Wednesday, February 28, 2007

Market Wrap

The markets did in fact bounce back, although it wasn't much of a bounce. But I guess its still better than another day of plunging markets.

I think what reassured investors early on was that China's markets bounced back from their drubbing, and that 10-year yields rose, indicating confidence in our markets and the U.S. economy. The 10-year finished higher at 4.55%.

You also had Bernanke speaking this morning. And since taking office, the markets have often risen on days that Gentle Ben has testified. Today, he reassured investors, saying "there didn't seem to be any single trigger'' for Tuesday's sell-off. I wouldn't expect him to say anything else, but it comforted investors nonetheless.

The volatility indexes fell today, after yesterdays record spike in the fear gauges. But the put/call ratios remained elevated, with the CBOE put/call running above 1.0 all day.

By market cap, big caps handily outperformed small caps, indicating a flight to quality pattern, as investors gravitate towards safer stocks first. The SPX rose 0.56% today, while the RUT was up only +0.08%.

In ETF land, the financial sector led the way, rising +1.8% on the day. Utilities and materials rose +0.7%, while consumer discretionary and tech lagged, rising +0.2%.

Oil also rose on the day, closing near $61.75. If China were truly collapsing, you would expect oil to fall as markets anticipate lower demand from that region. But such has not been the case for the last 2 days.

Morning News Roundup

Here are some highlights from this morning's news roundup:
  • Asian and European markets drop overnight
  • 4Q GDP revised lower to +2.2% (vs. +2.3% consensus)
  • RADVision profiled in New America section of IBD
  • Home Depot issues downside revenue guidance for FY08
  • VeraSun Energy beats by $0.07
  • Mortgage Applications +3.2% for the week ended Feb. 23
  • Joy Global misses by $0.09; guides FY07 in-line
  • King Pharms beats by $0.04, beats on revs
  • Station Casinos beats by $0.08, ex items
  • Merrill downgrades Select Brokers to Neutral from Buy
  • MRK guides Q1, FY07 EPS above consensus
  • Palomar Medical upgraded to Buy at WR Hambrecht
  • Martha Stewart beats by $0.06
  • Wynn Resorts tgt upped to $111.50 at Jefferies
  • Target raised to $70 from $65 at BofA
  • Boeing talking to 15 cos on 747-8 in Asia, Europe, Mid East
  • Int'l Securities Exchange announces record daily trading volume
  • Deckers Outdoor tgt raised, earlier, to $86 from $63 at Lazard
  • New Home Sales 937K vs 1080K consensus

long ISE

Waiting For The Big Fade

You know how distrustful I am of up openings in the market. So this morning, when I saw the futures pointing to a positive open for the market, my first thought was that it wouldn't hold.

The market may get a bounce at the open, but I would not buy into it. I think it will fade, and we will begin to move lower by mid morning.

China's market stabilized last night, although the other major Asian markets were weak, and some of the emerging markets got crushed again.

4Q GDP was revised lower to +2.2% this morning, which was pretty much expected. Nonetheless, bond yields are rising, with the 10-year up to 4.54%. This is a good sign, as it signals strength in the market.

Be careful out there--

Tuesday, February 27, 2007

A Day For The Recordbooks

The markets plunged today, experiencing their biggest declines since March 2003. Of course, the markets are up huge since that time, so a little perspective is in order.

The selling pressure washed up on our shores from China, which plunged in overnight trading yesterday. That means traders will nervously be watching the Asian markets tonight to see if the contagion continues.

As for the fear gauges I mentioned earlier, some of them spiked to levels I can't ever remember seeing. This tells me that panic, which usually peaks at the end of a prolonged decline, has already entered our markets.

To wit:
  • The VIX soared +64% today, its biggest move since after 9/11
  • The NYSE registered 99% downside volume. This might be an all-time record
  • The ARMS Index hit 16. I have no data going back 10 years that shows another reading this high (maybe it hit this level in the crash of 1987?)
  • The CBOE put/call spiked to 1.69, hitting panic levels
  • The volume in the QID (ultra-short QQQ ETF) topped 15 million shares; more than 3x its average volume

It has been said that bull markets often experience the sharpest declines. Because these declines were so sharp, and likely shocked many, the dust will not settle overnight. But I still believe most of the damage has been done, we just need more time to heal and digest the sticker shock.

The SPX is -4.2% off its previous high, the COMP is -4.9%. I do not believe this will reach a 10% pullback. As such, I want to start dipping my toe back in the long side on another 1-2% downside.

After a little bit longer, it will be time to start looking at the high relative strength stocks that held up best during the decline, and will likely lead the market on the next leg higher.

Early Look At Sentiment

As I mentioned earlier, my fear guages are really spiking this morning.

The ARMS index is surging. My quotes show it as high as 3.84, which is a very high level.

Also, the volatility index (VIX) is gapping above its 50-day today, and has been as much as +17% higher so far.

As for the put/call ratios, similar extreme readings are present. In particular, the CBOE put/call ratio is running at 1.67, as high as I can remember it. The ISEE is also at a very low level of 112, after closing at 96 yesterday.

The SPX is currently -2.0% off its high, and the COMP is -2.9% off its highs. I suspect that this correction could have more to go over the next few weeks, but I don't believe we will see more than a 3-5% correction.

Who Popped China's Bubble?

The markets are tanking at the open on the heels of a much weaker than expected durable goods report and spillover from very weak asian markets overnight.

China's main stock index plunged roughly -9%, its biggest one-day plunge in 10 years. You can see the gap lower on the FXI, the Chinese ETF that trades on the NYSE.

Gauges of investor sentiment are spiking higher, and this may help the market find a bottom and work higher into the close.

The 10-year yield is lower again, falling just below 4.60%. Oil is also trading lower, but still above $60.

The Nazz is down nearly 2%. The last time it suffered a 2% daily decline was Nov. 27 by my count. As a group, brokers are down the most (-2.5%), but every sector I follow is lower. Call it a sea of red.

But it is still very early. So while every bear CNBC trots out today will say this is day 1 of the dreaded correction, sentiment is already bearish and I believe that will limit the damage.

Monday, February 26, 2007

Reversal In Investor Sentiment

After the bullish open, the investor sentiment indicators have rolled over and are now flashing heightened pessimism, or fear.

The CBOE put/call ratio opened at a fairly low 0.73, but has since climbed to a lofty 0.98. Moreover, the 10-day average of this indicator topped 1.0 last week for the first time since Sept. 06.

The ISEE opened at a very high 200, but has since plunged below 100 to 93. This is the equivalent of a put/call of 1.07, a highly bearish reading.

I believe investors continue to rush out and buy downside protection at every little pullback in the averages. Until this behavior changes, I continue to feel that corrections will be brief and shallow.

