A.G. Edwards --- Goldman, Al ---Chief Market Strategist
>> sony, b.m.g. entertainment named a new chief executive officer. it’s a switch of top jobs after months of stalemate over the company’s management. they send to end a rift between sony-b.m.g.’s partners. sony is up 47 cents today. 49.62 at the close. concerning over weak earnings gave over applause to oil earnings falling tie six-week low. he expects the market to remain strong, butter now and then it needs a breather. joining me is al goldman, chief market strategist at a.g. edwards. thank you for joining us.
>> my pleasure. thank you for having me
>> what do you think is behind today’s turn around?
>> i think bavengly we’re in bull market , you the and it will sound naive, but they gun. it happened today, started out lower, what of a follow through to yesterday’s late selloff tied to fed governor stating that they are still worried about inflation and that created concern that interest rates might go higher than the financial market wants them to go. but the sellers came in and when they stopped going down, frankly, it just went up. it pointed out that the market had done enough to work off the january excesses, and that they wanted into the party. it was an impressive day, particularly for late on friday.
>> bull markets you say? how far out do you see that extending?
>> well, i think we’ll have a good market this year. my projections are more optimistic than most, is fine and dandy, i’m looking for the s&p to reach the area of 1 40. that would put the market at about 1ly times earnings by year end, and, of course, year end we’ll be looking into ‘07 earnings already. relative to interest rates, that say reasonable multiple.
>> what will the key driver fwow this market ?
>> well, i think the key driver will be when the fed officially indicates that there are about finished raising interest rates. i think that will make everybody feel better. last year we had a bear market in price earning multiples and a bull market in earnings. because the fed is raising interest rates every six weeks. when interest rates go up, fees tend to go down. we think interest rates will not go up much higher than perhaps another 25 basis points, the fed will stop their rate hike cycle by the spring. if that’s the case, i that i will improve the mood. also, hopefully the situation with iran has cooled down a bit by then, if it does, and we think it will, then the price of oil will also be lower.
>> we have a very big week next week coming up with ben bernanke testifying on capitol hill. what are you expecting to hear?
>> i’m expecting to hear that he’s going to look different than allan greenspan, but it’s basically a greenspannish speech. he’s taking over for an i con, and he’s a very qualified economist, and he’s going to walk in mr. greenspan’s footsteps for a year or six months or something, but he’ll be closely watched. hopefully he’s as good a communicator as greenspan was, because if you give your opinion and it sounds convincing it helps that opinion come true. i wouldn’t look for shock. the fed will stay vigilant, that’s the fed’s job.
>> what about the inflation factor? do you think he’ll signal inflation concerns and could have a market impact?
>> my guess would be that he’ll say that we’re going to continue to watch inflationary factors, there’s no question that inflationary pressure is picking up a bit. we’re looking for the c.p.i. next year to be about 2.5% higher than in last year, but still a rate that i think the economy can certainly live with. what he says will be closely watched, and also how he says it. he’s a new delivery system. we have to see how he goes over in the financial mark.
>> at what level do you think inflation is unmanageable for the market ?
>> well, i don’t think even the fed chairman green span or exfed chairman greenspan knows the answer to that question. sea logically, i would say that if people thought that inflation was going to get up to like 3.5%, i don’t think that’s the case, but if people feel that way, emotionally it will create concerns about much higher interest rates. one of the things that can kill a bull market is much higher interest rates.
>> in the remaining minute or so, let me ask you what are you buy these days?
>> keep in mind that this bull market is already months old. it’s going to be more selective. it’s going to go after those companies in two cases. one, for them to grow their earnings, two, they are not particularly popular. i like unpopular stocks. and a couple of groups we like are pharmaceuticals, technology, and finances. the time to buy quality companies is when other people don’t want them. the time not to buy them is when they are very popular.
>> so pharmaceuticals, disappointing forecast from pfizer today. does that alarm you at all?
>> not really. this is a―you know, pfizer and the other major pharmaceuticals operate in an economy that’s aging, there’s been lots of negative developments, and a lot of drug problems that intent plaguing this industry. the premultiples are the best eye seen in many, many years, they are good defensive growth stocks and economy is in its fifth year for recovery. the economic expansion is going to slow down to 3.2%, i think it’s good to focus on those companies that do well, even if the slowing economy, like pharmaceuticals.
>> al, thank you so much for joining us.
>> thank you.
>> our thanks to al goldman, chief market strategist at a.g. edwards.
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Listen Market briefing--- Lori (slow)
NYSE --- Deb (fast)
Nasdaq --- Robert (slow)
Crude oil --- Su (fast)
Pfizer --- Greg (slow)
after the bell. pfizer says earnings will rise this year as it continues a $4 billion cost-cutting plan. pfizer hosted a meeting of analysts and investors here in new york. c.e.o. frank mckin nell is cutting costs as pfizer prepares to lose patent protection on some of its biggest selling products. we have the phaser starting, and we’ll talk with michael obuchowski with altanes investments. dow closed up 37 points, 10,920. the s&p, up to 1267, and the nasdaq at 2261, gain of just about six points. strange numbers of the dow, i.b.m., a.i.g., 3-m, and pfizer with its disappointing forecast, capping the gain. let’s run through them.
