Portfolio Manager's Commentary on Investing and Trading in the U.S. Financial Markets
Tuesday, July 24, 2007
Stocks Sharply Lower into Final Hour on Lingering Housing-related Worries
Today's Headlines
Bloomberg:
- Volatility on options for interest-rate swaps may decline as concern eases that losses in subprime mortgage loans and other risky debt will spread, according to RBS Greenwich Capital.
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- Morgan Stanley(MS) says investors should reduce bets on European credit quality deteriorating because prices of credit-default swaps overstate the risk of companies missing debt payments.
- Crude oil fell for a third day on speculation that US refineries are increasing output and that OPEC might pump more.
- Eli Lilly(LLY) won the backing of a
- The US and Iranian ambassadors to
Wall Street Journal:
- Nokia Oyj(NOK) will say today that it has purchased Twango Inc., an online photo- and video-sharing start-up, as the
- Lockheed Martin(LMT) is finding it hard to meet its production schedule for the new “Marine One” helicopter designed to carry US presidents.
- Foreign governments are increasing their investments in US and European companies, prompting concern over a political backlash and rise in prices for speculative assets.
Dow Jones:
- TPG Inc., a private-equity company, has made a bid to buy Ford Motor’s(F) Jaguar and Land Rover units.
NY Post:
- Time Warner’s(TWX) AOL unit plans to acquire the “behavioral targeting” advertising firm Tacoda for $200 million to $300 million.
AP:
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CNBC-TV18:
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Sueddeutsche Zeitung:
- German intelligence authorities are bracing for possible terrorist attacks by members of the al-Qaeda network, citing senior security officials.
Islamic Republic News Agency:
- The Iranian Oil Ministry said OPEC will increase production if required. “If the oil market needs it, OPEC will inject more oil into it,” said Javad Yarjani, head of OPEC affairs at the country’s oil ministry.
Links of Interest
Market Snapshot Commentary
Market Performance Summary
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WSJ Data Center
Top 20 Biz Stories
IBD Breaking News
Movers & Shakers
Upgrades/Downgrades
In Play
NYSE Unusual Volume
NASDAQ Unusual Volume
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Option Dragon
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Intraday Chart/Quote
Dow Jones Hedge Fund Indexes
Monday, July 23, 2007
Tuesday Watch
Late-Night Headlines
Bloomberg:
- BHP Billiton Ltd.(BHP) posted record annual production in eight of its 19 main commodities, setting up for its largest yearly profit.
- Suncor Energy said its oil-sands production is returning to full strength after a 50-day shutdown at a Canadian processing plant.
- French President Nicolas Sarkozy, Deutsche Telecom AG shareholders and American lawyers are laying the groundwork to make Europe the next battleground for US-style class-action lawsuits.
- Newmont Mining Corp.(NEM) needs to rebuild its credibility with investors and may consider takeovers, CEO Richard T. O’Brien said.
- Midwest Air Group’s(MEH) largest investor, hedge fund Octavian Management LLC, renewed its call fro the carrier to “immediately engage” with AirTran Holdings about AirTran’s hostile takeover offer.
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Wall Street Journal:
- Foreign governments, flush with cash and no longer content with the meager returns to be had on safe but low-yielding investments like Treasurys, are becoming increasingly aggressive players on the equity front.
- With states around the country working on bills to force their public pension funds to unload shares of foreign companies doing business in Iran, a coalition of large public funds has begun pressuring companies to reconsider their ties to that nation.
TheStreet.com:
- Huge iPhone Fees Juice Apple
- Gasoline prices fall to 3-month low
MarketWatch.com:
- Managers see M&A activity bidding up stock prices. Individual investors likely to move off sidelines over next three months.
Financial Times:
- Crude prices ‘could be poised for rapid fall’ Crude oil prices fell more than $1/bbl. At one stage yesterday as hedge funds took profits after their rise to near-record levels.
