BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Retail longs and Semiconductor longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is modestly positive as the advance/decline line is slightly higher, sector performance is mixed and volume is above average. Investors are mostly ignoring the Iranian situation today. Considering we just issued the Iranian president a visa, it is very unlikely that today's situation will worsen, in my opinion. Yes, oil is .52 higher, but that is a rather muted response considering how far oil has fallen and the recent surge in speculation by investment funds. Moreover, gold is down $7 an ounce on the news, notwithstanding recent hawkish Fed comments. I am starting to wonder what would make gold move higher considering it is down almost $40 oz. from February highs during a time when emerging markets plunged, the U.S. dollar weakened, inflation readings accelerated and Iran captured British soldiers. Gold trades very poorly considering these recent events. Here is a good summary from Bloomberg of recent market data that indicate investors' fears over the effects of sub-prime woes are waning. The many stock market bears will point to this as evidence of complacency. However, I would note that recent economic data have been pointing toward economic acceleration, not deceleration. Housing has been slowing substantially for two years. Economic growth will likely come in substantially below trend this quarter. However, we should see a meaningful bounce back in 2Q and trend growth before year-end. I expect US stocks to trade mixed-to-higher into the close on short-covering.
Friday, March 23, 2007
Stocks Higher into Final Hour, Poised for Best Week in 4 Years
Today's Headlines
Bloomberg:
- US stocks are headed for their best week in four years.
- Quincy Krosby, who helps manage about $325 billion as Chief Investment Strategist at the Hartford, says the US stock market is in now in a “bottoming phase.”
- Crude oil is only .29 higher in NY after Iran seized 15 Bristish naval personnel. Gold is falling $8 an ounce of the news.
- The US dollar is rising against the euro after a report showed US existing home sales rose the most in three years.
- David Land, who helps manage $3.9 billion at Advantus Capital Management, says the US prime mortgage market will remain “rock solid.”
- Whatever scare rising defaults of subprime loans wreaked on stocks and bonds may already be on the wane.
- David Kelly, an economic adviser to Putnam Investments in Boston, see home sales and subprime woes stabilizing.
- Vonage Holdings(VG) was ordered by a judge to stop using Verizon Communications(VZ) technology that allows customers to make calls to standard phone lines.
- The House of Representatives voted to require the withdrawal of US troops from Iraq in the most direct challenge to President Bush’s policy since Democrats won control of Congress in January.
- Google Inc.(GOOG) said its engineers are developing software for handheld devices and the company has no plans to build mobile phones.
- Genentech Inc.(DNA) said it halted a study of the drug Avastin as a treatment for small-cell lung cancer because of safety issues.
- DaimlerChrysler AG(DCX) shares rose as much as 6% on speculation the German carmaker moved closer to selling its Chrysler unit, said analysts and traders.
Wall Street Journal:
- Citigroup Inc.(C) may bid for ABN Amro Holding NV, which is talking with Barclays Plc about a takeover.
- UBS AG and Goldman Sachs(GS) are among foreign brokerages with joint ventures set to profit from IPOs in China this year.
- Ford Motor(F) may introduce a new Ford Flex crossover sport-utility vehicle next month, to appeal to families who don’t like minivans.
- Morgan Stanley(MS) split its trading business into two parts to clarify the risk factor and to improve contact with trading clients, citing an internal memo from Co-President Zoe Cruz.
- ConocoPhillips’(COP) CEO Mulva is confident the company will sign a joint venture with OAO Lukoil within the next 12 months.
NY Times:
- Some US states have sought the help of Eli Lilly(LLY) to rein in the costs of antipsychotic drugs such as Zyprexa, which is made by Lilly.
CNBC:
- The Chicago Merc(CME) sees “no need” to alter its $8.6 billion offer for the Chicago Board of Trade(BOT) to fend off a rival bid by the Intercontinental Exchange(ICE), CEO Donohue said.
USA Today:
- The Dept. of Homeland Security and the US military plan to test whether unmanned drones flying above airports could protect planes from terrorists armed with shoulder-fired missiles.
Globe and Mail:
- Canada’s ruling Conservative Party is close to having enough support to win a majority government in an election, citing the results of a new poll.