Morning News Roundup

Here are some news and notes hitting the tape today:
  • The Oscars get 3rd lowest rating ever
  • Asian markets mixed overnight
  • Qualcomm and Nokia deal may not happen before deadline - Barron's
  • Station Casinos accepts revised $5.5 bln offer - WSJ
  • Univision agrees to record $24 mln FCC fine
  • Bolt Technology profiled in New America section of IBD
  • Marvel Enterprises beats by $0.04, beats on revs
  • South Florida housing market weakness should persist in 2007 - JMP
  • SanDisk initiated with a Neutral at Nollenberger
  • Google and NBA to announce YouTube partnership
  • Oracle added to Cowen's Focus List
  • Affiliated Managers announces a 3 mln share repurchase program
  • Smith & Wollensky and Patina Restaurant Group, agree to merge for $9.25/share
  • FBR ups ISIL to Outperform - $32 target
  • Credit Suisse lowers MCO to Underperform - $64 target
  • RIMM upgraded at RBC - $180 target
  • Goldman raises NOK target to $26


Monday Morning Musings

The market is getting a boost in early trading due to the big M&A news hitting the tape.

TXU Corp. (TXU) announced it will be taken private by KKR and Texas Pacific for $45 billion, the largest buyout ever.

Also, Station Casinos (STN) confirmed its buyout for $8.8 billion, and there are rumors that Dow Chemical (DOW) could be taken out for $54 billion, and that TRB is in play also.

Not helping the market are comments from former Fed Chairman Greenspan, who said that the US economy could "possibly" see recession by the end of the year. He made these comments at a conference in Hong Kong, but was really saying that it was a remote possibility, rather than a likelihood.

Oil is trading higher again this morning, to $61.55. Bond yields are falling further, with the 10-year yield down another 3 basis points to 4.64%. At the margin, these are offsetting factors.

I think the market will likely trade lower intraday, following the opening pop, but then stabilize by the end of the session. Last week's sentiment indicators showed a marked pickup in bearish sentiment, which should help keep a bid under the market.

I'll be back with a news roundup in a bit--

Saturday, February 24, 2007

Weekly Recap

Here is a copy of's Weekly Wrap:

There was a limited amount of news this week. Not surprisingly, the S&P was fairly stable. The largest swing occurred on Friday with a 5 point drop. The net result for this holiday-shortened week was a small decline, which is reasonable given that the most important news was bearish.
The January core CPI was reported on Wednesday to have risen 0.3%. That was the largest gain since June. It was larger than the 0.1% increases in each of the prior three months, and larger than an expected 0.2% gain. It pushed the year-over-year increase in the core rate to 2.7%. That is well above the Fed's inflation forecast for 2007 of 2% to 2.25%. It wasn't good news.

The market showed good resilience to the report. The S&P only lost 2 points that day. The impact on underlying sentiment might also have contributed to the 1 point loss on Thursday and the 5 point loss on Friday, but the reaction could easily have been worse.

The other major event this week was that oil pushed above $60 a barrel and closed the week at $61.10. That isn't up much from $59.39 at the close of the prior week, but the push above $60 has raised concerns for the broader market. Interestingly, energy prices are now down over the past year. The year-over-year total CPI is up just 2.1%. That is less than the 2.7% gain in the core rate as noted above. Energy prices have held down overall inflation.

The major earnings reports this week were from retailers. Wal-Mart beat expectations, but the stock was slightly lower on the week. Home Depot reported below expectationsand JC Penney above, but both suffered similar fates as Wal-Mart. Home builder Toll Brothers and Hewlett-Packard also saw their stock prices decline after earnings reports. Earnings individually and collectively provided no support to the market.

There were no major economic releases other than the CPI report. New claims for unemployment for the week ended February 17 fell to 332,000 from 359,000 the week before, but that is still above the recent trend of 300,000 to 330,000. There is a possibility that this reflects some softening in the labor market.

The other major event was the release of the January 31 Fed policy committee meeting minutes on Wednesday. The minutes presented no surprises, but did reflect a somewhat tougher stance towards inflation than Fed Chairman Bernanke seemed to express the previous week. Nevertheless, the minutes were not considered consequential.

There was also a fair amount of attention given this past week to the fact that default rates in the sub-prime mortgage market have picked up, but it was hard to discern much impact in the overall stock market.

The market thus drifted lower this week amidst a small amount of bearish news. The S&P showed good resilience, and the Nasdaq even managed a gain. This may reflect an unwinding of the recent upward momentum, or just another pause on the run that has occurred since July. Since then, the market has not retreated as much as 2%. That has many analysts suggesting a correction or consolidation is long overdue, and just as many saying that the widespread pessimism associated with that belief is a bullish sign.

The week ahead brings a reasonable number of earnings reports, once again highlighted by retailers. The economic calendar is highlighted by the a likely downward revision to the originally reported 3.5% fourth quarter GDP number on Wednesday.

Friday, February 23, 2007

Investor Sentiment Check

The market is continuing to probe for a bottom, and a quick check of the investor sentiment indicators supports the thesis of a rally into the close.

For the third day in a row, the CBOE put/call ratio is running above 1.0. Today it is rising to 1.41, a level indicating enormous bearishness.

The ISEE is also plunging to 97, which is the equivalent of a put/call ratio of 1.03. This too is a very bearish level.

The fact that investors are rushing to buy puts when the indexes are barely off their highs tells me that the herd is still not embracing this rally. As such, I continue to believe that buying the dips will prove profitable as the market continues to stairstep to new highs.

Another Week of Nasdaq Outperformance

The market is experiencing selling pressure in the opening hour again. But we have seen this patter a few times this week, and after peaking around mid-morning, the market has been able to gain strength into the close. Let's see if this pattern holds up on the last trading day of the week.

Barring a huge move today, the Nasdaq is poised for another solid week of outperformance versus the SPX. This would be the second week in a row that the Nazz has distanced itself in relative performance.

Oil is up again today, nearing $61.50, and this is likely weighing on the overall market again. Although semis are up again today, bucking the weakness for a second day. Nice.

I am not sure what is causing bond yields to drop so much, but the 10-year yield is down 5 basis points to 4.68%, and plunging back below its 50-day. So this should be chalked up in the positive side of the market ledger.

In other news and notes:
  • Asian markets mixed overnight
  • Private equity groups eye Chrysler - FT
  • Nymex plans stock offer - WSJ
  • Lowe's beats by $0.03, beats on revs
  • NII Holdings downgraded to Hold from Buy at Citigroup
  • Caught on video, Rats invade NYC KFC
  • initiated with a Sector Perform at RBC
  • VRGY reports strong earnings; stock soars
  • Red Robin Gourmet tgt upped to $47 at Piper
  • Dynamic Materials tgt upped to $42 at Jefferies
  • Motorola estimates cut at Nollenberger

Thursday, February 22, 2007

Market Wrap

The market squeezed out another very constructive day. This morning, the markets started to sell of in a hurry, and it looked like another nasty day was in the making.

But by the end of the day, the market had righted itself, and for the 2nd day in a row, the Nasdaq climbed all the way back into positive territory. That continues the recent trend of the Nasdaq outperforming the SPX.