- Baugur, the Icelandic investment group that has bought up much of the UK shopping scene, is turning its attention to the US luxury retail sector, with a $250 million investment in Saks(SKS), the department store chain.
Economic Daily News:
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Australian:
- James Packer’s Publishing & Broadcasting and partners proposed building the tallest tower in the
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Xinhua News Agency:
- Chinese propaganda officials signaled increased scrutiny of the media after the government said a television report showing cardboard being used as an ingredient in steamed buns was faked. The reporter on the story, Zi Beijia, has been arrested and three other Beijing Television employees have been fired over the report, which showed cardboard being used as a substitute for pork.
Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (AKAM), target $68.
- Reiterated Buy on (MRK), target $61.
Night Trading
Asian Indices are +.25% to +.75% on average.
S&P 500 futures -.14%.
NASDAQ 100 futures -.19%.
Morning Preview
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Earnings of Note
Company/EPS Estimate
- (AFL)/.81
- (AKS)/.68
- (AMZN)/.25
- (T)/.67
- (BIIB)/.63
- (BJS)/.56
- (BOW)/-.75
- (BNI)/1.23
- (CDWC)/.98
- (CEC)/.34
- (CTX)/-.06
- (CERN)/.41
- (CAKE)/.31
- (CB)/1.38
- (CME)/3.66
- (CFC)/.91
- (DPZ)/.24
- (LLY)/.82
- (EMC)/.16
- (ENR)/.83
- (ESV)/1.65
- (ILMN)/.13
- (JBLU)/.11
- (KMB)/1.03
- (LRCX)/1.17
- (LM)/1.24
- (LMT)/1.53
- (MCD)/.71
- (NBR)/.81
- (NOC)/1.24
- (PNRA)/.39
- (PEP)/.89
- (RJF)/.53
- (SWK)/1.02
- (TLAB)/.06
- (TIE)/.40
- (UPS)/1.03
- (X)/2.35
- (XTO)/1.13
Upcoming Splits
- (DIOD) 3-for-2
- (GMCR) 3-for-1
Economic Releases
- None of note
Other Potential Market Movers
- The Fed’s Mishkin speaking, Fed’s
Stocks Close Higher on Buyout Activity, Strong Earnings Reports, Falling Energy Prices
Indices
S&P 500 1,541.57 +.49%
DJIA 13,943.42 +.67%
NASDAQ 2,690.58 +.11%
Russell 2000 835.62 -.10%
Wilshire 5000 15,514.96 +.36%
Russell 1000 Growth 617.46 +.48%
Russell 1000 Value 870.43 +.34%
Morgan Stanley Consumer 736.99 +.88%
Morgan Stanley Cyclical 1,110.34 +.04%
Morgan Stanley Technology 654.50 +.19%
Transports 5,367.0 +.13%
Utilities 514.60 +.54%
MSCI Emerging Markets 143.52 +1.54%
Sentiment/Internals
Total Put/Call .79 -35.77%
NYSE Arms .73 -66.14%
Volatility(VIX) 16.81 -.83%
ISE Sentiment 171.0 +29.55%
Futures Spot Prices
Crude Oil 75.06 -.96%
Reformulated Gasoline 210.75 -2.64%
Natural Gas 6.03 -6.4%
Heating Oil 206.0 -1.54%
Gold 682.0 -.39%
Base Metals 268.72 +.57%
Copper 364.90 -1.52%
Economy
10-year US Treasury Yield 4.95% +1 basis point
US Dollar 80.32 +.04%
CRB Index 319.09 -1.65%
Leading Sectors
Oil Service +2.32%
Telecom +1.55%
Restaurants +1.09%
Lagging Sectors
Coal -1.21%
Hospitals -2.23%
Homebuilders -2.28%
Evening Review
Market Performance Summary
WSJ Data Center
Sector Performance
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Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Commentary
After-hours Movers
After-hours Stock Quote
In Play
Afternoon Recommendations
Oppenheimer:
- Rated (ROSG) Buy, target $11.
