Thursday, June 30, 2005

Stocks Fall as Global Growth Concerns Intensify

I trimmed existing longs into the afternoon weakness, thus leaving the Portfolio 75% net long.

Today's Headlines

Bloomberg:
- Consumer Confidence in France fell to its lowest on record this month amid surging oil prices and the highest jobless rate since 1999.
- The US dollar is headed for the biggest quarterly advance against the euro since 2001 as the euro region’s political problems intensify and their economies stagnate.
- The Fed will raise interest rates at least three more times this year to keep inflation in check, according to a majority of Wall Street’s biggest bond dealers.
- Bank of America agreed to buy MBNA for about $35 billion, gaining the biggest non-bank credit card issuer.
- OPEC suspended talks to raise crude oil output quotas.
- Crude oil is falling to a two-week low after an Energy Dept. report showed that US imports surged as refineries increased production of gasoline and other fuels.

Wall Street Journal:
- Vodafone Group Plc will team up with Microsoft to let users of Microsoft’s MSN instant-message service exchange messages with people using Vodafone phones.
- Chevron has helped US congressmen to draft and circulate letters urging the Bush administration to examine and possibly block the Chinese bid to acquire Unocal.
- A decrease in May air-cargo traffic from a year earlier illustrates how high oil prices may be crimping economic growth worldwide, citing the International Air Transport Assoc.
- Financing for CNOOC’s bid for Unocal, which includes favorable terms from its government-owned parent, caused waves among rival bidder Chevron and some lawmakers who say CNOOC is getting unfair subsides.
- China’s state-controlled telephone companies may build fewer third-generation wireless networks as the government cuts back construction over cost concerns.
- Shares of AIG have dropped 15% since it emerged in February that the company’s accounting was under investigation, though delayed first-quarter results indicate that the stock might now be a good bet.
- Sling Media’s Slingbox enables users to watch television shows they receive at home in other locations and other devices besides a TV, Walter Mossberg wrote.
- US and Canadian municipalities are turning to wireless technologies to monitor parking spaces, as the old-fashioned, coin-operated mechanical parking meters are being replaced.

NY Times:
- Microsoft has been in talks for two weeks to buy closely held Claria Corp., which makes pop-up ads and software that tracks Web site visitors, for $500 milllion.
- Midwestern cities made up seven of the 10 US cities with the largest population drops between 2000 and 2004.

LA Times:
- Los Angeles, whose rainy season ends at midnight, will have had the second-wettest period since officials began keeping records.

Reuters:
- CNOOC expects Chevron to improve its $16.3 billion cash and stock bid for Unocal before shareholders vote on the matter in August.

Jobless Claims Fall Again, Inflation Decelerates, Spending Slows

- Personal Income for May rose .2% versus estimates of a .3% increase and a .6% gain in April.
- Personal Spending for May was unchanged versus estimates of a .1% increase and a .6% gain in April.
- The PCE Deflator(YoY) for May rose 2.2% versus estimates of a 2.3% gain and a 2.6% increase in April.
- PCE Core(YoY) for May rose 1.6% versus estimates of a 1.7% increase and a downwardly revised 1.5% gain in April.
- Initial Jobless Claims for last week fell to 310K versus estimates of 325K and 316K the prior week.
- Continuing Claims rose to 2600K versus estimates of 2594K and 2596K prior.
- The Chicago Purchasing Manager for June fell to 53.6 versus estimates of 54.0 and a reading of 54.1 in May.

BOTTOM LINE: Blogging will be light from now through the weekend due to a scheduling conflict.

Links of Interest

Market Snapshot
Detailed Market Summary
Market Internals
Economic Commentary
Movers & Shakers
IBD New America
NYSE OrderTrac
I-Watch Sector Overview
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Option Dragon
Real-time Intraday Chart/Quote

Thursday Watch

Late-Night Headlines
Bloomberg:
- Computer Associates Intl. restated results from 2001-2005 after it found contracts that weren't recorded properly.
- Career Education said the US Education Department is reviewing its restated financial results for 2000-2003 and barring campus expansions in the meantime.
- Shares of China Cosco Holdings, the nation's biggest container shipping line, fell as much as 10% on their first day of trade in Hong Kong on concern that excess capacity for sea freight may cut the company's earnings.
- Oil is little changed in NY after falling to a two-week low yesterday when a US government report showed the nation's crude oil stockpile rose.
- South Korean businesses are the most pessimistic they've been in five months on concern a recovery in domestic demand may falter, squeezing profits as higher oil prices and won gains curb exports.

Wall Street Journal:
- Boeing is expected to name 3M CEO James McNerney Jr. as its new CEO tomorrow.

Financial Times:
- CNOOC Ltd. may partner with private equity firms for its proposed takeover of Unocal Corp. to improve its international management expertise.
- US citizens living abroad and foreigners living in the US must report details of overseas financial accounts or risk a minimum fine of $10,000.

Xinhua News Agency:
- Shanghai plans to spend $121 million building a wind farm to boost the city's electricity supply.

South China Morning Post:
- China has no plan to cap rising property prices, particularly in coastal cities, amid calls from urban dwellers.

Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on COH.
- Said aluminum fundamentals deteriorating due to excess capacity from China.

Night Trading
Asian Indices are unch. to +.50% on average.
S&P 500 indicated +.08%.
NASDAQ 100 indicated +.17%.

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
AM/.30
BMET/.42
CAG/.26
STZ/.30
MKC/.30
PLMO/.31
RHAT/.05

Upcoming Splits
FBP 2-for-1
LOGI 2-for-1
JWN 2-for-1
KWK 3-for-2

Economic Releases
8:30 am EST:
- Personal Income for May is estimated to rise .3% versus a .7% gain in April.
- Personal Spending for May is estimated to rise .1% versus a .6% increase in April.
- The PCE Deflator for May is estimated to rise 2.3% versus a 2.7% increase in April.
- Initial Jobless Claims for last week are estimated to rise to 325K versus 314K the prior week.
- Continuing Claims are estimated to fall to 2594K versus 2600K prior.

10:00 am EST:
- The Chicago Purchasing Manager for June is estimated to fall to 54.0 versus a reading of 54.1 in May.
- The Help Wanted Index for May is estimated to rise to 40 versus a reading of 39 in April.

2:15 pm EST:
- FOMC expected to raise Fed Funds Rate 25 basis points to 3.25%.

BOTTOM LINE: Asian indices are mostly higher, boosted by automaker shares in the region after the US dollar rose. I expect US equities to open mixed and rise modestly later in the afternoon. The Portfolio is 100% net long heading into the day.

Wednesday, June 29, 2005

Stocks Finish Modestly Lower Ahead of Fed Announcement

Indices
S&P 500 1,199.85 -.14%
DJIA 10,374.48 -.30%
NASDAQ 2,068.89 -.05%
Russell 2000 642.76 +.20%
DJ Wilshire 5000 11,930.50 -.07%
S&P Barra Growth 572.41 -.36%
S&P Barra Value 623.32 +.07%
Morgan Stanley Consumer 574.12 -.43%
Morgan Stanley Cyclical 722.24 +.04%
Morgan Stanley Technology 475.53 -.25%
Transports 3,513.88 +.95%
Utilities 385.35 -.16%
Put/Call .78 +4.0%
NYSE Arms 1.21 +81.62%
Volatility(VIX) 11.77 +1.64%
ISE Sentiment 211.00 +19.89%
US Dollar 89.15 +.18%
CRB 303.10 -.45%

Futures Spot Prices
Crude Oil 57.11 -.26%
Unleaded Gasoline 158.60 +.09%
Natural Gas 7.09 +.11%
Heating Oil 160.37 +.13%
Gold 438.50 -.02%
Base Metals 122.58 -.75%
Copper 156.05 -.10%
10-year US Treasury Yield 3.98% +.24%

Leading Sectors
Gold & Silver +3.79%
Insurance +1.63%
Networking +1.21%

Lagging Sectors
Foods -.86%
Semis -.90%
Broadcasting -1.19%

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
Goldman Sachs:
- Reiterated Outperform on DNA.