Two of the culprits for today's weakness were rising oil and rising interest rates. Oil gained nearly a buck again today, to close just below $61. I suspect we may bounce around between $60-65 for a while, but the energy markets are volatile and hard to predict.

The yield on the 10-year Note rose nearly 4 basis points on the day to close at 4.73%. This is just above its 50-day, but still well below January's high of 4.90% and still way below the fed funds rate at 5.25%. No inflation worries there.

Semis bucked the weakness and really stood out today, rising 2.75% on a huge volume spike (see the SMH chart). Biotechs also reversed their early weakness to finish flat. Housing stocks were down the most after TOL provided a bearish outlook on housing.

On the sentiment front, the bull/bear spread in the AAII survey rose to its highest level in roughly a year. This signals more bullish entering the market, which is good. But if these high levels persist, then it would mean everyone is getting bullish and then we might be closer to some sort of correction.

Have a great night--

Morning News Roundup

Here are some news and notes from this mornings headlines:

  • Asian markets rise overnight
  • Google to sell online software suite - Reuters
  • Bankrate profiled in New America section of IBD
  • Health Management guides FY07 EPS above consensus
  • Genentech's big drug for eyes faces a rival - WSJ
  • Citi ups ADI to Buy
  • BofA lowers estimates for CME
  • Goldman adds MDS Inc (MDZ) to their Conviction Buy list
  • ValueClick tgt raised to $34 from $30 at Needham
  • Newmont Mining beats by $0.08
  • Getty Images agrees to acquire WireImage
  • E*TRADE initiated with a Buy at UBS- tgt $29
  • Iran failed to suspend nuclear activity by Feb 21 deadline

long GOOG

Semis Strong Out of the Gate

The market is getting a bounce this morning. Oil is trading just below $60, which weighed on the market yesterday. Bond yields are slightly higher, with the 10-year yield up 2 basis points to 4.71%.

Semis are getting a big boost, and are up +2.1% as a group after Analog Devices (ADI) reported a strong quarter. Brokers are also strong as a group, while biotechs are weak.

The Nasdaq is also being helped by news that AAPL and CSCO have settled their iPhone dispute, and agreed to share some technology. Also, WFMI agreed to buy OATS for an 18% premium, and both stocks are higher.

The market has a good opportunity to sell off hard yesterday, with the bearish inflation report, oil hitting $60, and gold breaking out to new highs. But this market only seems willing to bend, and not break. When will this all change? When people stop collectively looking for a correction every minute of the trading day.

Wednesday, February 21, 2007

Apple Breaks Back Above 50-day Average

My Stock of the Day is Apple (AAPL)

The company had its estimates raised this morning at Prudential, and also received other bullish comments from the analyst community.

They think that the quarter is shaping up to be better than expected, due to strong Mac sales. Also, there is a lot of chatter that the upcoming iTV will be a huge hit and add to sales and earnings.

This is helping the stock enjoy a 4% pop today. The stock is spiking back above its 50-day average, on a big increase in volume. This is a bullish development. I would expect the 50-day to now act as support on any pullback.

Oil is rising back to $60 today, and gold is having a big day also, up more than 3% today to a 9-month high. Together, this is taking some of the wind out of the sail of the tech market.

Other stocks making notable, high-volume moves include:
  • NICE
  • VMC
  • MHS
  • FSLR
  • TSL
  • GEO
  • HOLX
  • ACOR
  • MFW
  • MDT
  • CROX
  • GPI
  • BPT
  • RNT
  • HPQ

long AAPL

Fighting The Rally For All Its Worth

Yesterday I commented on the high level of put buying, and how it would likely support the market on any dip. It is surprising to see that much put buying when the market is rallying, but it seems investors remained more worried about a selloff than missing further upside.

Today, I am seeing the same thing. The market dipped this morning, and it looked good for the bears, but the Nazz has climbed all the way back into positive territory, and the SPX has gotten close.

As for the put/call ratios, the CBOE is still trading at the extremely high level of 1.22. That is the kind of reading you get on a huge down day, not one like today.

And the ISEE is trading at the equivalent of 0.90, which is a very high reading for that index. In my book, this means that until the options herd turns unanimously bullish, dips can continue to be bought successfully.

Morning News Roundup

Here are some news and notes hitting the wires this morning:
  • Asian markets mixed overnight
  • GlaxoSmithKline mentioned positively in Barron's Online
  • Potential YouTube deal with CBS unravels
  • Bank of Japan moves to raise rates to 0.5%
  • British Airways chooses Boeing 777s over Airbus
  • Nice Systems beats by $0.02, beats on revs
  • Zale beats by $0.05; issues downside guidance
  • CROX beats estimates, raises guidance
  • Crocs tgt raised to $64 from $58 at Nollenberger
  • Pru raises estimates for AAPL
  • Citi raises target on GILD to $86 from $83
  • AT&T wins global networking contract worth nearly $1 bln from GM
  • ICE tgt raised to $205 from $160 at Prudential
  • Johnson Controls tgt upped to $120 at BofA


Concerns Surface Over Recent Inflation Data

Yesterday was another solid day in the market, on a day when many thought we would see a pullback, options expiration hangover, etc. I include myself in that group. Nonetheless, the market closed higher, and volume rose on the Nasdaq.

That made for another accumulation day. And we have seen very few distribution days recently. Breadth was also solid, and the indexes were able to make new highs.

This morning, we are opening on a weak note, as today's inflation data is worrying investors. The core CPI rose +0.3% (+0.2% consensus), which pushed the year-over-year rate to +2.7%. This is slightly above the Fed's comfort zone of 2.5%.

But it is still possible that this report will be a one-off, and that inflation will still trend lower as the year unfolds. The 10-year yield is only up 2 basis points on the news, to 4.70%, which is still below its 50-day average.

I'll be back in a bit with some stock news--

Tuesday, February 20, 2007

Standout Stocks

My Stock of the Day is Research In Motion (RIMM)

The stocks is breaking out today from a 2 week consolidation on fairly strong volume.

The stock is not far from its January high of 145. A breakout over this level would clear the way for additional highs as it would leave all resistance behind.

There is talk about the iPhone providing competition to RIMM's new Blackberry Pearl. But until it hits the market, the Pearl seems to be in a nice sweetspot in the smartphone market. My partner just got one, and I have to admit they're pretty sharp.

The market continues to build on this morning's reversal. Oil is still down a buck, and the 10-year is steady at 4.68%. I think there were a lot of worries about the subprime mortgage market, and a lot of puts bought to hedge against potential downside. As those fears subside, I expect another push higher in the indexes.

Other stocks making notable, high-volume moves include:
  • VDSI
  • TXI
  • HURC
  • SPAR
  • BWLD
  • TNH
  • TIE
  • VIP
  • BMRN
  • KAI
  • BPT
  • BBW
  • WLK
  • AMED
  • ORBK
  • MSSR
  • CMG

long RIMM

Investor Sentiment Check

The markets have rebounded strongly from this mornings lows, and are now all in positive territory and sitting near session highs.