- Rated (HALO) Buy, target $14.
Afternoon/Evening Headlines
Bloomberg:
- Crude oil fell $.67/bbl. after Reuters reported that OPEC was concerned about high oil prices and their impact on the world economy.
- Corn futures fell in
- Natural gas fell in NY to its lowest closing price since December as a combination of mild temperatures and high inventories served to undercut demand and push down prices.
- Texas Instruments(TXN) reported a 74% drop in second-quarter profit after the sale of a sensors business last year. The shares fell 3.6% in after-hours trading.
- Wal-Mart Stores(WMT) will reduce prices in the
- American Express(AXP) said second-quarter profit climbed 12% as customer spending and merchant fees increased. The stock fell $.97 to $63.69 in after-hours trading.
- NYC apartment prices climbed 16% in the second quarter as the country’s most expensive urban market sidestepped declines in the rest of the country.
- JDA Software(JDAS) reported total revenues of $90.8 million and software revenues of $18.6 million for second quarter 2007. This represents a 75% increase over the $51.8 million in total revenues and an 80% increase over the $10.4 million in software revenues reported for second quarter 2006. The shares soared 13% in after-hours trading.
- Treasury Secretary Paulson said today the
Stocks Surging into Final Hour on Buyout Activity, Falling Energy Prices and Positive Earnings Reports
BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Computer longs, Medical longs and Networking longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is slightly positive today as the advance/decline line is about even, most sectors are rising and volume is above-average. My intraday gauge of investor angst is around average levels. The NYSE reported late last week that short interest on the exchange, from mid-June through mid-July, rose from 12.47 billion shares to 12.95 billion shares, which is yet another all-time high. Moreover, the 3.9% increase leaves NYSE short interest up an astounding 35% since mid-February, the largest five-month percentage jump since at least 1991, when Bloomberg began tracking. This is even more shocking considering the S&P 500 jumped another 7.3% during that period and the DJIA was breaking records on its way to 14,000. It is also noteworthy that odd-lot short sales spiked into Friday's sell-off to levels exceeding those seen during the peak in sub-prime fears in March. This is just more evidence, in my opinion, that the many bears continue to party like it's 2000-2003, despite the S&P 500's 109% gain from that period's lows. NYSE short interest was basically flat from mid-2002 through first quarter 2005, which is what I would expect considering the extraordinary number of new hedge funds created during that period and a large stock rally off the bottom in October 2002. The recent parabolic rise in short interest is stunning, however, and is symptomatic of the current “
Here are the 25 NYSE stocks with the largest percentage increase in their short interest relative to their float from mid-June through mid-July:
1. Beazer Homes (BZH) +18.2%
2. Fortress Investment Group (FIG) +16.5%
3. Hovnanian (HOV) +13.8%
4. Titanium Metals (TIE) +13.8%
5. KBW Incorporated (KBW) +12.7%
6. Talbots (TLB) +11.9%
7. Primus Guaranty (PRS) +11.3%
8. Assured Guaranty (AGO) +11.1%
9.
10. Novastar Financial (NFI) +10.8%
11. Emergency Medical Services (
12. MVC Capital (MVC) +10.0%
13. Citadel Broadcasting (CDL) +9.7%
14. AZZ Incorporated (AZZ) +9.3%
15. General Maritime (GMR) +9.2%
16. Valhi (VHI) +9.2%
17. TriMas (TRS) +8.4%
18. Cal Dive International (DVR) +8.3%
19. Skilled Healthcare Group (SKH) +8.2%
20. Alesco Financial (AFN) +8.0%
21. Grubb & Ellis (GBE) +7.85%
22. Genco Shipping & Trading (GNK) +7.7%
23. RSC Holdings (RRR) +7.6%
24. Best Buy (BBY) +7.5%
25. Meritage Homes (MTH) +7.5%