Afternoon/Evening Headlines
Bloomberg:
- UK Prime Minister Tony Blair said in an interview with the AP that coalition forces need to stay in Iraq until the insurgency is defeated.
- Home Depot will put convenience stores selling gasoline and food next to four of its Nashville warehouse stores to increase customer visits.
- Canada will seek to ban bulk sales of patented medicines to the US to prevent shortages that could arise if that country’s government allows citizens to buy Canadian drugs.

BOTTOM LINE: The Portfolio finished slightly lower today on losses in my Internet and Homebuilding longs. I did not trade in the afternoon, thus leaving the Portfolio 100% net long. The tone of the market was slightly negative today as the advance/decline finished nearly unchanged, sector performance was modestly negative and volume was around average. Measures of investor anxiety were mostly higher into the close. Overall, today’s market action was negative. The 5.0% decline in Google (GOOG) over the last two days looks like healthy profit-taking to me. I would look to buy more GOOG around the $280-$290 level.

Stocks Modestly Lower Mid-day as Rates Move Slightly Higher

Indices
S&P 500 1,200.17 -.12%
DJIA 10,377.65 -.27%
NASDAQ 2,068.68 -.06%
Russell 2000 640.86 -.10%
DJ Wilshire 5000 11,926.25 -.13%
S&P Barra Growth 572.34 -.39%
S&P Barra Value 622.87 +.01%
Morgan Stanley Consumer 573.81 -.49%
Morgan Stanley Cyclical 721.50 -.05%
Morgan Stanley Technology 475.17 -.32%
Transports 3,514.29 +.96%
Utilities 385.15 -.21%
Put/Call .78 +4.0%
NYSE Arms 1.04 +56.37%
Volatility(VIX) 11.66 +.60%
ISE Sentiment 220.00 +25.0%
US Dollar 89.04 +.07%
CRB 304.08 -2.36%

Futures Spot Prices
Crude Oil 57.35 -1.41%
Unleaded Gasoline 160.70 -1.10%
Natural Gas 7.12 +.74%
Heating Oil 160.80 -.77%
Gold 439.30 +.37%
Base Metals 122.58 -.75%
Copper 156.20 +.51%
10-year US Treasury Yield 3.98% +1.14%

Leading Sectors
Gold & Silver +3.38%
Insurance +1.44%
Networking +1.08%

Lagging Sectors
Semis -.71%
Homebuilders -.76%
Restaurants -.78%
BOTTOM LINE: The Portfolio is slightly lower mid-day on losses in my Internet and Homebuilding longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is slightly negative as the advance/decline line is about even, most sectors are lower and volume is about average. Measures of investor anxiety are mixed. Today’s overall market action is negative, considering another decline in energy prices and better economic data. I expect the Fed to raise rates 25 basis points tomorrow. As well, they will likely restate that policy is "accommodative" and that accommodation can be removed at a pace that is likely to be "measured." However, I would expect to see some subtle changes in language acknowledging that risks to growth may have increased due to high energy prices and slowing global growth. Considering tomorrow is the last day of the quarter, stocks will likely rise as Fed uncertainty is temporarily lifted. I expect US stocks to trade modestly higher into the close on short-covering, declining energy prices and quarter-end window-dressing.

Today's Headlines

Bloomberg:
- Calpine agreed to sell its US oil and natural-gas properties for $1.05 billion.
- Mittal Steel, the world’s largest steelmaker, plans to cut production at plants worldwide by an amount equal to more than 5% of capacity as it joins rivals bidding to shore up plunging prices for the metal.
- A US Senate panel today voted in favor of the Central American Free Trade Agreement, clearing the way for the full Senate to vote on it as early as this week.
- Credit Suisse Group, Switzerland’s second-biggest bank by assets, will drop the 73-year-old First Boston moniker from its investment banking division.
- Jarden Corp., which makes Oster and Mr. Coffee appliances, agreed to buy Holmes Group for about $625.9 million to add brands such as Crock-Pot and Bionaire.
- Crude oil is falling, bringing its two-day drop to more than $3/bbl. in NY, as a government report showed US oil and fuel inventories rose.

Wall Street Journal:
- Deutsche Bank AG’s Deutsche Asset Management may say today it will buy a group of warehouses and other industrial properties totaling about 2.1 million square meters in 18 US markets for about $1.3 billion.
- Some members of the US Congress are demanding tariffs on Chinese goods unless China revalues the yuan, but either action could disrupt the US economy and global financial markets.

NY Times:
- Millennium Pharmaceuticals Chairman, President and CEO Levin is stepping down and will be succeeded by Deborah Dunsire, who heads Novartis AG’s North American cancer unit.
- Chinese companies are attempting to acquire brands that are famous worldwide in response to a government edict for companies to increase worldwide recognition.

Detroit News:
- DaimlerChrysler’s Chrysler unit told car dealers yesterday that it may offer customers an employee-discount pricing program as early as July 6 if General Motors extends a similar promotion.

Financial Times:
- The Chicago Merc approached the Chicago Board of Trade about a merger that would create the world’s largest futures exchange.

Deutsche Presse-Agentur:
- The International Monetary Fund has cut its forecast for economic growth in Germany next year to 1.3% from its previous forecast of 1.8%.

El Watan:
- Algeria plans to double petroleum refining capacity by 2010.

Hong Kong Commercial Broadcasting:
- China plans to start filling its strategic stockpile of crude oil with locally produced fuel from the end of this year. China won’t purchase oil from overseas for its strategic reserves because of high international oil prices, citing Zhang Guobao, vice chairman of the National Development and Reform Commission.

GDP Exceeds Estimates, Oil Inventories Rising

- Final 1Q GDP rose 3.8% versus estimates of 3.7% and a prior estimate of 3.5%.
- Final 1Q Personal Consumption rose 3.6% versus estimates of 3.6% and a prior estimate of 3.6%.
- Final 1Q GDP Price Index rose 2.9% versus estimates of a 3.2% increase and a prior estimate of 3.2%.
- Summary of Weekly Petroleum Data for the Week Ending June 24, 2005.
- The EIA reported that crude inventories rose 1.1M barrels vs. estimates of a 1.4M barrel fall. Gasoline inventories rose 310K barrels vs. estimates of a 190K barrel decline. Distillate inventories rose 1.64M barrels vs. estimates of a 1.5M barrel rise.


BOTTOM LINE: The US economy grew more than originally thought in the first three months of the year as the trade deficit narrowed and home construction increased more than initially estimated. Without adjusting for inflation, GDP rose 6.7%, the strongest in a year. The Core PCE Price Index rose 2.0%, substantially below recent measures of income growth. Current-production cash flow, or the internal funds available to companies for investment, increased 8.4% in the first quarter, the biggest rise since the second quarter of 1978, Bloomberg reported. The pace of first-quarter growth was faster than the 3.0% average of the last 3 decades. The last time growth exceeded 3% for eight or more quarters was from January-March 1983 to the first three months of 1986, according to Bloomberg. The US economy remains the strongest of all major industrialized nations. Growth this year is forecast at 3.5% versus projections of 1.4% growth in Europe. This would be the 13th year out of 14 US growth has exceeded that of Europe.