Investor sentiment is supporting the move, as this morning's trading was characterized by high levels of bearishness. Here is a quick look:
  • The ARMS Index is above average at 1.17
  • The volatility indexes are both higher today
  • The CBOE put/call ratio is very high at 1.08
  • The ISEE is also elevated at 0.87

Small caps are leading the way, with large caps lagging. Retailers are the best performing sub group, while semis are still in the red. Tech and brokers are also doing relatively well.

Today Could Suffer From Post-Expiration Hangover

The market is opening under a bit of selling pressure this morning, on the first trading day following Friday's options expiration. This day has a history of weakness, owing to what many call the options expiration hangover.

There was some notable M&A activity over the weekend, with the big news coming out of the satellite radio space.

Semis and biotechs are the weakest so far, while homebuilders are bucking the weakness and seeing a bid.

Oil is trading lower this morning, falling below $58. And the yield on the 10-year Note is up a bit to 4.70%.

In other news and notes:
  • What was Britney thinking?
  • Electronic Arts mentioned positively in Barron's
  • XM Satellite and Sirius to combine in $13 bln merger
  • Vulcan Materials to acquire Florida Rock for $4.6 bln
  • Jetblue Airways begins reimbursing stranded passengers
  • New River Pharma to be acquired by Shire plc for $64
  • Home Depot misses by $0.01
  • Wal-Mart beats by $0.03
  • Boyd Gaming beats by $0.07
  • SanDisk upgraded to Buy from Neutral at Goldman
  • Yahoo! tgt raised to $38 from $32 at Oppenheimer
  • Smart & Final to be acquired by Apollo Management
  • Ultra Petroleum upgraded to Buy at Goldman- tgt $59
  • Wendy's announces $300 mln share buyback

long GS

Friday, February 16, 2007

Standout Stocks

My Stock of the Day is Varian Semi (VSEA)

This stock gapped lower in late January, but did not fall too far below its 50-day average. This week, it shot back above that resistance on a huge spike in volume.

The stock has continued to drift higher, and has made a new 52-week high. It is a little overbought at current levels, but looks good on a pullback.

The market is recovering as I write, and trying to get back into positive territory before the close. I think today's consolidation is healthy, and that the market should continue to grind higher. We are still working off the overbought condition, but pessimism has been running high, and more gains next week could cause another round of short covering by the bears.

Other stocks making notable, high-volume moves include:
  • HURC
  • PSYS
  • WBD
  • LFL
  • SIMO
  • LQDT
  • PCLN
  • VSEA
  • NHWK
  • CNSL
  • CPKI
  • TAP
  • CECO
  • NCI
  • CRYP
  • BPT

Profit Taking Ahead of Long Weekend

The markets have opened under a bit of pressure. Today is options expiration also. In addition, I would not be surprised to see a little profit taking ahead of the holiday weekend. So I am not expecting too much action today.

Microsoft CEO Steve Ballmer threw a wet blanket on the tech sector last night when he suggested that analysts' expectations for Vista were a little high. Now, either he is just trying to lower the bar so that the company can beat expectations, or Vista really will have a slow uptake.

There was also a very weak housing figure this morning, as housing starts fell -14% in the most recent period. I am not as worried about this, as lower starts mean lower supply in the market, which should support home prices. But it doesn't help the homebuilders.

On the inflation front, overall PPI fell 0.6%, in-line with consensus, and indicative of the easing inflation pressures on the food and energy side.

In other news and notes:
  • Asian markets mixed overnight
  • Boeing to retry commercial satellites - WSJ
  • Goldman ups PEP and KO to Buy
  • Polo Ralph Lauren profiled in New America section of IBD
  • Apple, Cisco extend negotiations on iPhone name
  • Google confirms agreement to buy Adscape
  • Audiocodes initiated with a Buy at Stanford- tgt $15
  • Yahoo! Music might drop copy protection from some songs
  • ValueClick tgt raised to $33 from $23 at Kaufman
  • Honeywell announces a new $3 bln share repurchase program
  • Chipotle Mexican Grill tgt upped to $72 at RBC
  • GMarket tgt upped to $27 at RBC
  • Michigan Sentiment prelim 93.3 vs 96.5 consensus


Thursday, February 15, 2007

Metropolitan Home Sales Not That Bad

I took a look under the hood of the NAR's Metropolitan Home Sales report today, and I came away with the belief that housing prices are hanging in pretty well throughout most of the country.

For the US as a whole, median sales prices fell -2.7% in 4Q06. But given the long, multi-year streak of double-digit gains, I view this as a modest pullback, or soft-landing if you will.

Here is a snapshot of five of the largest metro areas I follow, and how they fared in Q4:
  • Los Angeles: +3.2%
  • New York: +2.3%
  • San Francisco: +2.0%
  • Chicago: +0.9%
  • Miami: -6.2%

4 out of 5 of these cities showed continued price gains, albeit at more modest growth rates. As a homeowner in LA, this suits me just fine.

In a very unscientific approach, I decided to highlight all of the metro areas showing double-digit moves. I counted 14 areas still experiencing double-digit growth (Atlantic City NJ, Baton Rouge LA, Cumberland MD, Portland OR, Farmington NM, Raleigh NC, Salt Lake City and Seattle to name a handful) and only 3 experiencing double-digit declines. And guess what? All 3 metro areas were in Florida (Cape Coral-Fort Myers, Palm Bay-Melbourne, and Sarasota-Venice). So I guess is you live in South Florida, its no wonder you're bearish on the housing market. Things don't sound good.

But some other formerly "overheated" areas are also experiencing more modest pullbacks: Las Vegas (-0.8%), Phoenix (-2.3%), Washington, DC (-2.6%), and San Diego (-4.5%). Overall, this report, like the ones that have preceded it in recent quarters, paints a picture of a housing market that is slowing, not collapsing. For many households that have seen a nice rise in home equity appreciation over the last several years, this is a welcomed scenario.

How Will Day 2 of "Dovish Ben" Go?

The market is up a touch in the first hour of trading, after a nice day yesterday. Chairman Bernanke gave a more dovish testimony before Congress than many were expecting. He also did a nice job during the Q&A of staying on message and not wavering. Let's see how day 2 of his testimony goes, though I doubt we will see a repeat of yesterday's market action.

Oil is lower again this morning, falling below the $58 level. Bond yields are also lower so far, with the 10-year yield down another 3 basis points to 4.70%. It has now broken its recent uptrend and dropped below its 50-day support.

The NY Empire Index came in well above expectations (24.4 vs. 11.0), giving a hint of a manufacturing rebound. Regardless, with the breakout in the transports to new highs, I don't think many are worried about a big drop in economic activity.

As earnings season winds down, it looks like we had another quarter of double-digit profit growth. The market and the economy remain on solid footing, and the calls for a 2-3% correction have proven wishful thinking once again. The longer we go without one, the more likely that performance anxiety sets in and causes portfolio managers to start chasing stocks higher.

