan to tout quality and win back buyers lost to Toyota Motor(TM) and other rivals.
- SEC Chairman Cox said regulators will be bringing action against more companies for fraudulent reporting of their stock options grants.
- ASML Holding NV, Europe’s largest maker of semiconductor equipment, raised its forecast for third-quarter machine orders and 2006 sales because of “strong demand” from manufacturers of memory chips.
- Sony Corp.(SNE) delayed the European release of its PlayStation 3 video game console until March and cut its 2006 shipment target in half to 2 million, surrendering holiday sales to Microsoft and Nintendo.
- Fast growing demand has resulted in Taiwan Semiconductor Manufacturing Company(TSM) to extend its shipment time to eight weeks or more.
Wall Street Journal:
- Cisco Systems(CSCO) is beginning a campaign to broaden its image to include consumers and sell services such as Internet phone calling, set-top television boxes, and networked DVD players.
- Eastman Kodak(EK) is to introduce more than 2,000 photo-processing kiosks into Wal-Mart Stores(WMT) as the popularity of instant print, self-service booths grows.
- Amazon.com(AMZN) will offer a movie downloading service, called Amazon Unbox, to match its DVD sales and rental businesses.
NY Times:
- New Boston-area buildings designed as laboratory space for biotechnology research are attracting cash-rich institutional investors.
- A group including Cisco Systems(CSCO), IBM(IBM) and Azulstar Networks will spend between $75 million and $270 million to build a wireless network for Silicon Valley.
Sacramento Bee:
- State Farm Mutual Automobile Insurance Co., California’s largest provider of homeowners’ insurance, will propose cutting its rates there by an average of 10.6% today.
Philadelphia Inquirer:
- A professor emeritus at the Wharton School who was arrested last week in Virginia on child porn allegations now faces charges in Pennsylvania after a search of his campus office turned up illegal photos and videos.
Finanz & Wirtschaft:
- UBS AG CEO Wuffli sees “very good” prospects to expand in wealth management in the US.
Emirates Today:
- Foreign direct investment into the United Arab Emirates will drop by almost half by 2010.
AFP:
- Russia’s foreign minister said the country may support UN sanctions against Iran because of the Islamic Republic’s nuclear program.
Productivity and Unit Labor Costs Revised Higher, Service Sector Healthy
- Final 2Q Non-farm Productivity rose 1.6% versus estimates of a 1.6% increase and a prior estimate of a 1.1% gain.
- Final 2Q Unit Labor Costs rose 4.9% versus estimates of a 4.0% gain and a prior estimate of a 4.2% increase.
- ISM Non-Manufacturing for August rose to 57.0 versus estimates of 55.1 and a reading of 54.8 in July.
- Final 2Q Unit Labor Costs rose 4.9% versus estimates of a 4.0% gain and a prior estimate of a 4.2% increase.
- ISM Non-Manufacturing for August rose to 57.0 versus estimates of 55.1 and a reading of 54.8 in July.
BOTTOM LINE: Productivity slowed and labor costs rose last quarter, Bloomberg reported. Compensation to American workers rose 6.6% in the second quarter, almost twice most measures of inflation. Productivity growth rates had averaged 3.2% each quarter since the expansion began in 2001 compared with 2.1% during the prior 10-year expansion. Job cuts announced by US employers fell 7.5% in August, a sign the labor market remains healthy, according to a recent report from Challenger, Gray & Christmas. I continue to expect productivity to remain relatively high and unit labor costs to remain subdued over the intermediate-term.
Growth in US service industries in August accelerated as business surged at transportation companies, utilities and retailers, Bloomberg reported. An unemployment rate at low levels by historic standards and a drop in gas prices are boosting consumer spending. Gas prices dropped about .21/gallon just in the month of August. The new orders component of the index fell to 52.1 versus 55.6 the prior month. The prices paid component fell to 72.4 from 74.8 in July. I expect the service sector to continue to decelerate to around average levels over the intermediate-term. There is no evidence to suggest a sharp consumer spending slowdown is at hand, which is what the many market bears have been warning about for months. Better-than-expected retail sales this holiday season will likely provide another catalyst for broad market gains this fall.
