Tag - :VM

Investors saw lots of red in today’s trading session as regional manufacturing data suggested that economy is not picking up as much as had been hoped. Most economists had expected gains in the New York Fed’s manufacturing index but were instead treated to numbers indicating that the factory sector shrank at a more severe rate than expected.

A stronger U.S. dollar pulled oil below $70 away from its eight month high.

As of press time, 3:30 P.M. Eastern, the Dow was down -194.75 to 8,604.50; the Nasdaq was down -46.29 to 1,812.51, and the S&P 500 was down -23.25 at 922.96.

The Russell 2000 Index, comprised of the top 2,000 small-cap stocks, was down 16.77 at 510.06.

Bucking the downward trend today was pharma and financials. Two of the top percentage gainers were JazzPharma (Nasdaq:JAZZ) up 69.7% on positive news about it fibromyalgia drug and MAP Pharma (Nasdaq:MAPP) up 11.89%. MAPP has been on a tear since late May when it shot up to $11.39 from $3.15.

Other small-caps showing leadership today include QEP (Nasdaq:QEPC) up 39.07%, Tongxin Intl (Nasdaq:TXICU) up 24.75%, and two financials, American Capital (Nasdaq:ACAS) up 14.67% and New Century Bancorp (Nasdaq:NCBC) up 14.83%.

Small-cap decliners were lead by Oil-Dri Corp. of America (NYSE:ODC) down 23.24% following Friday’s news that it will lose its largest customer in the cat litter retail segment. Other leading decliners include Virgin Mobile USA (NYSE:VM) down 16.98%, book retailer Borders Group (NYSE:BGP) down 13.16%, and Integrated Electrical Services (Nasdaq:IESC) down 17.64%.

*****Summer doesn’t officially start for a few more days. Tell that to the parents who are now getting their kids off to camp or getting ready for vacation. For the standard two-income household, living easy in summertime is just a memory.

Including today, we have just 12 more trading days until the end of June and the end of the second quarter. I suspect we will have seen the highs for stock prices by then. That is, if we haven’t seen them already.

Oil backed off recent highs on Friday. And that’s likely to continue. Oil was too cheap at $33 a barrel. But $73 is too high, at least for now while much of the developed world is still mired in an economic downturn. We know demand is still weak. And we know there are looming supply issues when demand picks back up. However, the issue right now is the economy.

*****Oil has been rallying as the news cycle has been relentlessly optimistic about an imminent economic recovery. In fact, many leading economists expect U.S. GDP to actually grow in the third quarter.

Oil stocks that we’ve been following have been on a tear the market bottom, including Graham Corp. (AMEX:GHM) up 81%; Brigham Exploration (Nasdaq:BEXP) up 239%; Gulfport Energy Corp. (Nasdaq:GPOR) up 326%. Even the majors like ExxonMobil (NYSE:XOM), Chevron (NYSE:CVX), BP (NYSE:BP), and ConocoPhillips (NYSE:COP) are bringing investors some decent returns, though not as great as small-cap stocks in the same sector.

Investors have bought the rumor of economic recovery. We’ll see how they respond to the news. I’ll be watching oil as the leading indicator for economic expectations.

Right now, it seems like stock prices have priced in a modest recovery. And if investors perceive that there’s not much upside left for stock prices, it would makes sense to trim exposure, take profits, or however you want to put it.

*****We’ve seen anecdotal evidence that investors are moving funds out of the stocks that have led the market higher. Technology has been having trouble making headway. And we’ve seen strength in healthcare and consumer staple stocks. Plus, the Volatility Index (VIX), which measures the cost of put options (which rise in value as stocks or indices fall, thereby giving investors downside protection) has been on the rise.

This suggests that investors are preparing for a downside move for stock prices, or, at the very least, protecting gains they have made.

*****On Mondays, I’m going to start offering a look at the economic data coming out during the week ahead. This week is a bit unusual as all the economic data is out on Tuesday. Tomorrow we get Housing Starts, Building Permits and the Producer Price Index (PPI).

Of course, consumers will focus on the housing numbers. But I’d expect any numbers will be interpreted with optimism. Investors seem to understand that the bottoming process for the housing market will be volatile and that wild swings in the data should be expected.

In my opinion, the PPI is the one to watch. The U.S. dollar rallied a bit last week, but there’s no doubt that massive Treasury bond sales have investors worried about a weaker dollar the potential for inflation to pick up. Add to that improving retail sales numbers, helped by higher gasoline prices, and you have the potential for a higher-than-expected PPI reading. Needless to say, that would not be good for stocks.

I’ll talk to you tomorrow.

Ian Wyatt

P.S. You’ll recall from Friday’s issue we start sharing charting analysis from TradeMaster’s technical analyst, Jason Cimpl. If you didn’t have a chance to catch, here’s the link. You’ll get his take on this week’s market direction. Since this is a new feature for Daily Profit I’d greatly appreciate receiving any feedback from you on it.