In other news and notes:
  • Asian markets rise overnight
  • Japan GDP rises +4.8%
  • Icahn, Affiliate Cut TWX Stake To 25M Shrs Vs 68.7M - DJ
  • Baker Hughes misses by $0.05, ex items
  • Laboratory Corp beats by $0.13
  • aQuantive beats by $0.06, beats on revs
  • JP Morgan Chase removed from Focus 1 List at Merrill
  • Nutrisystem target raised to $78 at BB&T
  • Nutrisystem tgt raised to $75 from $72 at Lazard
  • Qualcomm upgraded to Buy from Neutral at Oppenheimer
  • downgraded to Sell from Neutral at Citigroup
  • beats by a penny
  • Chicago Cubs, Under Armour reach partnership agreement
  • January wireless industry growth weakens in Brazil

Wednesday, February 14, 2007

Market Wrap

The market really loves Bernanke. It seems like whenever he speaks, the financials markets key into the sense of calm he provides, and respond positively. Both the stock and bond market rallied strongly today.

Bond yields fell 8 basis points to 4.73%, as measured by the 10-year T-note. And Bernanke said that he doesn't believe the inverted yield curve is foreshadowing economic weakness ahead.

In the stock market, the Dow utilities, transports, and industrials all hit new highs today. This is the first time that the trio has made simultaneous new highs since 1998. Not bad.

Tech stocks led the way, with the semis up +2.1%, followed by brokers (+2.0%), and industrials (+1.5%). Nearly all sectors were higher, save for the REITs, which were down on the day.

Large-caps really led the way, with the Russell 1000G +0.9%, while the Russell 2000 was up only +0.2%. For its part, the Nasdaq 100 was up +1.75%, and is leading the major indexes YTD.

Go back and read my sentiment post from today. I dont' think we will have that 2% correction people keep talking about until more investors embrace this rally.

Investor Sentiment Check

Given the big spike in the market today, after yesterday's nice showing, I would expect to see increased bullishness on the part of investors. Yet we are seeing the opposite.

If you told me the news today, and how much the markets were up, I would have guessed that the CBOE put/call was around 0.85 and that the ISEE was at the equivalent of around 55.

In actuality, the CBOE put/call is currently very high at 1.10, and the ISEE is also very elevated at 0.88.

These are high levels, that often coincide with big down days in the market. On an up day like this, they signify that investors don't believe in this rally, and are buying protection for a pullback. I like that setup, and think it should continue to support this market as it climbs the proverbial 'wall of worry'.

Bernanke Soothes Investor Concerns

The markets are enjoying a huge pop in early trading, on top of yesterday's nice rally. The catalyst for this morning's strength is the comments made by Chairman Bernanke, which eased investors' concerns about what he might say regarding inflation.

Here are some highlights of his comments:
  • Inflation pressures are beginning to diminish
  • US economy to expand moderately 2007-08
  • Signs of stabilization in housing, but still a risk
  • "Encouraging" that inflation expectations contained

There was a lot of chatter that Bernanke might make more hawkish comments about inflation, and hint at the possibility of more rate hikes. But he obviously sees inflation pressures as easing, and I think this will enable the Fed to remain on hold for awhile.

Bond yields are plunging on the news, with the 10-year yield falling 7 basis points to 4.75%. That leaves a lower high on the chart, and should help support stocks.

A strong earnings report from Garmin (GRMN) and also Applied Materials (AMAT) is helping the tech sector get a boost. But the strongest group this morning is the broker index (XBD), which is rebounding from the last couple days weakness.

Bernanke's testimony before Congress is starting now.

Tuesday, February 13, 2007

Standout Stocks

My Stock of the Day is Focus Media (FMCN)

I have highlighted this stock in the past as a long trading candidate. A look at the chart above shows it has had quite a run.

But today, many Asian stocks are reversing lower, and FMCN is taking a hit also. I think this correction in the stock could have further to run. As such, I have taken a trading short in the stock with a tight stop-loss.

Other stocks making notable, high-volume moves include:
  • CYNO
  • PCLN
  • VSNT
  • ICLR
  • VSEA
  • EAT
  • LFL
  • KSU
  • EFD
  • NDAQ
  • HDB
  • ININ
  • KNOT
  • IRBT
  • LQDT
  • CTRP
  • HANS

short FMCN

Investor Sentiment Check

Investor sentiment is getting more bullish today, after a spike in bearishness yesterday. The CBOE put/call closed at 1.18 yesterday. Also, the bull/bear poll on showed more bears than bulls for the first time since October 9th.

Today, the volatility indexes are breaking back below their 50-day moving averages. The ARMS Index is low at 0.78, and the put/call ratios are also lower (although the CBOE is still near 1.0).

In ETF land, the materials sector is leading the way (+1.7%), followed by energy (+0.9%). The tech and healthcare sectors are lagging (+0.2%). Biotechs are one of the few industries lower on the day.

The SPX is hitting a new high for the day as I write, and helping large-caps outpace small and mid-caps.

Dow Gets a Nice Boost

The market is opening on a strong note this morning, with takeover chatter hinting that Alocoa (AA) might get a bid. Also, MMM announced a record buyback, and GM got a strong upgrade from Merrill Lynch (MER) this morning.

Oil is getting a small bounce, and helping the energy stocks. Bond yields are flat, with the 10-year yield at 4.80%. Bernanke testifies tomorrow, and some are worried that he will present a more hawkish picture of inflation.

Steel stocks are also getting another boost this morning as well, likely on further takeover speculation for that group as well. The materials sector is leading the action this morning, while brokers are slow out of the gate.

In other news and notes:
  • North Korea accepts aid-for-disarmament plan
  • BHP Billiton and Rio Tinto both eyeing Alcoa as target
  • Belgian court says Google violated copyright law
  • 3M upgraded to Buy from Hold at Soleil
  • Anadigics tgt raised to $14 from $10.50 at Roth Capital
  • Cynosure beats by $0.05, beats on revs
  • UTHR initiated with a Buy at Brean Murray- tgt $65
  • Time Warner Cable becomes a public company
  • More than 1 bln Wi-Fi chips to ship in 2012 - EE Times

long GOOG

Monday, February 12, 2007

Investor Sentiment Check

While the selling in the market has been relatively contained, it has not been able to work its way back into positive territory. Oil and gold are both lower, while yields are up a bit to 4.81%.

Investor sentiment is running high today. Here is a quick rundown:
  • The ARMS Index is above-average at 1.14
  • The VIX/VXN are up again today
  • The CBOE put/call is high at 1.08
  • The ISEE is high, at the equivalent of 0.85

The blogger sentiment poll on Ticker Sense show more bulls than bears for the first time since October 2006. That's a lot of late to the party bulls if you ask me. Combined with the current overbought condition, that leads me to believe that this market could have some more work to do before its ready to run again. I am looking for places to put cash to work, but may try to sit on my hands a bit longer.