- US stocks are headed for their best week in four years.
- Quincy Krosby, who helps manage about $325 billion as Chief Investment Strategist at the Hartford, says the US stock market is in now in a “bottoming phase.”
- Crude oil is only .29 higher in NY after Iran seized 15 Bristish naval personnel. Gold is falling $8 an ounce of the news.
- The US dollar is rising against the euro after a report showed US existing home sales rose the most in three years.
- David Land, who helps manage $3.9 billion at Advantus Capital Management, says the US prime mortgage market will remain “rock solid.”
- Whatever scare rising defaults of subprime loans wreaked on stocks and bonds may already be on the wane.
- David Kelly, an economic adviser to Putnam Investments in Boston, see home sales and subprime woes stabilizing.
- Vonage Holdings(VG) was ordered by a judge to stop using Verizon Communications(VZ) technology that allows customers to make calls to standard phone lines.
- The House of Representatives voted to require the withdrawal of US troops from Iraq in the most direct challenge to President Bush’s policy since Democrats won control of Congress in January.
- Google Inc.(GOOG) said its engineers are developing software for handheld devices and the company has no plans to build mobile phones.
- Genentech Inc.(DNA) said it halted a study of the drug Avastin as a treatment for small-cell lung cancer because of safety issues.
- DaimlerChrysler AG(DCX) shares rose as much as 6% on speculation the German carmaker moved closer to selling its Chrysler unit, said analysts and traders.
Wall Street Journal:
- Citigroup Inc.(C) may bid for ABN Amro Holding NV, which is talking with Barclays Plc about a takeover.
- UBS AG and Goldman Sachs(GS) are among foreign brokerages with joint ventures set to profit from IPOs in China this year.
- Ford Motor(F) may introduce a new Ford Flex crossover sport-utility vehicle next month, to appeal to families who don’t like minivans.
- Morgan Stanley(MS) split its trading business into two parts to clarify the risk factor and to improve contact with trading clients, citing an internal memo from Co-President Zoe Cruz.
- ConocoPhillips’(COP) CEO Mulva is confident the company will sign a joint venture with OAO Lukoil within the next 12 months.
NY Times:
- Some US states have sought the help of Eli Lilly(LLY) to rein in the costs of antipsychotic drugs such as Zyprexa, which is made by Lilly.
CNBC:
- The Chicago Merc(CME) sees “no need” to alter its $8.6 billion offer for the Chicago Board of Trade(BOT) to fend off a rival bid by the Intercontinental Exchange(ICE), CEO Donohue said.
USA Today:
- The Dept. of Homeland Security and the US military plan to test whether unmanned drones flying above airports could protect planes from terrorists armed with shoulder-fired missiles.
Globe and Mail:
- Canada’s ruling Conservative Party is close to having enough support to win a majority government in an election, citing the results of a new poll.
Existing Home Sales Hit 3-Year High
Existing Home Sales for February rose to 6.69M versus estimates of 6.30M and 6.44M in January.
BOTTOM LINE: Sales of previously owned homes in the US unexpectedly rose 3.9%, the biggest monthly gain in almost three years, a sign the housing market is recovering even as lending standards tighten, Bloomberg said. Lower prices and low interest rates are boosting demand for homes. The median home prices fell 1.3%, from a year ago, to $212,800. Existing home inventories rose to 6.7 month’s supply at the current sales pace from 6.6 months the prior month. Purchases rose 14.2% in the Northeast, 3.9% in the Midwest and 1.6% in the South. Purchases fell slightly in the West. I continue to believe housing sales are stabilizing at relatively high levels and that home construction will remain subdued throughout the year as homebuilders work down excess inventory.
Thursday, March 22, 2007
Friday Watch
Late-Night Headlines
Bloomberg:
- Russ Koesterich, who helps oversee $1.7 trillion at Barclays Global Investments says US sub-prime turmoil “looks contained.”
- New Century Financial(NEWC), struggling with a surge in bad loans and short on cash, said Barclays Plc dropped demands that the sub-prime lender buy back mortgages valued at $900 million.