So what jingle-linga-ling brings your cell phone to life? Beethoven’s 5th? Your sweetheart’s favorite love song? Some Grateful Dead?

That’s ringtone. But what about the beeps and blips that someone hears while waiting for you to pick up? That’s ringback.

In an impersonal world, consumers enjoy personalizing mobile phones in many ways, and adding ringback tones appears to be a growing fad — plus there’s a potential for video content. NMS Communications Corp. (Nasdaq:NMSS) is making some noise about becoming a leading player in this blossoming market, and has made some strategic changes to its business model while serving up a suite of added services.

Investors in NMS Communications might like the sound of that, since this Framingham, Mass., company has posted losses for the past two years. Now this 20-year-old company is feeling the Groove (as in Groove Mobile; more on this later).

NMS Communications is transitioning from a nuts-and-bolts, equipment and products sort of company, to a company with a services-oriented focus. And it could lead to a divorce of its NMS Communications voice, video and data platform business from its LiveWire Mobile suite of managed personalization services.

Of the four analysts surveyed by Thomson Reuters, three have NMS Communications as a “buy,” with another calling the stock a “hold,” with a median price target of $2.50.

NMS appears to be pinning its future on the cutting-edge mobile media services field. Shares hit a 52-week low of $1.16 on Friday, three days after NMS reported first-quarter results. The stock traded as high as $1.97 last June 4, but has not . . .

BIDZ.com, Inc. (Nasdaq: BIDZ), China Finance Online Co. (Nasdaq: JRJC) and Genesco Inc. (NYSE: GCO) are among the biggest percentage losers in Tuesday's trading among companies with market capitalizations under $750 million.

Here are today's biggest percentage losers:

The Russell 2000 (NYSE: IWM) fell for the third consecutive time today following news of a decline in industrial production and renewed fears of a credit squeeze. The Russell 2000 lost 2.10 points, or 0.27%, to 769.50. The Dow Jones Industrial Average (INDU) added 66.74 points, or 0.51%, to 13,176.79.

On a year-to-date basis, the Russell 2000 has retreated 2.28%, while the Dow has risen 5.63% and the S&P 500 has added 2.97%.

Industrial production unexpectedly fell 0.5% in October, the U.S. Federal Reserve reported before the opening. That’s the biggest decline since January, defying economists’ projections of a rise of 0.1%. Industrial production added 0.2% in September.

The decline was due primarily to a 1.6% drop in utilities, as well as smaller declines in mines, construction and consumer goods. Compared with October 2006, industrial production has increased 1.8%.

Capacity utilization for the total industry declined to 81.7% from 82.2% in September.

The data tell us that the U.S. economy is probably headed for a slowdown, as industrial production is about 20% of gross domestic product. On the plus side, factories have room to ramp up production without triggering inflation.

012 Smile.Communications LTD
www.012.net
NASDAQ: SMLC
Scheduled for Oct. 29
$375.7 million post-money valuation

Is it 1999 all over again? No matter how mature the Internet seems, investors want stock in it. Hence, Internet Gold - Golden Lines Ltd. (Nasdaq: IGLD), an Israeli telecommunications and Internet company, is spinning off its 012 Smile.Communications subsidiary, which operates a broadband Internet service, VoIP-based telephone and business services, and a network of Wi-Fi Internet access spots throughout Israel. After the deal closes, Internet Gold will own 73.3% of the 012 Smile.Communications business and all of its Smile.Media business, which provides online content, advertising, commerce and search services.

Internet Gold hopes to net about $91.3 million from the offering of 6,675,000 shares at a price between $14 and $16 per share. (All numbers are in U.S. dollars on U.S. GAAP.) Of the proceeds from the offering, $41.0 million will go to pay off debt, debentures, and a contingent payment stemming from its December 2006 acquisition of 012 Golden Lines, an Internet service provider (ISP) that was rolled into Smile.Communications. The rest of the funds will go to general corporate purposes, possibly including acquisitions. Acquisitions aside, the big source of growth will be telephone services. Israel is a tiny country. Its citizens come from all over the world, and its businesses (including Internet Gold) rely on customers and partners all over the place. Hence, it’s easy for people to run up big long-distance bills, and that makes alternatives attractive. Already, the company captures 34% of incoming and outgoing international call minutes within Israel.

Although 012 Smile.Communications is the second largest ISP in Israel with about a third of the market, it generated just $244.4 million in revenue from one million residential and business customers in 2006 on a pro-forma basis. To put that in perspective, Comcast Corporation (Nasdaq: CMCSA), which is the second largest ISP in the United States with about 12% of the market, brought in over $24.9 billion in total revenue last year, although the company did not break down how much of those sales came from its 11 million Internet subscribers and how much came from customers using television and telephone services.