Crude oil is down modestly on the energy inventory news. According to the Dept. of Energy, crude supply is up 7.76% over the last year, while API implied crude demand has declined 5.65% during this same period. I would expect further declines in oil later today.

Links of Interest

Market Snapshot
Detailed Market Summary
Market Internals
Economic Commentary
Movers & Shakers
IBD New America
NYSE OrderTrac
I-Watch Sector Overview
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Option Dragon
Real-time Intraday Chart/Quote

Wednesday Watch

Late-Night Headlines
Bloomberg:
- Johnson & Johnson's Concerta attention-deficit disorder drug users have experienced hallucinations, psychotic behavior, suicidal thoughts and heart complications such as high blood pressure, the FDA said.
- The Australian dollar fell to its lowest in two weeks on a plunge in the price of commodities, which account for almost 60% of the nation's exports.
- Japan's industrial production fell in May as technology companies pared inventories and demand from China and the US slowed.
- The National Academy of Sciences has decided to publish a study that details how terrorists could contaminate the US milk supply with botulism, after the US government warned the study was a "road map for terrorists."

DigiTimes:
- South Korean electronics overtook those from Taiwan in China's market for the first time in 10 years, citing World Trade Atlas data.

Financial Times:
- European finance ministers in the 12 countries sharing the euro should enter a "dialogue" with the European Central Bank to define common economic government to tackle stagnate growth and high unemployment, citing French Prime Minister Dominique de Villepin.
- Labor market reforms are essential in the context of high unemployment rates in France and Germany that show no sign of declining this year, citing the OECD.

AFP:
- US Defense Secretary Donald Rumsfeld and his Indian counterpart Pranab Mukherjee signed a 10-year defense agreement that includes joint production of weapons and cooperation in missile defense.

Hong Kong Economic Journal:
- CNOOC Ltd. is expected to complete talks with Unocal Corp. within a week in its bid to buy Unocal for $18.5 billion.

Australian Financial Review:
- Microsoft CEO Ballmer said the company has "great" growth prospects, though sales will no longer increase by 20% a year.

Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on BAC and AIG.

Night Trading
Asian Indices are -.25% to +.50% on average.
S&P 500 indicated -.04%.
NASDAQ 100 indicated unch.

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
GIS/.65
MON/1.01
ORCL/.23

Upcoming Splits
None of note

Economic Releases
8:30 am EST:
- Final 1Q GDP is estimated to rise to 3.7% versus a prior estimate of 3.5%.
- Final 1Q Personal Consumption is estimated to rise 3.2% versus a prior estimate of 3.6%.
- Final 1Q GDP Price Index is estimated to rise 3.2% versus a prior estimate of 3.2%.

10:30 am EST:
- Summary of weekly energy inventory data.

BOTTOM LINE: Asian indices are mostly higher, led by technology and automaker shares in the region. I expect US equities to open modestly higher and build on gains later in the afternoon. The Portfolio is 100% net long heading into the day.

Tuesday, June 28, 2005

Stocks Close Higher as Commodity Prices Fall the Most in 14 Years

Indices
S&P 500 1,201.57 +.91%
DJIA 10,405.63 +1.12%
NASDAQ 2,069.89 +1.21%
Russell 2000 641.48 +2.10%
DJ Wilshire 5000 11,939.42 +.98%
S&P Barra Growth 574.50 +1.12%
S&P Barra Value 622.88 +.71%
Morgan Stanley Consumer 576.61 +1.23%
Morgan Stanley Cyclical 721.94 +1.89%
Morgan Stanley Technology 476.70 +.68%
Transports 3,480.91 +2.51%
Utilities 385.95 +.98%
Put/Call .75 -21.05%
NYSE Arms .67 -47.59%
Volatility(VIX) 11.58 -7.51%
ISE Sentiment 176.00 +37.50%
US Dollar 88.99 +.61%
CRB 304.48 -2.21%

Futures Spot Prices
Crude Oil 58.30 +.17%
Unleaded Gasoline 162.60 +.07%
Natural Gas 7.07 +.03%
Heating Oil 162.50 +.28%
Gold 437.50 -.05%
Base Metals 123.51 -.64%
Copper 154.80 -.39%
10-year US Treasury Yield 3.96% +1.66%

Leading Sectors
Airlines +6.30%
Steel +3.05%
Defense +2.64%

Lagging Sectors
Gold & Silver -.62%
Energy -1.69%
Oil Service -2.10%

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
Goldman Sachs:
- Reiterated Outperform on PAYX and ADP.
- Reiterated Underperform on LEA.

Afternoon/Evening Headlines
Bloomberg:
- American International Group former CEO Maurice “Hank” Greenberg is reversing the transfer of 41 million shares of company stock to his wife.

Financial Times:
- China has pledged to improve accounting standards for its companies, bringing them closer to international practices, citing Wang Jun, assistant minister of finance.
- Richard Scrushy, the former chief executive of HealthSouth, was acquitted of directing a $2.7 billion accounting fraud that nearly bankrupted the company he built into the largest US operator of rehabilitation hospitals.
- Apple Computer cut prices on its iPod digital music players, added color screens to some models and began supporting downloadable radio programs to boost sales of the devices.
- Crude oil fell more than $2/bbl., the biggest drop in eight weeks, on speculation fuel supplies increased.
- Verizon Wireless will unveil a music-playing phone and online music service to compete with Apple Computer’s iTunes store and planned phone with Motorola.
- The dollar rallied against the euro for the first day in three as reports showed US consumer confidence at a three-year high while optimism dwindles in Germany and Italy.
- Commodity prices plunged by the most in 14 years, led by declines in crude oil, hog, corn and soybean futures.
- AIG, reporting its first results since a $3.9 billion earnings restatement, said quarterly profit rose 44% on Asian life insurance businesses and gains from derivatives.

BOTTOM LINE: The Portfolio finished substantially higher on gains in my Homebuilding, Retail and Technology longs. I did not trade in the afternoon, thus leaving the Portfolio 100% net long. The tone of the market was positive today as the advance/decline finished substantially higher, almost every sector rose and volume was below average. Measures of investor anxiety were lower into the close. Overall, today’s market action was positive. I would like to see better volume on a follow-through from today’s gains. I expect tomorrow's final revision to 1Q GDP to come in around expectations. I also expect to see a greater build in distillate inventories than expectations, which should lead to further declines in the price of crude.

