Ideas:
Digging into the PPI / CPI data, the PPI finished goods data saw a decline from 1.3% in November to 0.2% in December and the core intermediate goods PPI was negative at -0.1% for a second consecutive month. I believe this is telling us that producers are having trouble pushing price increases on the consumers. Meanwhile the retailers were bid up today, I suspect because housing numbers and the decline in oil prices are supporting the thesis that the consumer will be cleaning out the inventory at the local stores. While I believe the consumer will hang in there with his supply of credit cards and be a steady influence on this strong but non-inflationary economy, I believe the seasonality of the retail business will take over with a decline/lack of upside momentum in retail names(Take a look at this chart of TGT going back two years and notice what happens in the Jan.- May periods)
<<sg606346.gif>> see below

While everyone questions the Housing statistics does anyone notice the divergence between LEN and CTX? Some of the other names are also looking sloppy..... BZH?

DRGs (drugs) are getting a lift ....  the House passed the bill, 255 to 170, aimed at forcing the administration to negotiate the prices Medicare pays for drugs and now it goes to the Senate. I mentioned this in my Jan. 5th commentary. The vote will not be strong enough to override a threatened veto by Bush, who said he will not accept it in its current form.

> IBM released earnings after the close. The stock skipped the rally part that INTC and AAPL had when their numbers came out and went to straight for the selling.... down about 6.00 in after hours trading at 93.48 as I write.
>
> Credit Default Swaps:
> On the Thursday - Friday Commentary, I am adding a list of the single stocks that are having the greatest move in the Credit Default Swaps market for the week. Listed are the best and worst performing 3 year CDS for the last 5 days by percentage terms:
> Over all              best - AT&T Inc and HCA Inc                  worst - Stanley Works and Boston Scientific
> Basic Materials - best- Phelps Dodge and Temple Inland   worst - PolyOne Corp and U.S. Steel
> Communications-best- AT&T Inc and Tribune Co.              worst -  News America Inc and AT&T Corp
> Consumer/Cyclical-best- Cooper Tire and KB Home          worst - Mattel Inc and Sabre Holdings Corp.
> Consumer/Non-cyclical- best HCA Inc and UST Inc           worst - Boston Scientific and Aetna Inc
> Energy              best - Marathon Oil And Schlumberger     worst - Williams Co. and Plains All American
> Financial            best- Loews Corp and PMI Group            worst - Credit Suisse USA and Ambac Assurance Corp
> Industrial           best - Caterpillar Inc and Sealed Air          worst - Stanley Works and Tyco International
> Technology       best - Hewett-Packard and Freescale Semi  worst- Pitney Bowes and Computer Sciences
> Utilities            best - Duke Energy and First Energy          worst- Sempra Energy and Progress Energy Inc.
>
> Equity Options:
I'll skip the Jan.'07 expiry noise..... in longer dated expiry, VZ jan'09 40 puts were sold x 3k at 4.975, MOT Jan'08 20 calls traded 10k at 1.875 = 18.70, TOL Jan'08 40 calls were bought at 1.90 vs 31.95 x 5k, there was a buyer of BAC Jan'09 55-40 put spread at 4.40 vs 53.40 x 4k, INTC Jan'08 20 straddle traded at 4.30 vs 20.68.
In the shorter term, WM jul 45 puts were paid by a cust at 2.85 vs 43.98 x 5k , JPM Feb 50 calls were bought by a cust at around .34 x 2k, and ALL saw a seller of the Jan- Feb 62.5 call spread down to .55 x 5k.

Equity Indexes:

IWM Jan'07 and Feb '07 77 puts were the stand out trading over 40k on each line - possibly a roll.

 Regards,
 Harley E. Evans

sg606346.gif 21K View Download