Friday, May 19, 2006

Looking For A Strong Close To A Weak Week

Morning News of Note:
  • High End E-Commerce: Fashionably Late? Designer Brands Are Starting To Embrace E-Commerce Far from the chic avenues of Paris, one of Christian Dior's most successful French boutiques has a much more mundane address: Six months after Dior launched its French online boutique, the Web site is quickly becoming one of the company's fastest-growing points of sale in its key domestic market. (Full Story) WSJ
  • DIS VIA: There's Gold in the Vault THE RESULTS OF THIS WEEK'S "upfront" TV-ad buying spree suggest television broadcasters have their work cut out for them: They will likely generate no growth in ad revenue this year as advertisers flock to the Web. But all is not lost. New forms of digital content distribution such as iPod downloads, streaming video on the Internet, and cable video-on-demand could yet bring a windfall to television and film conglomerates such as Walt Disney and Viacom. (Full Story) BARRONS
  • DELL AMD INTC: Dell's Decision to Use Advanced Micro Chips Is Blow to Intel Dell Inc.'s decision to end its 22- year exclusive use of Intel Corp. computer chips marks the biggest victory for Advanced Micro Devices Inc. in its battle to take market share from the world's largest chipmaker. Shares of Advanced Micro surged after Dell, the world's largest personal-computer maker, yesterday said it will use Sunnyvale, California-based Advanced Micro's Opteron processor in some server machines. Intel slumped. (Full Story) Bloomberg
  • Commodities: Speculative premium on commodities about 50% above fundamentals -- Globe and Mail: The Globe and Mail (Canada) cites a report by Merrill strategist Richard Bernstein that suggests commodity prices at the end of April were about 50% above where they would be if based solely on fundamentals. Story says that at the end of March, the speculative premium was at 30%, already the largest premium in the history of his data. With such a high premium built into commodity markets, story suggests that liquidity is driving pricing. Bernstein is quoted as saying, "It should be no surprise, therefore, that commodities have recently fallen as the fed funds futures markets have started to discount a higher probability of a Fed tightening."
  • Mad Money Summary: Cramer opened his show by praising Qwest Communications (Q), saying it is a "textbook comeback story" and no one realizes it yet. Cramer then noted that both Dell (DELL) and Advanced Micro Devices (AMD) moved higher on the news that Dell was switching from Intel (INTC) chips to AMD chips. Cramer then discussed Sears (SHLD), which he says is one of the best stocks out there. "It's a $200 stock masquerading as a $150 stock," he said. Cramer then spoke to L-3 Communications (LLL) CEO Frank Lanza about the company's recent acquisition of TRL Electronics. Cramer said L-3 is one of his top defense picks. In the "Lightning Round," Cramer was bullish on TD Ameritrade (AMTD), Crystallex (KRY), Anglo American (AAUK), Joy Global (JOYG), Terex (TEX), Deere (DE), Caterpillar (CAT), Baidu (BIDU), The Pantry (PTRY), Texas Roadhouse (TXRH) and Schlumberger (SLB), and was bearish on E*Trade (ET), Select Comfort (SCSS), Sirius (SIRI), Wind River Systems (WIND), Goldcorp (GG), CBOT Holdings (BOT), AMR Corp (AMR), Netease (NTES), Expedia (EXPE) and Ruddick (RDK).

Market Comments: The market is again opening on a strong note. Yesterday, we saw this early strength fade by the close. This is why I usually prefer weak openings. Let's see if the market can hang on to its early strength today.

Bond yields continue to fall, with the 10-year dropping to 5.04% currently. Recently, it was as high as 5.20%. Copper plunged this morning, and was limit down in the futures markets. The air coming out of commodity prices should help ease inflation concerns.

The put/call ratio opened above 1.0 again this morning. There has been a ton of puts purchased in the last week. If the market can turn higher, these positions will quickly be under water and excert additional upside pressure on the market. But for the time being, the put buyers have been right.

Semis are getting the strongest bounce so far, after some positive news for AMD and MRVL. Biotechs are down again, as are most energy and commodity stocks.



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