Stocks Higher Mid-day on Oil Decline and Strong Consumer Confidence Reading

Indices
S&P 500 1,199.49 +.74%
DJIA 10,372.87 +.81%
NASDAQ 2,065.79 +1.02%
Russell 2000 637.70 +1.49%
DJ Wilshire 5000 11,916.25 +.79%
S&P Barra Growth 573.40 +.93%
S&P Barra Value 621.98 +.57%
Morgan Stanley Consumer 576.07 +1.14%
Morgan Stanley Cyclical 719.68 +1.57%
Morgan Stanley Technology 477.02 +.74%
Transports 3,457.92 +1.83%
Utilities 384.84 +.70%
Put/Call .81 -14.74%
NYSE Arms .67 -47.29%
Volatility(VIX) 11.77 -5.99%
ISE Sentiment 200.00 +56.25%
US Dollar 89.00 +.63%
CRB 304.08 -2.36%

Futures Spot Prices
Crude Oil 58.10 -4.03%
Unleaded Gasoline 162.10 -3.22%
Natural Gas 7.02 -1.58%
Heating Oil 161.50 -3.65%
Gold 437.70 -.91%
Base Metals 123.51 -.64%
Copper 155.40 -.58%
10-year US Treasury Yield 3.96% +1.51%

Leading Sectors
Airlines +4.68%
Steel +2.68%
Homebuilders +2.20%

Lagging Sectors
Gold & Silver -.97%
Energy -1.50%
Oil Service -1.78%
BOTTOM LINE: The Portfolio is substantially higher mid-day on gains in my Internet, Homebuilding, Retail and Networking longs. I covered my Steel shorts this morning, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is substantially higher, almost every sector is higher and volume is below average. Measures of investor anxiety are lower. Today’s overall market action is positive. The Johnson Redbook Same-store-sales Index rose 3.8% year over year last week vs. a 3.7% rise the prior week. This is also up from a 1.5% gain in late April and the eighth week in a row the index has exceeded 3%. Oil is breaking down through a relentless uptrend that had been in place since mid-May. It has a ways to go before longer-term trends break, but it's a start. I expect US stocks to trade modestly higher into the close on short-covering, declining energy prices and quarter-end window-dressing.

Today's Headlines

Bloomberg:
- FedEx CEO Smith told CNBC that record-high crude oil prices will slow the “economy down to some degree.”
- AMD, the second-largest maker of chips for personal computers, said it sued larger competitor Intel, claiming it forced away dozens of potential clients.
- Citigroup hired more than 30 people including former Enron executive Vincent Kaminski at its Houston energy-trading unit to rebuild a business once offered for sale.
- PetroChina became Asia’s largest company by market value, overtaking Toyota Motor, as the Chinese oil producers’ shares rose 3.5% to a record on higher oil prices.
- Chinese automaker Chery Automobile may join Asian and European companies with US plants to compete with GM and Ford on their home turf, an entrepreneur planning to bring Chery cars to the US said.
- The Chicago Board of Trade, the second-biggest US futures market, has received “expressions of interest” in a business combination from one or more companies, as it prepares an IPO.
- US Treasury notes fell the most in more than two weeks after the Conference Board’s measure of June consumer confidence rose more than forecast.
- The US dollar is rallying against the euro as reports showed US consumer confidence at a three-year high while optimism dwindles in Germany and Italy.
- The US Senate approved legislation to revamp the nation’s energy policy by fostering more efficient use of energy and the development of renewable fuels such as ethanol.
- Crude oil is falling more than $1/bbl. on the Senate’s approval and speculation US refiners lifted output of transportation fuels, easing concern that supplies could be strained during the summer travel season.

Wall Street Journal:
- Japan’s new assertiveness has intensified the Asian nation’s rivalry with China as a younger generation of politicians calls for a stronger response to China’s nationalistic initiatives.
- US federal prosecutors have obtained the cooperation of a former stockbroker in their investigation of the way law firm Milberg Weiss Bershad & Schulman allegedly recruited plaintiffs for class-action law suits.
- China has banned distribution of the Far Eastern Economic Review’s June issue because of an essay about a historical account of the brutality of Chinese communist leader Mao Zedong.
- The US underestimates the state of its economy because of a lack of understanding about its strengths and weaknesses, David Malpass, chief economist at Bear Stearns wrote.

Washington Post:
- President Bush’s administration has taken the side of public schools in a dispute over special-education student rights and school funding priorities that the US Supreme Court will review in its next term.

Maariv:
- Direct foreign investment in Israel will probably more than triple this year to $6 billion.

Handelsblatt:
- Ninety-seven percent of German executives expect Chancellor Gerhard Schroeder to lose a planned early election this year, citing a poll by Psephos GmbH.

Les Echos:
- Goldman Sachs’ co-head of European investment banking, Yoel Zaoui, forecast that 2005 may be the best year for mergers and acquisitions in Europe since 2000.

Xinhua News Agency:
- China has more than 100 million Internet users, second only to the US.

Consumer Confidence at 3-Year High

- Consumer Confidence for June rose to 105.8 versus estimates of 104.0 and an upwardly revised reading of 103.1 in May.

BOTTOM LINE: US consumer confidence rose to a three-year high in June, spurred by an improving labor market and rising incomes. The percentage of consumers expecting their incomes to rise was the highest this year even as gas prices rose. Incomes rose 7% last month from a year earlier, more than twice the rate of inflation. The present situations component of the index increased to 120.7, the highest since September 2001. The expectations component of the index rose to 95.8 from 93.4. The percentage of consumers who expected their incomes to increase in the next six months increased to 19.4%, the highest this year. The percentage of consumers who saw jobs as “hard to get” fell to 22.6% from 24.1%. Overall, a very positive report considering energy prices are near record highs.

Links of Interest

Market Snapshot
Detailed Market Summary
Market Internals
Economic Commentary
Movers & Shakers
IBD New America
NYSE OrderTrac
I-Watch Sector Overview
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Option Dragon
Real-time Intraday Chart/Quote

Monday, June 27, 2005

Tuesday Watch

Late-Night Headlines
Bloomberg:
- John Walton, son of Wal-Mart Stores founder Sam Walton, died in a plane crash near Jackson Hole Airport in Wyoming today.
- CNOOC Ltd., China's third-biggest oil company, will borrow $7 billion from its state-owned parents at below-market interest rates to help finance an $18.5 billion bid for Unocal Corp.

Xinhua News:
- Flooding in southern China caused by heavy rainfall has killed 607 people and caused $3.3 billion in damage this year. Some 164 people remain missing.

Beijing Times:
- Citigroup inc. scrapped talks with China Construction Bank to take a strategic stake in the Chinese lender.

Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on BAC and ENH.
- Reiterated Underperform on HBAN, FHN and NFS.
- Downgraded STX to Underperform.

Night Trading
Asian Indices are -.25% to +.50% on average.
S&P 500 indicated +.13%.
NASDAQ 100 indicated +.10%.

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
APOL/.74
BE/.00
DRL/.40
EMMS/.15

Upcoming Splits
None of note

Economic Releases
10:00 am:
- Consumer Confidence for June is estimated to rise to 104.0 versus 102.2 in May.

BOTTOM LINE: Asian indices are mostly higher as oil prices pulled back from early session highs. Consumer Confidence will likely come in modestly below expectations. I expect US equities to open mixed and move modestly higher in the afternoon. The Portfolio is 75% net long heading into the day.

Stocks Finish Modestly Lower as Oil Closes Above $60

Indices
S&P 500 1,190.69 -.07%
DJIA 10,290.78 -.07%
NASDAQ 2,045.20 -.39%
Russell 2000 628.31 -.33%
DJ Wilshire 5000 11,822.97 -.06%
S&P Barra Growth 568.12 +.03%
S&P Barra Value 618.48 -.18%
Morgan Stanley Consumer 569.58 -.16%
Morgan Stanley Cyclical 708.53 -.53%
Morgan Stanley Technology 473.50 -.61%
Transports 3,395.84 -.45%
Utilities 382.19 +.40%
Put/Call .95 +6.74%
NYSE Arms 1.27 -8.70%
Volatility(VIX) 12.52 +2.79%
ISE Sentiment 128.00 -48.18%
US Dollar 88.45 -.37%
CRB 311.37 -.28%

Futures Spot Prices
Crude Oil 60.29 -.41%
Unleaded Gasoline 167.30 -.12%
Natural Gas 7.12 -.18%
Heating Oil 167.50 -.07%
Gold 441.20 -.11%
Base Metals 123.51 -.64%
Copper 156.20 -.06%
10-year US Treasury Yield 3.90% -.39%

Leading Sectors
Energy +1.51%
Homebuilders +1.50%
Oil Service +1.32%

Lagging Sectors
Semis -1.32%
Networking –1.51%
Airlines -3.20%

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
Goldman Sachs:
- None of note

Banc of America:
- Upgraded RYL to Buy.