Monday Morning Musings

The market is opening under more selling pressure, continuing what we saw on Friday. Retailers and financials are bucking the weakness so far. REITs are down again, but given the run this group has had, a pullback there was well overdue.

Oil is also trading lower, falling below $59. Interest rates are pretty stable, with the 10-year yield at 4.78%. The volatility indexes are rising again, reflective of some building in fear.

This week is also options expiration week, so we might see some increased volatility associated with that event. The SPX is only -1.25% off its recent high, so a little pullback doesn't exactly reverse the uptrend.

A little pickup in bearish sentiment and a move to work off the overbought condition in the market would be a longer-term positive, and help put the market in position to continue that stair-step higher action that has been in place for months.

In other news and notes:
  • Asian, European markets dip overnight
  • Crude oil trading lower in early trade, now 58.80 -1.09
  • Costco mentioned positively in Barron's
  • Research In Motion to introduce newest BlackBerry
  • LCAV beats by $0.09; guides FY07 EPS above consensus
  • ILMN to repurchase approx $200 mln in common stock
  • Apple upgraded to Buy from Hold at Citigroup-tgt $105
  • FS confirms it will be taken private at US$82.00 per share
  • Hansen announces distribution deal with PepsiCo Canada
  • Garmin downgraded to Hold from Buy at Needham
  • Apple announces that Lionsgate Movies now on iTunes
  • GME declares 2-for-1 stock split; bond buyback increased by $150 mln

long AAPL

Friday, February 09, 2007

Investor Sentiment Check

The markets are taking it on the chin this afternoon. Bond yields are spiking 5 basis points to 4.78%, and oil is rising to the $60 level. Also, negative comments out of Micron (MU) today weighed on the tech sector.

I am starting to see the sentiment indicators pick up, and reflect heightened levels of fear. Here is a quick snapshot:
  • The volatility indexes are spiking +8-10% today
  • The ARMS Index is around average at 1.12
  • The CBOE put/call ratio is high at 1.03
  • The ISEE is also high, at the equivalent of 0.97

Given the tight trading range I mentioned in my opening post, this move is not that surprising. I mentioned that whichever way we broke out, we could get an exaggerated move. The brokers are down the most, and its hard to make any headway without them providing leadership.

Market Continues To Trade in Tight Range

The S&P 500 has closed between 1445 and 1450 for six straight days. That is pretty tight consolidation, and increases the likelihood that whichever direction to which the market breaks out could have some legs.

This morning's headline in the USA Today says, "Stocks may be overdue for a pullback". When the media is already looking for a pullback, I am not too worried. I would be more concerned if the headline read something like, 'stocks look to continue higher'.

CWTR warned about lower revenues again, with the CEO saying that customers are likely buying more electronics than clothing. Kind of a strange comment to make, but I guess when you're not doing well, any excuse sounds better than the truth.

In M&A news, Fortress Investments is set to go public, making the first hedge fund company to register an IPO. Goldman Sachs (GS) is also making news that it will raise around $19 billion for another private equity fund. Guess that means more buyouts are on the way.

In other news and notes:
  • Asian markets rise overnight
  • Insider selling reported at Merrill Lynch
  • PNRA misses by a penny; guides Q1 below consensus
  • Hasbro beats by $0.07, beats on revs
  • EMI mulls lifting online-music restrictions
  • Landstar System initiated with a Buy at Keybanc
  • MasterCard beats by $0.15
  • American Science & Engineering misses by $0.18
  • Circuit City target raised to $30 at CIBC
  • Broadcom target raised to $40 at Needham
  • Poole says development of subprime mortgage market 'healthy'

long GS

Thursday, February 08, 2007

Standout Stocks

My Stock of the Day is F5 Networks (FFIV)

The stock has a big day yesterday, after making bullish comments at its analyst day.

The stock spiked above its 50-day average on a big rise in volume. Today, it is consolidating those gains, and so far remaining above that key moving average.

I think the stock could continue to recover, as it is still below $80.85 high in mid-January.

As for the major indexes, they are still struggling with moving into positive territory. Energy stocks have come on strong, due to a big intraday spike in crude oil, and this could be weighing on the rest of the market.

Other stocks making notable, high-volume moves include:

  • SINA

  • TTEC

  • WW

  • AMX

  • AKAM

  • GEO

  • ANF

  • ICE

  • ARO

  • BECN

  • PACR

  • PL

  • AIZ

  • WMI

  • UHAL

  • GDI

  • GYMB

  • RVBD

  • PMTI

long FFIV

Retail Sales Roundup

The market is bouncing back from its lows this morning, and looks in pretty good shape. The NDX has already moved into positive territory, and more and more stocks on my screen have turned green.

Here are some highlights from this mornings retail sales report. For the companies below, I have highlighted their same-stores sales growth (vs. consensus expectations):
  • ARO: +5.4% vs. +3.8%
  • CTRN: +3.2% vs. +0.8%
  • GPS:+0.0% vs. -7.6%
  • KSS: +8.7% vs. +5.5%
  • MCD: +4.9% vs. +4.0%
  • JWN: +11.1% vs. +6.3%
  • ZUMZ: +13.0% vs. +8.8%
  • TGT: +5.1% vs. +4.9%
  • WMT: +2.2% vs. +2.1%
  • ANF: -6.0% vs. -1.8%
  • ANN: -10.2% vs. -4.9%
  • CHS: -3.5% vs. -1.0%
  • PLCE: +3.0% vs. +5.2%
  • COST: +2.0% vs. +3.4%
  • GYMB: +0.0% vs. +11.0%
  • PSUN: -7.7% vs. -5.0%
  • SHRP: -25.0% vs. -17.3%

long CHS

Market Dips After Retail Sales Reports

The market opened under selling pressure this morning, but you know how I feel about weak opens.

The monthly retail sales figures came out this morning, and were pretty much a mixed bag. That said, most of the stocks are actually trading higher. I will have a more detailed roundup later.

Another concern on the minds of investors today is the big warning out of HSBC regarding their subprime lending division. I don't think it will hurt the earnings of most financials too much, just those that may have been over-aggressive in their lending activities.

Oil is a bit higher this morning, but still below $58. And the 10-year yield is steady at 4.74%. So those should not be a big headwind for the market at current levels.

Most sectors are trading lower this morning, save for the retail and biotech indexes. Homebuilders are down pretty big, followed by brokers.

In other news and notes:
  • Europe lower overnight after ECB rate comments
  • Asian markets mixed overnight
  • Intermec to postpone Q4 earnings release
  • JNJ psoriasis drug posts mixed results in trial
  • Tempur-Pedic profiled in New America section of IBD
  • Thermo Fischer beats by $0.04; reaffirms
  • Aetna reports in line, guides Q1 EPS in line, ups Y07 guidance
  • Warner Music Group beats by $0.12, light on revs
  • BG beats by $0.08, beats on revs, guides Y07 above consensus
  • Florida insurance law fuels growing debate - WSJ
  • Bank Of England leaves bank rate unchanged at 5.25%
  • IntercontinentalExchange target raised to $176 at BofA
  • ESRX raises repurchase authorization to $1 bln
  • NEW REIT downgraded to Sell from neutral at Merrill

long JNJ

Market Dips After Retail Sales Reports

The market opened under selling pressure this morning, but you know how I feel about weak opens.