Tuesday, September 05, 2006
Wednesday Watch
Late-Night Headlines
Bloomberg:
- Australia’s economy expanded at the slowest pace in three years as higher interest rates and fuel costs curbed consumer spending and companies ran down stocks.
- The Bank of Japan will probably keep its overnight lending rate at .25% this week, judging that the economy isn’t expanding fast enough to require a second increase in two months.
Economic Daily News:
- Nanya Technology Corp. expects its prices DDR2 dynamic random access memory chips to rise between 5% and 10% this month, citing Vice-President Pai Pei-lin.
Late Buy/Sell Recommendations
Morgan Stanley:
Reiterated Overweight on (MBT), target $45.50.
Night Trading
Asian Indices are -.50% to unch. on average.
S&P 500 indicated -.07%.
NASDAQ 100 indicated -.14%.
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
- (HOV)/1.10
- (MATK)/.15
Upcoming Splits
- (RDY) 2-for-1
Economic Releases
8:30 am EST
- Final 2Q Non-farm Productivity is estimated to rise 1.6% versus a prior estimate of a 1.1% gain.
- Final 2Q Unit Labor Costs are estimated to rise 4.0% versus a prior estimate of a 4.2% gain.
10:00 am EST
- ISM Non-Manufacturing for August is estimated to rise to 55.1 versus a reading of 54.8 in July.
2:00 pm EST:
- The Fed’s Beige Book
Bloomberg:
- Australia’s economy expanded at the slowest pace in three years as higher interest rates and fuel costs curbed consumer spending and companies ran down stocks.
- The Bank of Japan will probably keep its overnight lending rate at .25% this week, judging that the economy isn’t expanding fast enough to require a second increase in two months.
Economic Daily News:
- Nanya Technology Corp. expects its prices DDR2 dynamic random access memory chips to rise between 5% and 10% this month, citing Vice-President Pai Pei-lin.
Late Buy/Sell Recommendations
Morgan Stanley:
Reiterated Overweight on (MBT), target $45.50.
Night Trading
Asian Indices are -.50% to unch. on average.
S&P 500 indicated -.07%.
NASDAQ 100 indicated -.14%.
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
- (HOV)/1.10
- (MATK)/.15
Upcoming Splits
- (RDY) 2-for-1
Economic Releases
8:30 am EST
- Final 2Q Non-farm Productivity is estimated to rise 1.6% versus a prior estimate of a 1.1% gain.
- Final 2Q Unit Labor Costs are estimated to rise 4.0% versus a prior estimate of a 4.2% gain.
10:00 am EST
- ISM Non-Manufacturing for August is estimated to rise to 55.1 versus a reading of 54.8 in July.
2:00 pm EST:
- The Fed’s Beige Book
BOTTOM LINE: Asian indices are mostly lower, weighed down by technology stocks in the region. I expect US equities to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.
Stocks Finish Near Session Highs on Another Fall in Energy Prices and Less Pessimism
Indices
S&P 1,313.25 +.17%
DJIA 11,469.28 +.04%
NASDAQ 2,205.70 +.57%
Russell 2000 727.50 +.82%
Wilshire 5000 13,150.60 +.25%
S&P Barra Growth 609.57 +.11%
S&P Barra Value 701.63 +.23%
Morgan Stanley Consumer 645.46 -.15%
Morgan Stanley Cyclical 816.44 +.78%
Morgan Stanley Technology 513.12 +.71%
Transports 4,305.78 -.11%
Utilities 438.12 -.74%
Put/Call .97 -3.0%
NYSE Arms .82 +21.52%
Volatility(VIX) 12.63 +5.60%
ISE Sentiment 69.0 unch.
US Dollar 85.0 +.38%
CRB 327.08 +.51%
Futures Spot Prices
Crude Oil 68.70 -.71%
Unleaded Gasoline 166.25 -4.15%
Natural Gas 6.02 +2.52%
Heating Oil 194.20 -1.29%
Gold 646.90 unch.
Base Metals 235.07 +2.45%
Copper 362.40 -.01%
10-year US Treasury Yield 4.78% +1.21%
Leading Sectors
Gold & Silver +2.92%
Steel +2.53%
Oil Service +2.27%
Lagging Sectors
Broadcasting -.93%
Disk Drives -1.24%
HMOs -1.30%
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
Citigroup:
- Rated (MRVL) Buy, target $29.