Afternoon/Evening Headlines
Bloomberg:
- Women who become sterilized form cancer treatments may still be able to get pregnant if their ovary tissues are frozen before high-dose chemotherapy, a new study suggests.
- Carlyle Group, a US-based private investor with $30 billion under management, plans to raise $1 billion in the next few months for a new Asia investment fund, said Rajeev Gupta, who will head the group’s India unit.
- Wyeth raised its estimate for 2005 earnings to $2.80 to $2.90 a share, citing revenue growth, slower-than-expected cost increases and favorable tax developments.
- Milberg Weiss Bershad & Schulman LLP, a law firm that specializes in shareholder fraud lawsuits, said it never made illegal payments to a client, a retired California lawyer, who was charged by a grand jury last week.
- IBM said the SEC started an informal probe of its disclosure about first-quarter earnings and stock-option expenses.
- Google’s shares rose above $300 after less than a year as a public company, cementing the most-used Internet search engine’s status as the world’s largest media company by market value.
- Crude oil closed above $60 a barrel for the first time on concern that Iran’s new president may limit foreign investment in the nation’s oil industry.

BOTTOM LINE: The Portfolio finished modestly higher on gains in my Homebuilding longs and Steel shorts. I did not trade in the afternoon, thus leaving the Portfolio 75% net long. The tone of the market was modestly negative today as the advance/decline finished lower, most sectors fell and volume was light. Measures of investor anxiety were mostly higher into the close. Overall, today’s market action was mildly negative. I expect Consumer Confidence to come in slightly below estimates tomorrow. Google hit another all-time high today and remains my largest long position.

Stocks Modestly Lower Mid-day as Oil Trades Above $60

Indices
S&P 500 1,189.90 -.14%
DJIA 10,272.06 -.25%
NASDAQ 2,041.91 -.55%
Russell 2000 626.44 -.63%
DJ Wilshire 5000 11,810.44 -.16%
S&P Barra Growth 567.77 -.03%
S&P Barra Value 618.11 -.24%
Morgan Stanley Consumer 569.56 -.14%
Morgan Stanley Cyclical 708.65 -.51%
Morgan Stanley Technology 472.22 -.88%
Transports 3,386.49 -.73%
Utilities 382.53 +.48%
Put/Call 1.01 +13.48%
NYSE Arms 1.22 -12.0%
Volatility(VIX) 12.68 +4.11%
ISE Sentiment 128.00 -48.18%
US Dollar 88.44 -.38%
CRB 311.85 -.12%

Futures Spot Prices
Crude Oil 60.65 +1.35%
Unleaded Gasoline 167.95 +1.44%
Natural Gas 7.18 -2.45%
Heating Oil 168.00 +1.79%
Gold 441.80 -.05%
Base Metals 123.51 -.64%
Copper 156.30 +.81%
10-year US Treasury Yield 3.89% -.54%

Leading Sectors
Energy +1.47%
Homebuilding +1.40%
Oil Service +1.12%

Lagging Sectors
Networking -1.51%
Semis -1.56%
Airlines -2.81%
BOTTOM LINE: The Portfolio is slightly lower mid-day on losses in my Internet and Semiconductor longs. I have not traded today, thus leaving the Portfolio 75% net long. The tone of the market is negative as the advance/decline line is lower, most sectors are lower and volume is light. Measures of investor anxiety are mostly higher. Today’s overall market action is modestly negative. The consumer discretionary industry saw the greatest amount of net insider selling in the S&P 500 last week. Insiders sold $110,306,445 worth of stock and made no purchases. The energy industry, which led insider selling the prior week, saw no purchases or sales. I expect US stocks to trade mixed-to-higher into the close on short-covering and quarter-end window-dressing.

Today's Headlines

Bloomberg:
- Ten Commandments displays designed for two Kentucky courthouses are unconstitutional, the US Supreme Court ruled in a high-profile church-state clash.
- The US Supreme Court bolstered the entertainment industry’s anti-piracy campaign, saying Grokster Ltd. and other Internet file-sharing networks may bear responsibility when users illegally download music and films.
- The euro rose the most in more than a week against the dollar and yen after European Central Bank officials damped speculation they are considering a reduction in interest rates.
- Crude oil touched a record for a third straight day on concern that Iran’s new president may limit foreign investment in the nation’s oil industry.
- President Bush said the US and its allies view Iran’s pursuit of nuclear weapons “unacceptable.”

Wall Street Journal:
- The US Housing and Urban is planning a review of closing costs for home mortgages in a bid to better define them and reduce their costs for homebuyers.
- US federal prosecutors have sent subpoenas to more than a dozen insurers and re-insurers that have entered into “finite-risk” and other non-traditional transactions with units of Warren Buffett’s Berkshire Hathaway.

NY Times:
- Viacom’s MTV Networks will promote Midway Games video games in advertising and programming in a partnership expected to be announced today.
- SBC Communications delayed plans to sell television programming over high-speed lines by six months because of problems with installation.

NY Daily News:
- NY’s murder rate may fall below 500 this year, which would be the lowest since 1991.

San Francisco Chronicle:
- Ethanol, a clean-burning fuel produced by corn and sugarcane, may require as much as six times as much energy to produce as it gives off, citing a study in the journal Critical Reviews in Plant Sciences.

Financial News:
- Blackstone Group LP may seek to raise an unprecedented $12.5 billion for its latest buyout fund, topping the record $8.5 billion raised by Goldman Sachs Group.

Washington Post:
- Employees of suppliers to Wal-Mart Stores are moving near the company’s northwest Arkansas headquarters, gentrifying the area and increasing the region’s average income.

Reuters:
- Cingular Wireless LLC, the biggest US cellular phone service, may sell a Motorola handset that can download and play songs from Apple Computer’s iTunes music service.

Financial Times:
- Wal-Mart Stores will start a new marketing push for George clothing, the brand the US-based discount-store chain acquired withy its 1999 purchase of Britain’s Asda sotres.

Economic Releases

None of note

Links of Interest

Market Snapshot
Detailed Market Summary
Market Internals
Economic Commentary
Movers & Shakers
IBD New America
NYSE OrderTrac
I-Watch Sector Overview
NYSE Unusual Volume
NASDAQ Unusual Volume
Hot Spots
NASDAQ 100 Heatmap
DJIA Quick Charts
Chart Toppers
Option Dragon
Real-time Intraday Chart/Quote

Monday Watch

Weekend Headlines
Bloomberg:
- China said it opposes anti-dumping investigations by the European Union into increased Chinese show imports, accusing its trading partner of distorting trade figures and misleading the public.
- China's central bank Governor Zhou Ziaochuan said it's too soon to drop the decade-old yuan peg and that he has no plans to discuss the currency's link to the US dollar at a weekend meeting of the world's central bankers in Basel, Switzerland.
- Russian President Putin urged US executives from companies including Citigroup and Intel to invest more in Russian, after the breakup of OAO Yukos undermined investor confidence.
- Finance ministers from the European Union and Asia called on OPEC to boost oil production, saying "high and volatile" crude costs pose a threat to global economic growth.
- The US dollar is headed for its biggest quarterly advance since Sept. 2000 and may extend its rally, according to a Bloomberg News survey.
- International Paper may sell its $900 million stake in New Zealand forester Carter Holt Harvey, ending a 14-year investment as it seeks better returns in markets such as China.
- Crude oil is rising to another record in NY after Iran, OPEC's second-largest producer, elected a president who promised to pursue the country's nuclear power program, increasing tension with the US.