The monthly retail sales figures came out this morning, and were pretty much a mixed bag. That said, most of the stocks are actually trading higher. I will have a more detailed roundup later.

Another concern on the minds of investors today is the big warning out of HSBC regarding their subprime lending division. I don't think it will hurt the earnings of most financials too much, just those that may have been over-aggressive in their lending activities.

Oil is a bit higher this morning, but still below $58. And the 10-year yield is steady at 4.74%. So those should not be a big headwind for the market at current levels.

Most sectors are trading lower this morning, save for the retail and biotech indexes. Homebuilders are down pretty big, followed by brokers.

In other news and notes:
  • Europe lower overnight after ECB rate comments
  • Asian markets mixed overnight
  • Intermec to postpone Q4 earnings release
  • JNJ psoriasis drug posts mixed results in trial
  • Tempur-Pedic profiled in New America section of IBD
  • Thermo Fischer beats by $0.04; reaffirms
  • Aetna reports in line, guides Q1 EPS in line, ups Y07 guidance
  • Warner Music Group beats by $0.12, light on revs
  • BG beats by $0.08, beats on revs, guides Y07 above consensus
  • Florida insurance law fuels growing debate - WSJ
  • Bank Of England leaves bank rate unchanged at 5.25%
  • IntercontinentalExchange target raised to $176 at BofA
  • ESRX raises repurchase authorization to $1 bln
  • NEW REIT downgraded to Sell from neutral at Merrill

long JNJ

Wednesday, February 07, 2007

Investor Sentiment Check

The market is losing a bit of its momentum as I write this, but semis are still strong, as tech is outperforming.

Investor sentiment is running at about average levels:
  • The ARMS Index is just above average at 1.23
  • The CBOE put/call is average at 0.87
  • The ISEE is showing a bit more bearishness, running at the equivalent of 0.83

As for the sector ETFs, after tech, financials are up the most (+0.5%), while energy is down the most (-0.5%) and consumer staples are down slightly (-0.1%).

Oil has put in a fairly large downside reversal today, and is currently down more than a buck, to below $58. This should boost the overall market, even as we have seen that it can weigh on the market in the short-term as it drags energy stocks lower.

The Cisco Kid Comes Through

Sorry for the lack of posts yesterday. It was just one of those days where I didn't even have time to come up for air, let along make posts to my blog.

Anyway, the market is getting a little bounce this morning, on the heels of a strong earnings report from Cisco (CSCO). This is helping the tech sector and also boosting the semis. Of course, its still very early.

Oil is trading higher, but still below the $60 level. The energy complex is mostly higher, while retailers and homebuilders are down slightly.

This mornings productivty report was strong, helping to alleviate some of the near-term inflation worries. The 10-year yield continues to drift lower, currently at 4.75%. Some people are talking about a rate hike this year, but I just don't see it.

In other news and notes:
  • Asian markets mixed overnight
  • Raytheon selects IBM for Navy contract
  • Amazon offering video downloads for TV
  • CIGNA beats by $0.34, ex items; guides in-line
  • WHR beats by $0.20 misses on revs, guides FY07 below consensus
  • Liquidity Services profiled in New America section of IBD
  • Apollo Group beats by $0.04
  • IntercontinentalExchange beats by $0.07, light on revs
  • Fed's Plosser says Real GDP to grow at trend at about 3% in 2007
  • Fed's Plosser says unemployment rate to be just below 5% in 2007
  • Immelt's (GE) rise could herald sale of NBC TV, movies - NY Post
  • Amgen's Neupogen raises blood cancer risk in study
  • Gilead Sciences added to Conviction Buy List at Goldman
  • Vornado Rlty Trust withdraws from bidding on Equity Office


Tuesday, February 06, 2007

Oil Nearing the $60 Level Again

Oil, gold, and commodities are all higher this morning, but so are the major indexes. There continues to be a healthy rotation among the underlying economic sectors, as the SPX continues to quietly stair-step to new highs. The COMP still needs to get above 2508, its high from mid-January.

Semis are trading lower on weak Natl. Semi (NSM) guidance. Biotechs are also lower, while financials are nicely higher, followed by homebuilders.

Yesterday, I made a fuss about the ISEE being above 200 during the day. But by the close, it had fallen all the way back to 146, which is an average level. So I wouldn't waive the red flag yet. There is still enough skepticism and bearish sentiment out there to support stocks on a pullback.

In other news and notes:
  • Asian markets rise overnight
  • Toyota posts 7.3% rise in net profit
  • Saudi cuts Q4 oil supply to Asia, Iran exports more
  • URBN reports Q4 sales of $360.8 mln vs $358.0 mln consensus
  • Emerson beats by $0.02; issues in line FY07 guidance
  • St. Joe Company beats by $0.09, comments on Y07 outlook
  • Celanese beats by $0.20; raises FY07 guidance
  • RTSX upgraded to Buy from Neutral at Goldman
  • Int'l Securities Exchange beats by $0.04
  • Garmin teams with Ford to sell nuvi navigators
  • Tower Group added to Top Picks list at FBR
  • Navteq added to Amtech's Focus List
  • BE Aerospace tgt upped to $40 from $35 at Amtech


Monday, February 05, 2007

Standout Stocks

My Stock of the Day is Atheros Comm. (ATHR)

The stock is breaking out to a new 9-month high today on surging volume. Other than a brief mention in Barron's over the weekend, there is little news to account for the rise.

It looks mostly like a technical breakout. But given the strong volume, and the fact that the stock is still below its 52-week high, I think the move still has some legs.

The ISEE is still running above 200. I went back and looked, and the last time we saw a close above 200 was 8/31/06. So its been a while.

Other stocks making notable, high-volume moves include:
  • CTSH
  • SIMO
  • CROX
  • SYX
  • SPTN
  • STP
  • SHLD
  • STT
  • SLM
  • NEU
  • RCL
  • RBC
  • VVI

long ATHR

A Surge In Bullish Sentiment

It's only one indicator, but the ISEE is surging today to a level not seen in quite some time. The index is running at 225 right now, a highly bullish reading.

I am not sure where this surge in bullishness is coming from, and it is not being reflected in the other indicators. Also, it was very low on Friday, closing at 97, so maybe we should just look at the 2-day total to smooth out any abberations.