Banc of America:
- Upgraded (AFL) to Buy, target $50.
- Upgraded (HIG) to Buy, target $97.
- Downgraded (AMP) to Sell, target $41.
- Downgraded (NFS) to Sell, target $45.
Afternoon/Evening Headlines
Bloomberg:
- Gasoline futures fell to their lowest price in almost six months as the peak-demand driving season came to a close with US inventories of the motor fuel above normal levels.
- Ford Motor(F) unexpectedly named Boeing(BA) executive Alan Mullaly to replace CEO Bill Ford, great-grandson of the struggling automaker’s founder.
- Merrill Lynch(MER), an also-ran in the growing market for mortgage securities, agreed to buy National City’s home-loan unit for $1.3 billion.
- Viacom(VIA) Chairman Sumner Redstone ousted Tom Freston as CEO after the media company’s stock dropped 10% following a split with CBS Corp.
Dow Jones:
- European economic growth will slow in 2007, according to a document prepared for a meeting of the region’s finance ministers.
S&P 1,313.25 +.17%
DJIA 11,469.28 +.04%
NASDAQ 2,205.70 +.57%
Russell 2000 727.50 +.82%
Wilshire 5000 13,150.60 +.25%
S&P Barra Growth 609.57 +.11%
S&P Barra Value 701.63 +.23%
Morgan Stanley Consumer 645.46 -.15%
Morgan Stanley Cyclical 816.44 +.78%
Morgan Stanley Technology 513.12 +.71%
Transports 4,305.78 -.11%
Utilities 438.12 -.74%
Put/Call .97 -3.0%
NYSE Arms .82 +21.52%
Volatility(VIX) 12.63 +5.60%
ISE Sentiment 69.0 unch.
US Dollar 85.0 +.38%
CRB 327.08 +.51%
Futures Spot Prices
Crude Oil 68.70 -.71%
Unleaded Gasoline 166.25 -4.15%
Natural Gas 6.02 +2.52%
Heating Oil 194.20 -1.29%
Gold 646.90 unch.
Base Metals 235.07 +2.45%
Copper 362.40 -.01%
10-year US Treasury Yield 4.78% +1.21%
Leading Sectors
Gold & Silver +2.92%
Steel +2.53%
Oil Service +2.27%
Lagging Sectors
Broadcasting -.93%
Disk Drives -1.24%
HMOs -1.30%
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
Citigroup:
- Rated (MRVL) Buy, target $29.
Banc of America:
- Upgraded (AFL) to Buy, target $50.
- Upgraded (HIG) to Buy, target $97.
- Downgraded (AMP) to Sell, target $41.
- Downgraded (NFS) to Sell, target $45.
Afternoon/Evening Headlines
Bloomberg:
- Gasoline futures fell to their lowest price in almost six months as the peak-demand driving season came to a close with US inventories of the motor fuel above normal levels.
- Ford Motor(F) unexpectedly named Boeing(BA) executive Alan Mullaly to replace CEO Bill Ford, great-grandson of the struggling automaker’s founder.
- Merrill Lynch(MER), an also-ran in the growing market for mortgage securities, agreed to buy National City’s home-loan unit for $1.3 billion.
- Viacom(VIA) Chairman Sumner Redstone ousted Tom Freston as CEO after the media company’s stock dropped 10% following a split with CBS Corp.
Dow Jones:
- European economic growth will slow in 2007, according to a document prepared for a meeting of the region’s finance ministers.
BOTTOM LINE: The Portfolio finished higher today on gains in my Semi longs, Computer longs, Medical longs, Internet longs and Retail longs. I did not trade in the final hour, thus leaving the Portfolio 100% net long. The tone of the market was positive today as the advance/decline line finished higher, most sectors rose and volume was about average. Measures of investor anxiety were mostly higher into the close. Overall, today's market performance was bullish. I suspect a test of the S&P's cycle highs is coming very soon which will likely lead to a short period of consolidation before a more substantial push higher occurs during the fourth quarter. Unleaded gas futures fell another 4.3% today and have plunged about 30% in a month. This is a significant positive. Today’s announcement of a huge oil find in the Gulf of Mexico is a substantial psychological negative for the many oil bulls that believe the world is imminently running out of oil.
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