Wall Street Journal:
- US Congress members signed a letter asking President Bush to review CNOOC's $18.5 billion unsolicited bid for Unocal.

Barron's:
- A global economic slowdown will help counter inflationary pressures and increase the possibility of a prolonged expansion, said Nancy Lazar, an economist at International Strategy & Investment Group.
- The US Fed may raise the fed-funds rate another two or three times, to 3.75% or 4%, by year-end, citing economists.

New York Times:
- Morgan Stanley former President John Mack has told the board of the company he wants two former executives, Vikram Pandit and Joseph Perella, to return with him if he takes up the post of CEO.
- The city of Philadelphia's public schools will require all students entering high school this year to take a course in African-American history to graduate, making it the first major US city with such a requirement.
- Chevron Vice Chairman Robertson called CNOOC's $18.5 billion offer for Unocal unfair because Chevron was competing with the Chinese government, not another commercial company, for oil producer Unocal.
- Chinese bids for US companies may benefit the US economy by keeping domestic workers employed longer than they might have been otherwise.

Crain's New York Business:
- NY companies are increasingly offering insurance and other benefits to their gay and lesbian employees' live-in partners.

Crain's Chicago Business:
- Chicago's downtown has more than 26 million square feet of vacant office space, making it one of the weakest markets in the nation.

Washington Post:
- US colleges are competing to become more energy efficient and cut carbon dioxide emissions amid rising natural gas costs and student environmental activism.
- The internet has become more vulnerable to hackers and other problems, and those who repair glitches say the situation is getting worse.

Folha de S. Paulo:
- Google plans to open a Brazilian unit this year, according to Sergey Brin, a company founder and its technology chief.

Financial Times:
- Demand for shares in PartyGaming Plc's IPO is triple the amount available in the online poker operator.
- The victory of Mahmoud Ahmadinejad in Iran's presidential election on June 24 may jeopardize the country's relations with the European Union.
- Wal-Mart Stores plans to expand in central and eastern Europe, with particular emphasis on Poland, Hungary and Russia.
- Merrill Lynch says the growth of demand in the US for spirits may be a short-lived fashion rather than a structural change.

AFP:
- OPEC ministers have started talks to discuss ways of lowering oil prices that climbed to $60 a barrel this week, citing OPEC's president.

Nihon Keizai:
- Nissan Motor and Toyota Motor, Japan's two biggest automakers, will spend billions of dollars revamping their US dealerships.

China Daily:
- China may remove taxes on vehicles that emit low levels or zero exhaust emissions to cut pollution and oil consumption.

Weekend Recommendations
Bulls and Bears:
- Had guests that were positive on BAC, MMC, AMR, mixed on UNH, NFG, AIG, VZ, IGT and negative on DIS, AA.

Forbes on Fox:
- Had guests that were positive on PSUN and mixed on DNA, AGN, EXEL, ISSX.

Cashin' In:
- Had guests that were positive on IGR, THO, RNT, SO and negative on VLCCF, NAT.

Cavuto on Business:
- Had guests that were positive on EFX, SYMC, KRB and C.

Barron's:
- Had positive comments on DOW, MNCP and HEW.
- Had negative comments on AAPL.

Goldman Sachs:
- Reiterated Outperform on MO.

Night Trading
Asian indices are -1.0% to unch. on average.
S&P 500 indicated -.05%.
NASDAQ 100 indicated -.07%.

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
CYBX/-.32
NKE/1.27
PAYX/.24
SONC/.36
WAG/.38

Upcoming Splits
CTR 3-for-2

Economic Releases
None of note

BOTTOM LINE: Asian Indices are mostly lower on worries over slowing growth in the region. I expect US stocks to open modestly lower on another rise in energy prices. However, stocks may rise later in the day on short-covering and quarter-end window dressing. The Portfolio is 75% net long heading into the week.

Sunday, June 26, 2005

Weekly Outlook

There are a few important economic reports and several significant corporate earnings reports scheduled for release this week.

Economic reports for the week include:

Mon. - None of note
Tues. - Consumer Confidence
Wed. - Final 1Q GDP, Final 1Q Personal Consumption, Final 1Q GDP Price Index
Thur. - Personal Income, Personal Spending, PCE Deflator, Initial Jobless Claims, Chicago Purchasing Manager, Help Wanted, FOMC Rate Decision
Fri. - Univ. of Mich. Consumer Confidence

Some of the more noteworthy companies that release quarterly earnings this week are:

Mon. - Cyberonics Inc.(CYBX), Nike Inc.(NKE), Walgreen Co.(WAG), Paychex Inc.(PAYX), Sonic Corp.(SONC)
Tues. - Apollo Group(APOL), BearingPoint(BE), BMC Software(BMC), Doral Financial(DRL), Emmis Communications(EMMS)
Wed. - General Mills(GIS), Monsanto(MON), Oracle Corp.(ORCL)
Thur. - American Greetings(AM), Biomet(BMET), ConAgra Foods(CAG), Constellation Brands(STZ), PalmOne(PLMO), Red Hat(RHAT)
Fri. - None of note

Other events that have market-moving potential this week include:

Mon. - Wachovia Equity Conference
Tue. - Banc of America Utilities & Gas Conference, Wachovia Equity Conference, Bear Stearns Biotech Conference
Wed. - Morgan Stanley Business and Professional Conference, Wachovia Equity Conference
Thur. - Wachovia Equity Conference, Morgan Stanley Business and Professional Conference
Fri. - F, DCX, GM Sales Conference Call

BOTTOM LINE: I expect US stocks to finish the week modestly higher. End-of-the-quarter window dressing, an end to Fed speculation and better economic data should spur stock gains next week. A reversal in oil would obviously help, as well. US stocks will likely remain mixed over the next few weeks as earnings pre-announcements come in. A stronger dollar and weakening economic conditions in Europe may adversely affect US companies with significant exposure to the region. While the current level of energy prices is having minimal direct impact on US consumer spending thus far, it is affecting the already weakened economies of other nations to a much greater degree. With China's economy becoming increasingly susceptible to a "hard-landing" and Europe on the verge of negative growth, the odds of a synchronized global slowdown are rising. I continue to believe energy prices will decline precipitously during the second half of the year as global demand slows more than most anticipate. This should have a very positive effect on US stock prices. As well, low interest rates, lower inflation, a modestly improving labor market, a flight to US assets, a strong but slowing housing market, reasonable valuations and a stable dollar should help boost equities during this time period. My trading indicators are now giving neutral signals and the Portfolio is 75% net long heading into the week.

Saturday, June 25, 2005

Economic Week in Review

ECRI Weekly Leading Index 133.40 -.52%

Leading Indicators for May fell .5% versus estimates of a .3% decrease and an unchanged reading in April. The index of leading economic indicators fell for the fourth month in five, pulled down by a flattening of the yield curve. The University of Michigan’s Consumer Confidence Index fell in May which also contributed to the overall decline, however it has since rebounded. The Conference Board has stated that they believe a six-moth annualized decline of 3.5% or more would suggest imminent risk of recession. However, the six-moth annualized decline in May was 2.2%. "This is the fifth consecutive month of flat or down LEI numbers and this last happened ahead of the 1995 soft landing," said David Rosenberg, Chief North American Economist at Merrill Lynch. "The June LEI will rise, thanks to higher stock prices and consumer sentiment," said Ian Sheperdson, chief US economist at High Frequency Economics.