Let's see how it fares for the rest of the day--

Morning News Roundup

Some of the morning's news and notes highlights:
  • Asian markets lower overnight
  • Downside greater than upside for Microsoft after Vista launch - Barron's
  • Wal-Mart sees January same-store sales up 2.2%
  • Triad Hospitals nears private-equity pact - WSJ
  • Harley-Davidson mentioned negatively in Heard on the Street
  • Nigeria oil workers call off strike - AP
  • Cognizant Tech beats by $0.03; guides above consensus for Q1
  • Humana beats by $0.04; guides Q1 EPS below consensus
  • Nighthawk Radiology profiled in New America section of IBD
  • In email to workers, Michael Dell outlines cost-cutting moves
  • Verint Systems estimates raised at RBC
  • IntercontinentalExchange estimates raised at Goldman
  • misses by $1.08
  • ISM Services 59.0 vs 57.0 consensus

Monday Morning Musings

The market is opening under a bit of selling pressure this morning. After last week's rally, the markets are now fairly overbought. So some consolidation this week would not be a bad thing. But I would prefer to see mostly sideways action as opposed to more distribution days.

Oil ir rising again today, nearing the psychological $60 level. This is helping the energy complex, but likely weighing on the broader market.

Bond yields are moving lower, with the 10-year yield down 3 basis points to 4.80%.

And semis are getting a boost after the positive comments and guidance from KLAC.

I'll be back in a bit with the news roundup.

Friday, February 02, 2007

Investor Sentiment Check

The markets are still hovering slightly in positive territory, and volume looks to be running a little light. Oil is higher by $1.60 today, and is nearing the $59 level. This is likely weighing on the broader market.

As for investor sentiment, caution continues to be reflected in the indicators:
  • The ARMS Index is slightly above average at 1.04
  • The CBOE put/call is running high at 1.01
  • The ISEE is also high at the equivalent of 1.03

While the indexes are now reaching overbought levels on the oscillators, I think the recent runup in the put/call ratios will likely offset this a bit, and limit the damage from any pullback in the next week or so.

For today, here is what the sector ETF activity looks like:

  • Energy is leading (+0.9%)
  • Industrials are next (+0.44%)
  • Materials and healthcare are lower (-0.25%)

Mutual Fund Monthly

January got off to a good start. Growth stocks outperformed value stocks, domestic outperformed international, and mid and large-cap stocks outperformed small-cap stocks.

I keep tabs on a lot of mutual funds, and post my top and bottom performers each month. Here is the list for January:

Top 5
  • +5.95%: Baron Partners (BPTRX)
  • +4.79%: Marsico 21st (MXXIX)
  • +4.10%: Meridian Growth (MERDX)
  • +4.01%: CGM Focus (CGMFX)
  • +3.58%: Rainier Sm/Mid (RAISX)

Bottom 5

  • -1.05%: PIMCO Developing (PLMDX)
  • -0.82%: Driehaus Emerg Mkt (DREGX)
  • -0.59%: T.Rowe Emerg. Eurpoe (TREMX)
  • -0.07%: Fairholme Fund (FAIRX)
  • +0.07%: Artisan Intl. (ARTIX)

Payroll Data Not Too Hot, Not Too Cold

The market likes this morning's economic data. Payrolls came in a little light (111k vs. 150k consensus), and the unemployment rate ticked up slightly to 4.6%. If you are in the camp that is hoping for a Fed rate cut later this year, then you do not want to see the labor market heat up too much.

The markets seem to like this mornings report, with both the stock and bond markets rallying. The S&P 500 is hitting a new high, while the 10-year yield is falling another 2 basis points to 4.82%.

Reactions to earnings reports seemed to improve at the margin this week, with several large-cap stocks gapping higher after reporting earnings. This tells me that expectations maybe aren't too lofty.

The homebuilders are having another good day so far (+2.6%), followed by semis (+1.0%). Energy and materials stocks are lower.

In other news and notes:
  • Asian markets rise overnight
  • Heelys profiled in New America section of IBD
  • Global chip sales hit record $247.7 bln in 2006
  • Equity Office reaffirms support for Blackstone transaction
  • Cognizant Tech target raised to $100 at Jefferies
  • Monster Worldwide tgt raised to $62 from $57 at BofA
  • Akamai Tech downgraded to Hold at Maxim- tgt $55
  • WAG Jan same store sales increase 10.8% vs +8.0% single estimate
  • NYSE Group misses by a penny, beats on revs
  • Alliant Tech tgt raised to $103 from $96 at Friedman Billings

Thursday, February 01, 2007

Is The Market Getting Overbought?

Today was another solid day. Breadth was very strong also. But one of the things I would highlight as a slight concern is the number of new highs on the NYSE.

We had 384 new highs today, quite a number. The last time we saw this many highs, we were about a week away from a short-term market top. Now, I'm not saying that anytime the new highs hit this level, that you need to sell. Just that we might be getting a tad overbought in the short-term.

Small and mid-caps really led the way today (+0.9%), while the COMP was +0.2% and the NDX was actually negative.

Tomorrow morning we get the always overanalyzed payrolls report. I'm betting that we come in a little below the 150k consensus. Should be up.

Midday Sentiment Check

The markets are hanging in pretty well, following yesterday's nice rally and a strong open this morning.

Investment sentiment indicators are running at about average levels:
  • The ARMS Index is a little above-average at 1.01
  • The CBOE put/call is around average at 0.81
  • The ISEE Index is a little below average at 141

In terms of ETF activity, the materials sector is outperforming (+1.1%), followed by energy (+0.8%). On the downside is technology (-0.6%), which is being weighed on by MSFT and GOOG.


More Benign Inflation Data

Yesterday was a very solid day, with rising volume making for a strong accumulation day. The market seems to still be in a good mood following yesterday's Fed comments. This mornings inflation data reinforced the moderate inflation view, and the markets are reacting positively.

The yield on the 10-year note fell yesterday, and is falling again today. This morning, it hit 4.77% before bouncing off its 20-day average.

Personal spending was also up nicely, despite the bears' call that consumers are on the cusp of reigning in there spending.

The markets also seem to be dealing with the recent spike in oil prices well also. Oil is up again this morning, above $58, which is helping the energy stocks. But it is not coming at the expense of the rest of the market. Homebuilders are up, retail is doing well, and semis are positive also.

In other news and notes:
  • Asian markets strong overnight
  • Monster Employment Index edges higher in January
  • Mylan Labs beats by $0.08; guides FY07 above consensus
  • Starwood Hotels beats by $0.19, ex items; guides above consensus
  • Mobile TeleSystems profiled in New America section of IBD
  • Pru, ThinkEquity raise GOOG target to $600
  • Goldman raises GOOG target to $620
  • Comcast announces 3-for-2 stock split
  • CVS Corp beats by $0.01, revs in-line
  • CIBC raises GILD target to $82
  • Under Armour misses on bottom line, beats on top line
  • Wachovia raises their Q1 ests for GS adn LEH
  • Crocs tgt upped to $57 at Piper Jaffray
  • Vornado bids $56 a share for Equity office, topping Blackstone
  • Rite Aid reports 4.5% Same Store Sales increase for January
  • Michael Dell return to CEO of DELL