- The US dollar headed for a weekly gain against the yen as investors pared bets the Fed will cut interest rates by June.
- Kraft Foods(KFT) will join the S&P 500, becoming the biggest company by market value to do so since Google Inc.(GOOG) last year, after Altria Group(MO) distributes its 89% stake to shareholders.
- Owl Creek Asset Management LP and seven other hedge funds disclosed their holdings in bankrupt Northwest Airlines(NWACQ), yielding to a federal judge’s order.
- The United Nations Security Council formally introduced a draft resolution that would freeze the assets of a state-owned Iranian bank and bar some exports from the country, to pressure Iran to suspend its nuclear program.
Business Week:
- Motion-capture technology, which grew out of Hollywood movie-making, is being used by other industries as the cost of the hardware and software involved falls. Anyone making a PowerPoint presentation soon will be able to operate the technology developed by Los Angles-based Gesture Studios, which uses cameras to track hand movements and translate them into computer instructions.
London-based Times:
- Iraq’s Kurdish area aims for an oil production of one million barrels a day within five years, citing Ashti Hawrami, the oil minister for Iraqi Kurdistan. Speaking in London yesterday, Hawrami said Kurdistan aims to be the “hub” for Iraq’s future oil industry and wants to sign as many as 10 exploration contracts by the end of the year.
China Daily:
- PetroChina Co. is pumping an initial 500 metric tons a day of crude oil from its new field in Bohai Bay off the coast of northeastern China. PetroChina will announce in the first half of this year details of a “very rich” new oilfield in Bohai Bay, Vice Chairman Jiang Jiemin told reporters on March 19. The field is the largest find in China in the past decade.
Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (AIZ), target $62.
- Reiterated Buy on (NKE), target $115.
Business Week:
- Ultralife Batteries Inc.(ULBI), a maker of industrial and military lithium batteries, has attracted an investor who has “steadily been buying shares” because of the company’s potential to be acquired. Investment firm Grace Brothers has accumulated a 30% stake in the company since last year.
Night Trading
Asian Indices are -.25% to +.50% on average.
S&P 500 indicated -.03%.
NASDAQ 100 indicated -.04%.
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
Conference Calendar
Daily Stock Events
Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule
Earnings of Note
Company/EPS Estimate
- (FRE)/1.42
Upcoming Splits
- (KMX) 2-for-1
- (HSC) 2-for-1
Economic Releases
10:00 pm EST
- Existing Home Sales for February are estimated to fall to 6.30M versus 6.46M in January.
Bloomberg:
- Russ Koesterich, who helps oversee $1.7 trillion at Barclays Global Investments says US sub-prime turmoil “looks contained.”
- New Century Financial(NEWC), struggling with a surge in bad loans and short on cash, said Barclays Plc dropped demands that the sub-prime lender buy back mortgages valued at $900 million.
- The US dollar headed for a weekly gain against the yen as investors pared bets the Fed will cut interest rates by June.
- Kraft Foods(KFT) will join the S&P 500, becoming the biggest company by market value to do so since Google Inc.(GOOG) last year, after Altria Group(MO) distributes its 89% stake to shareholders.
- Owl Creek Asset Management LP and seven other hedge funds disclosed their holdings in bankrupt Northwest Airlines(NWACQ), yielding to a federal judge’s order.
- The United Nations Security Council formally introduced a draft resolution that would freeze the assets of a state-owned Iranian bank and bar some exports from the country, to pressure Iran to suspend its nuclear program.
Business Week:
- Motion-capture technology, which grew out of Hollywood movie-making, is being used by other industries as the cost of the hardware and software involved falls. Anyone making a PowerPoint presentation soon will be able to operate the technology developed by Los Angles-based Gesture Studios, which uses cameras to track hand movements and translate them into computer instructions.
London-based Times:
- Iraq’s Kurdish area aims for an oil production of one million barrels a day within five years, citing Ashti Hawrami, the oil minister for Iraqi Kurdistan. Speaking in London yesterday, Hawrami said Kurdistan aims to be the “hub” for Iraq’s future oil industry and wants to sign as many as 10 exploration contracts by the end of the year.