Initial Jobless Claims for last week fell to 314K versus estimates of 330K and 334K the prior week. Continuing Claims fell to 2600K versus estimates of 2600K and 2638K prior. The number of US workers filing first-time claims for jobless benefits fell more than expected as companies retained more of the productive workers who have led the economic recovery. The four-week moving average, a less volatile measure, fell 2,500 to 333,000, Bloomberg reported. "Growth is picking up, business conditions are improving and fewer companies are looking to trim staff at this point in the recovery," said Wesley Beal, chief US economist at IDEAglobal.com. "This report signals there's a good chance we'll see stronger employment growth in June." The four-week moving average of continuing claims fell to 2.603M from 2.596M, Bloomberg reported. "In the second half of an expansion, companies typically hold on to workers more closely as productivity gains slow and the pool of unemployed workers diminishes," said Michael Englund, chief economist at Action Economics. The insured unemployment rate, which tracks closely with the US unemployment rate, fell to 2.0% from 2.1% the week before last.

Existing Home Sales for May fell to 7.13M versus estimates of 7.15M and 7.18M in April. US sales of previously owned homes fell in May to the second-highest level on record, as low borrowing costs and rising incomes fueled demand and pushed prices to an all-time high, Bloomberg said. The median home sales price increased to $207,000 from $205,000 and is up 12.5% over the last 12 months. The supply of homes available for sale, another gauge of housing demand, rose to 4.3 months' worth in May from 4.1 months' worth the previous month, Bloomberg reported. "There clearly is some froth in some markets but we still don't see a nationwide housing bubble," said Fed Governor Olson.

Durable Goods Orders for May rose 5.5% versus estimates of a 1.5% increase and a 1.4% gain in April. Durables Ex Transportation for May fell .2% versus estimates of a .5% increase and a .7% decline in April. Orders for durable goods rose in May by the most in more than a year, mainly reflecting a surge in bookings for Boeing aircraft. With inventories fairly high and fuel costs rising, investment in new equipment may be slow to recover in coming months, Bloomberg said. At the current sales pace, manufacturers have 1.41 months of supply, unchanged from a month earlier and near a two-year high. Transportation equipment orders surged 21.2%, the most since July 2002, after rising 7.8% in April. Orders for non-defense capital goods excluding aircraft, a gauge of future business investment, fell 2.3% last month. However, unfilled orders, a proxy of future production rose 1.9%, the most since June 2000.

New Home Sales for May rose to 1298K versus estimates of 1320K and a downwardly revised 1271K in April. US new home sales rose to the second-best level in history, boosted by low mortgage rates and an improving job market. Prices declined 6.6%, the most since January 2003. The median price of a new home fell to $217,000 from $232,200 in April. The median price of a new home has increased 2.5% over the last 12 months. The National Association of Realtors said this year would be a record year for sales of both new and existing homes, beating last year’s records. Sales rose 22.9% in the Midwest and fell 24.5% in the Northeast. The supply of homes for sale was unchanged at 4.2 months in May, a relatively low level.

BOTTOM LINE: Overall, last week's economic data were modestly positive. The Leading Indicators is not as useful as other gauges, however it should not be ignored. At this point, it continues to forecast slowing growth, but not a recession. The labor market continues to improve at a moderate, choppy pace. This should hold unit labor costs in check. This month's payroll report should improve modestly over last month's. Home price appreciation appears to be moderating to more sustainable healthy rates. I continue to believe prices will consolidate at elevated levels for a few years rather than decline precipitously. Manufacturing activity is still sluggish and will likely remain that way for several more months. Finally, the ECRI Weekly Leading Index fell .52% to 133.40 and is forecasting moderately decelerating growth.

Market Week in Review

S&P 500 1,191.57 -2.09%*

Image hosted by Photobucket.com

Click here for the Weekly Wrap by Briefing.com.

BOTTOM LINE: Overall, last week's market performance was negative. The advance/decline line fell, almost every sector declined and volume was average on the week. Measures of investor anxiety were mostly higher. The AAII % Bulls fell and is around average levels. Mortgage rates declined and are now 36 basis points away from all-time lows set in June 2003. The benchmark 10-year T-note yield broke back below 4% and appears poised to test the lows of 3.77% last seen in March 2004. Cyclicals underperformed substantially as worries over slowing global growth resurfaced. As well, high energy prices and a stronger US dollar added to earnings jitters. I expect the dollar index to break up through resistance at 90.0 over the coming weeks. Energy prices were mostly unchanged even as evidence continues to mount of a significant slowing in global demand. A report on Friday showed China imported 2.45 million barrels of crude oil per day last month, down 18.3% from April and only equal to the average for all of 2004. As of last month, global supply was 85.0M barrels per day and global demand was 82.1M barrels per day. This is the widest gap since May 1998. Steel stocks led all decliners on worries over substantial excess capacity coming from Asia and slowing global demand. Investors took profits in the Homebuilders as home price appreciation appears to have stabilized. On the positive side, I-Banks outperformed substantially for the week on positive news from Morgan Stanley and Legg Mason. As well, Technology shares held recent gains for the most part, led by Semiconductor stocks.

Friday, June 24, 2005

Weekly Scoreboard*

Indices
S&P 500 1,191.57 -2.09%
DJIA 10,297.84 -3.06%
NASDAQ 2,053.27 -1.76%
Russell 2000 630.41 -2.14%
DJ Wilshire 5000 11,829.64 -1.97%
S&P Equity Long/Short Index 1,027.10 +.35%
S&P Barra Growth 567.94 -2.61%
S&P Barra Value 619.57 -1.57%
Morgan Stanley Consumer 570.50 -2.43%
Morgan Stanley Cyclical 712.27 -4.24%
Morgan Stanley Technology 476.40 -1.16%
Transports 3,411.24 -5.03%
Utilities 380.68 +.79%
S&P 500 Cum A/D Line 7,570.00 -3.55%
Bloomberg Crude Oil % Bulls 48.0% -6.74%
Put/Call .89 -13.59%
NYSE Arms 1.39 +78.21%
Volatility(VIX) 12.18 +6.10%
ISE Sentiment 247.00 +130.84%
AAII % Bulls 46.59 -3.04%
US Dollar 88.78 +1.28%
CRB 312.24 +.41%

Futures Spot Prices
Crude Oil 59.84 +1.08%
Unleaded Gasoline 165.57 +.53%
Natural Gas 7.36 -4.42%
Heating Oil 165.04 -.34%
Gold 442.00 +.43%
Base Metals 124.30 -2.30%
Copper 155.05 -.16%
10-year US Treasury Yield 3.92% -3.76%
Average 30-year Mortgage Rate 5.57% -1.07%

Leading Sectors
I-Banks +4.04%
Alternative Energy +.21%
HMOs -.27%

Lagging Sectors
Disk Drives -4.45%
Homebuilders -5.04%
Steel -12.38%

*5-Day % Change

Stocks Lower Mid-day on Earnings Worries

Indices
S&P 500 1,194.92 -.48%
DJIA 10,329.29 -.88%
NASDAQ 2,057.31 -.64%
Russell 2000 627.12 -1.10%
DJ Wilshire 5000 11,852.58 -.54%
S&P Barra Growth 569.79 -.58%
S&P Barra Value 620.94 -.40%
Morgan Stanley Consumer 572.37 -.60%
Morgan Stanley Cyclical 711.89 -1.42%
Morgan Stanley Technology 477.21 -1.01%
Transports 3,410.27 -1.36%
Utilities 381.87 -.40%
Put/Call .89 +18.67%
NYSE Arms 1.53 +32.80%
Volatility(VIX) 12.07 -.49%
ISE Sentiment 226.00 +43.04%
US Dollar 88.80 -.36%
CRB 311.97 +.17%

