Tuesday, April 18, 2006

Strong Open for Stocks

Morning News of Note:
  • BSC: Heard on the Street... Bear Stearns Flirts With China Trailing many of his Wall Street rivals in the rush to establish a foothold in China, Bear Stearns Cos.' Chief Executive Officer James Cayne, a competitive bridge player, is hoping to trump his rivals by striking a deal with China Construction Bank. Since at least March, Bear and the Chinese bank, one of China's Big Four state-controlled banks, have had exploratory discussions that could lead to CCB becoming Bear's biggest shareholder by taking a minority stake in the firm, as reported in yesterday's Wall Street Journal. (Full Story) WSJ
  • URBN: Urban Outfitters' Urban Renewal URBAN OUTFITTERS HAS BEEN OUT OF FASHION with investors lately. Shares of the specialty apparel retailer have fallen wider than 33% from a 52-week high and are flirting with a 52-week low mark of almost 12 months ago. Shares closed Monday at $22.58 per share. But hedge fund Ziff Asset Management recently acquired a 5.6% stake in the company according to a Securities and Exchange Commission filing last Thursday. (Full Story) BARRONS
  • Homebuilders: Start Worrying They can't say they weren't warned. For many years, economists have worried that the U.S. housing market was bound to slow once interest rates started rising. And the apparent slowdown that started last summer has been well documented. So homebuilders -- and the people who invest in them -- shouldn't be surprised by the big risk now standing at their front door. (Full Story) WSJ
  • Mobile Handsets: Digitimes reports Samsung Electronics plans to launch three handsets -- the slide form factor D528, the ultra-slim P308 and a 3G handset, the Z548 -- in the Taiwan market on April 21, aiming to boost its share in the local market to 10% in 2006, according to sources at Samsung Taiwan. Since the three handsets are all ultra-slim form factor, Samsung is aiming to attract customers in the ultra-slim segment away from Motorola (MOT), said market sources, adding that Nokia (NOK) is expected to join the ultra-slim segment by the fourth quarter of this year.
  • NDAQ: Hedge funds increasing their holdings in LSE-FT: Hedge funds, which are anticipating a higher bid for the exchange from either Nasdaq (NDAQ) or another bidder, are increasing their holdings in the London Stock Exchange. DE Shaw, Halcyon Asset Management, and Chesapeake Partners Management have all increased their holdings in the LSE at prices above what Nasdaq paid for their 15% stake in the LSE last week

Market Comments: The market has opened on a very strong note following some better than expected earnings reports from Merrill Lynch (MER) and United Health (UNH) to name a couple.

The core PPI also came in lower than expected, easing inflation fears and helping bond yields fall. The 10-year yield is hovering around 4.98% currently, and oil is still above $70. The latter is really helping the energy stocks rally this week.

I have been on the record as saying I felt the oil service stocks were due for a run back to new highs, and they seem to be doing quite well lately. The question is where and when to take profits?

I'm sure I don't need to say it again, but I am skeptical of markets that open this strong. They usually set themselves up for disappointment late in the day. But let's give the market the benefit of the doubt for the time being.

long UNH, URBN


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