China Daily:
- PetroChina Co. is pumping an initial 500 metric tons a day of crude oil from its new field in Bohai Bay off the coast of northeastern China. PetroChina will announce in the first half of this year details of a “very rich” new oilfield in Bohai Bay, Vice Chairman Jiang Jiemin told reporters on March 19. The field is the largest find in China in the past decade.
Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (AIZ), target $62.
- Reiterated Buy on (NKE), target $115.
Business Week:
- Ultralife Batteries Inc.(ULBI), a maker of industrial and military lithium batteries, has attracted an investor who has “steadily been buying shares” because of the company’s potential to be acquired. Investment firm Grace Brothers has accumulated a 30% stake in the company since last year.
Night Trading
Asian Indices are -.25% to +.50% on average.
S&P 500 indicated -.03%.
NASDAQ 100 indicated -.04%.
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
Conference Calendar
Daily Stock Events
Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule
Earnings of Note
Company/EPS Estimate
- (FRE)/1.42
Upcoming Splits
- (KMX) 2-for-1
- (HSC) 2-for-1
Economic Releases
10:00 pm EST
- Existing Home Sales for February are estimated to fall to 6.30M versus 6.46M in January.
BOTTOM LINE: Asian indices are mostly higher, boosted by financial and energy shares in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 100% net long heading into the day.
Stocks Finish Mixed, Consolidating Yesterday's Sharp Gains
Indices
S&P 500 1,434.54 -.03%
DJIA 12,461.14 +.11%
NASDAQ 2,451.74 -.17%
Russell 2000 808.05 +.07%
Wilshire 5000 14,483.72 +.02%
Russell 1000 Growth 565.37 -.11%
Russell 1000 Value 828.54 +.07%
Morgan Stanley Consumer 706.99 +.02%
Morgan Stanley Cyclical 960.62 -.33%
Morgan Stanley Technology 563.86 -1.03%
Transports 4,891.63 -.04%
Utilities 497.31 +.11%
MSCI Emerging Markets 115.96 +.54%
Sentiment/Internals
Total Put/Call .94 -16.07%
NYSE Arms 1.11 +152.62%
Volatility(VIX) 12.93 +6.07%
ISE Sentiment 116.0 +16.0%
Futures Spot Prices
Crude Oil 61.76 +3.61%
Reformulated Gasoline 195.87 +3.22%
Natural Gas 7.33 +2.43%
Heating Oil 171.90 +3.27%
Gold 664.20 +.64%
Base Metals 248.96 +.71%
Copper 307.40 +1.82%
Economy
10-year US Treasury Yield 4.58% +4 basis points
US Dollar 83.06 +.35%
CRB Index 310.91 +1.50%
Leading Sectors
Energy +1.79%
Oil Service +1.60%
Telecom +.62%
Lagging Sectors
Steel -1.30%
Semis -1.50%
Airlines -2.82%
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
AG Edwards:
- Rated (ERTS), (THQI) Buy.
Afternoon/Evening Headlines
Bloomberg:
- Blackstone Group LP, the leveraged buyout firm that has spent $160 billion taking companies private in the past two decades, filed to raise as much as $4 billion in an IPO.
- Nike Inc.(NKE) said third quarter profit rose more than analysts anticipated on sales of new products such as the Air Force 25 and iPod-compatible shoes. The shares rose $1 after-hours to $109.60.
- Palm Inc.(PALM) posted a 61% drop in third quarter profit because of marketing and development spending to stem the loss of customers to Research In Motion’s(RIMM) BlackBerry. The shares rose .25 to $18.00 in after hours trading.
- Crude oil rose $2/bbl. on increased speculation by investment funds that demand will increase.
Wall Street Journal:
- Brian Hunter, the Amaranth Advisors LLC trader whose losses led to the biggest hedge-fund collapse in history, is seeking to raise money for new commodities funds. Hunter formed Solengo Capital and has hired colleagues from Amaranth and previous jobs. The firm, with offices in Calgary and Greenwich, Connecticut, wants to raise “hundreds of millions of dollars” from investors outside the US.