Futures Spot Prices
Crude Oil 59.80 +.64%
Unleaded Gasoline 165.70 +.02%
Natural Gas 7.37 -1.31%
Heating Oil 166.15 -.84%
Gold 442.00 unch.
Base Metals 124.30 +.95%
Copper 154.45 -.39%
10-year US Treasury Yield 3.92% -.73%

Leading Sectors
I-Banks +1.66%
Gold & Silver +.71%
Biotech +.33%

Lagging Sectors
Networking -2.07%
Steel -2.29%
Airlines -3.51%
BOTTOM LINE: The Portfolio is unchanged mid-day as gains in my Internet longs, Steel shorts and Oil Tanker shorts are offsetting losses in my Homebuilding and Retail longs. I have not traded today, thus leaving the Portfolio 50% net long. The tone of the market is negative as the advance/decline line is substantially lower, almost every sector is lower and volume is very light. Measures of investor anxiety are mixed. Today’s overall market action is negative. China's Iron and Steel Association said last night that China may use 300 million tons of steel this year and produce 322 million tons, citing the National Development and Reform Commission. This is the first time the country's top planning body has indicated demand will fall short of supply. Earlier in the week the vice chairman of the China Iron and Steel Association said 90% of the country's steel producers will be unprofitable soon. Look for the Chinese government to try and cap production soon. This should further curtail China's energy demand. I expect US stocks to trade mixed-to-higher into the close on short-covering.

Today's Headlines

Bloomberg:
- Advertising spending growth may slow from next year as TV networks in the US are forced to cut rates as audience levels fall, Saatchi & Saatchi CEO Roberts said at an industry conference.
- Legg Mason agreed to buy hedge fund company Permal Group and Citigroup’s fund unit in separate deals totaling more than $4.5 billion to become the fifth-largest US asset manager.
- Guidant said it has advised doctors about safety concerns regarding some of its defibrillators and that implants of the devices should be discontinued until further notice.

Wall Street Journal:
- William Foley II said he and a group that includes Thomas H. Lee Partners have made a takeover bid for Callaway Golf.

NY Times:
- A drastic rise in foreign students in the past 20 years is presenting a problem at some US universities as an increasing number of undergraduates cannot understand classes run by foreign graduate teaching assistants.
- US doctors are changing the way they treat lung cancer, after studies showed that chemotherapy, which had often been considered futile in treating the disease, helps many patients live significantly longer.
- Hundreds of artists, hipsters, Web designers, doctors and journalists are moving into industrial lofts and 19th century row houses in the Port Morris and Mott Haven neighborhoods of the South Bronx.

Philadelphia Inquirer:
- Penn National Gaming and other racetrack operators are ready to begin building slots parlors after the Pennsylvania Supreme Court upheld a state gambling law.

AP:
- Iraqi Prime Minister Ibrahim al-Jaafari and US President Bush will discuss training Iraqi security forces and efforts to draft a constitution when they meet today in Washington.

Reuters:
- Workers at Placer Dome’s Zaldiver copper mine in Chile may strike after voting yesterday to reject a two-year labor contract.

Durables Exceed Estimates, Median New Home Price Fell 6.6%

- Durable Goods Orders for May rose 5.5% versus estimates of a 1.5% increase and a 1.4% gain in April.
- Durables Ex Transportation for May fell .2% versus estimates of a .5% gain and a downwardly revised .7% decline in April.
- New Home Sales for May rose to 1298K versus estimates of 1320K and a downwardly revised 1271K in April.

BOTTOM LINE: Orders for durable goods rose in May by the most in more than a year, mainly reflecting a surge in bookings for Boeing aircraft. With inventories fairly high and fuel costs rising, investment in new equipment may be slow to recover in coming months. At the current sales pace, manufacturers have 1.41 months of supply, unchanged from a month earlier and near a two-year high. Transportation equipment orders surged 21.2%, the most since July 2002, after rising 7.8% in April. Orders for non-defense capital goods excluding aircraft, a gauge of future business investment, fell 2.3% last month. However, unfilled orders, a proxy of future production rose 1.9%, the most since June 2000.

US new home sales rose to the second-best level in history, boosted by low mortgage rates and an improving job market. Prices declined 6.6%, the most since January 2003. The median price of a new home fell to $217,000 from $232,200 in April. The median price of a new home has increased 2.5% over the last 12 months. The National Association of Realtors said this year would be a record year for sales of both new and existing homes, beating last year’s records. Sales rose 22.9% in the Midwest and fell 24.5% in the Northeast. The supply of homes for sale was unchanged at 4.2 months in May, a relatively low level.

Links of Interest

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Real-time Intraday Chart/Quote

Thursday, June 23, 2005

Friday Watch

Late-Night Headlines
Bloomberg:
- Unocal Corp. said it received permission from Chevron Corp. to negotiate with CNOOC Ltd., advancing the prospects of the Chinese oil company's rival $18.5 billion cash bid for Unocal.
- CNOOC Ltd. has enlisted Enron's former chief spokesman to counter public concerns about the company's $18.5 billion bid to buy US oil company Unocal Corp.
- The San Antonio Spurs defeated the Detroit Pistons 81-74 in the decisive seventh game of the National Basketball Association Finals.

Financial Times:
- The World Customs Organization's 165 member state may offer support to new global standards designed to ensure safer sea trade and make container transport more secure against terrorists.

China Securities Journal:
- China's fiscal revenue slowed in the first five months after the country cut import tariffs, citing Finance Minister Jin Renqing. Fiscal revenge rose 13.1% year-on-year in the five months ended May 31 to $163 billion, compared with the 32.4% growth of a year ago.

Late Buy/Sell Recommendations
Goldman Sachs:
- Reiterated Outperform on GE, GILD, MCK and DNA.

Business Week:
- Access Integrated Technologies(AIX) is best positioned to profit from an expected switch by movie studios to digital film from analog, citing William Relyea of HC Wainwright.
- Jones Soda(JSDA) is a "solid long-term investment opportunity," citing ThinkEquity Partners analyst Nicole Miller.
- Energy Conversion Corp.(ENER), the No.1 US maker of nickel hydride batteries used in hybrid vehicles, may see its stock price more than double in a year as demand rises.

Night Trading
Asian Indices are -1.0% to -.50% on average.
S&P 500 indicated +.07%.
NASDAQ 100 indicated -.03%.

Morning Preview
US AM Market Call
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Pre-market Commentary
Before the Bell CNBC Video(bottom right)
Global Commentary
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European Indices
Top 20 Business Stories
In Play
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Macro Calls
Rasmussen Consumer/Investor Daily Indices
CNBC Guest Schedule

Earnings of Note
Company/EPS Estimate
HR/.32
TONS/.85

Upcoming Splits
ESRX 2-for-1

Economic Releases
8:30 am:
- Durable Goods Orders for May are estimated to rise 1.5% versus a 1.9% increase in April.
- Durables Ex Transportation for May are estimated to rise .5% versus a .2% decline in April.

10:00 am:
- New Home Sales for May are estimated to rise to 1320K versus 1316K in April.

BOTTOM LINE: Asian indices are lower on worries that rising energy prices will dampen economic growth in the region. I expect US equities to open modestly lower. China's oil import data are released tomorrow.
The US dollar will also be of focus for traders. The Portfolio is 50% net long heading into the day.