S&P 500 1,434.54 -.03%
DJIA 12,461.14 +.11%
NASDAQ 2,451.74 -.17%
Russell 2000 808.05 +.07%
Wilshire 5000 14,483.72 +.02%
Russell 1000 Growth 565.37 -.11%
Russell 1000 Value 828.54 +.07%
Morgan Stanley Consumer 706.99 +.02%
Morgan Stanley Cyclical 960.62 -.33%
Morgan Stanley Technology 563.86 -1.03%
Transports 4,891.63 -.04%
Utilities 497.31 +.11%
MSCI Emerging Markets 115.96 +.54%
Sentiment/Internals
Total Put/Call .94 -16.07%
NYSE Arms 1.11 +152.62%
Volatility(VIX) 12.93 +6.07%
ISE Sentiment 116.0 +16.0%
Futures Spot Prices
Crude Oil 61.76 +3.61%
Reformulated Gasoline 195.87 +3.22%
Natural Gas 7.33 +2.43%
Heating Oil 171.90 +3.27%
Gold 664.20 +.64%
Base Metals 248.96 +.71%
Copper 307.40 +1.82%
Economy
10-year US Treasury Yield 4.58% +4 basis points
US Dollar 83.06 +.35%
CRB Index 310.91 +1.50%
Leading Sectors
Energy +1.79%
Oil Service +1.60%
Telecom +.62%
Lagging Sectors
Steel -1.30%
Semis -1.50%
Airlines -2.82%
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
AG Edwards:
- Rated (ERTS), (THQI) Buy.
Afternoon/Evening Headlines
Bloomberg:
- Blackstone Group LP, the leveraged buyout firm that has spent $160 billion taking companies private in the past two decades, filed to raise as much as $4 billion in an IPO.
- Nike Inc.(NKE) said third quarter profit rose more than analysts anticipated on sales of new products such as the Air Force 25 and iPod-compatible shoes. The shares rose $1 after-hours to $109.60.
- Palm Inc.(PALM) posted a 61% drop in third quarter profit because of marketing and development spending to stem the loss of customers to Research In Motion’s(RIMM) BlackBerry. The shares rose .25 to $18.00 in after hours trading.
- Crude oil rose $2/bbl. on increased speculation by investment funds that demand will increase.
Wall Street Journal:
- Brian Hunter, the Amaranth Advisors LLC trader whose losses led to the biggest hedge-fund collapse in history, is seeking to raise money for new commodities funds. Hunter formed Solengo Capital and has hired colleagues from Amaranth and previous jobs. The firm, with offices in Calgary and Greenwich, Connecticut, wants to raise “hundreds of millions of dollars” from investors outside the US.
BOTTOM LINE: The Portfolio finished higher today on gains in my Medical longs, Retail longs and Telecom longs. I did not trade in the final hour, thus leaving the Portfolio 100% net long. The tone of the market was modestly positive today as the advance/decline line finished slightly higher, sector performance was mixed and volume was above average. Measures of investor anxiety were above-average into the close. Today's overall market action was bullish considering yesterday’s gains. Many stocks broke meaningfully higher today, building on yesterday's sharp gains. Intuitive Surgical (ISRG), Google Inc.(GOOG), Quanta Services (PWR) and Tractor Supply (TSCO) are three of my longs that surged again. I would buy all three at current levels. The ISE Sentiment Index continues to trade at low levels as retail options traders remain bearish. The ABX Subprime Indicies continue to trend higher from the scare of a couple of weeks ago. So far, this year is turning into one of the better I can remember for stockpickers. Many individual equities are trouncing the major averages. I wouldn't be surprised to see some profit-taking again tomorrow morning on the likely weaker-than-expected existing home sales report due to one of the coldest Februarys in history. A number of the many US stock market bears are pointing to the 30s as a guide for recent technical stock market action. From a technical standpoint, today's DJIA looks much more like 1983 than 1937, in my opinion. Take a look at this long-term DJIA chart. Moreover, the current macro backdrop is far better today than either of those periods. This corresponds with my belief that we experienced an "accelerated" secular bear market from 1998 through 2003. I say "accelerated" because the explosion of hedge funds, massive increase in market participants and much better information flow than during other secular bear periods sped up the cleansing process.
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