the dow up 1.1%, the s&p up.25%, the nasdaq losing.03%. we’re off tie rocky start of the trading session, but by the afternoon, transports 4e7 lead the market higher. deborah cost run it is here to wrap up the day at the new york stock edge change what we did see, the dow was up at 61 points, closing up 37. not at our best level of the day, but if you take a look at the biggest winners here in this afternoon’s session. i was talking to traders on the floor, what we really want to see is this market really move higher. we didn’t see a big push, one trader sa i talked to said we didn’t see the volume, one of the reasons is we couldn’t stick to the higher levels. transports performing quite well, even though we did see the transports rising and then falling off just a little bit. not only that, one of the reasons transports doing so well, the reason for that is crude oil at the six-week low. everyone looking that that, crude below $62 per barrel. closing at 61.84. financial performs quite well, crude coming in at the six-week low, oil services are taking off in the this afternoon’s session. but kind of the castover the market all through youd the trading day that led to us the rocky open that we did see, that was really pfizer. a lot of disappointment in their yearly forecast for this year, that was all the biggest drag in the dow jones industrial average. if you take a willing at the winning end in the s&p 500. really what also helped out this market besides the transports and financials performing well. you saw telecom stocks among the biggest winners in today’s session. commercial services, insurance performing quite well, g.e. also getting a pretty nice blip in today’s session after they raised their quarter many dividend. i was talking about the telecom names like ath&th, verizon and bell south performing really well in today’s session. we’ve been talking about gold, rightfully so. the gold index is lower. gold with the biggest weekly dop in two months, gold moving around with the price of oil. looks like the demand from commodity investors may be slow sloing down. you saw this past week, gold and gold stocks were lower, and once again you saw that in today’s sefplgs lori, ba to you in the studio.
>> thank you. telecom stocks led a late session rally at the nasdaq.
>> take a look at the nasdaq in today’s session. mostly lower throughout the session. below the white line, the yellow line, the nasdaq for today. as crude closed around 2.30, you can see the nasdaq moving higher. traders say this played a big part in the rally. and we have the head trader at oak book saying that investors reevaluating earnings, mentioning disney and another, and they kind of overcome the negative sentiment in technology stocks and google, yao hoo, and amy, all disappointing investors with their forecasts, gary was saying they were buying and adding to the cisco position from chief executive john chambers, cisco systems, one of the strongest groups on the nasdaq. up 1%. telecom index rose about.7%. and google up more than 1%. and definitely looking a lot more attractive, a little more than $100 off its high. apple shares rallying today after nearly 6% decline op thursday, up 3% today. the company last night reassuring consumers and investors that they will plan to ship those new mcintosh computers this month, there was concerns there that were delays. demritches with that notebook are more of a software issue than a hardware issue. starbucks, moving up to a record in today’s session, up about 1%. starbucks boasting its four year forecast by a nickel at the beginning of the month. yesterday, introducing new drinks, a new iced coffee that will be distributed by pepsi. dell up and they’ll be reporting earnings next week. we’ll be following it from the nasdaq.
>> robert, thank you. on to energy. crude slid to a six-week low on a report that global producers are boosting output. new york trading, crude futures fell more than 1% to close below the $62 per barrel mark. for the week, is a loss of more than 5%. the declines were across the board, gasoline futures, the biggest mover fall almost 3% on a surge in u.s. supply. sheer su keenan, and she joins us in studio with the latest on what’s behind energy trading. we have seen bear ish sentiment set in and it was reinforced by a report that high-priced oil fueled new investments which would lead tie boost in oil production. for much of this week, investors have shifted their focus away from iran’s nuclear program, the questions about how that conflict might hurt supply and keyed in on current fuel supplies in the u.s., are well above average.
>> across the board our supplies are really adequate, maybe a little better than adequate, that certainly is putting the blanket on any sort of move. early in the month, we actually early in the year we were trading $69. it’s a lock way from now.
>> look ahead to next week. our latest bloomberg polls shows the surplus in u.s. fuel supplies will continue to drive prices lower. our poll surveys 24, or 43% predict a drop in prices. the first time this year that more expected to climb than a gain, as you saw just over a third predict prices will rise. lori.
>> su, thank you. pfizer sharesly if after hank mckinnell spoke to analysts and investors. greg was there and spoke with the c.e.o.
>> they was down by as much as 3.8%, ended at 2%. many investors were disappointed by the c.e.o. and top management forecast for flat growth in revenue and earnings per share on adjusted diluted basis and cost cuts were not as big as they hoped for. and he believes pfizer’s outlook is very bright. he argues revenues will recover in 2007 and that would be enough to boost earnings growth to high single digits or 6-9% yearly. he did also stress that over the next two years, they will need cost cuts, that’s $2 billion worth in 2006, up to $4 billion in 2008 to get those profit numbers up, and he said a large percentage of those deductions will come from job cuts. let’s listen to what mr. mckinnell had to say about that
>> 25% will be from reductions of positions, not all of which have people in them. we are closing a number of manufacturing facilities. from 93 plants around the world to 66. some of those plants will be closed. some will be purchased by others along with the work force.
>> the same time, mckinle said six new products will be launched within 2006, could be enough to get revenue growth back to 10% or higher, something that we haven’t done in the past few years. he said they could get a big chunk of drugs and revenue growth from acquisitions. they’ve got―they will have up to 60 billion in cash by the end of this year. let’s listen to what mr. mckinnell had to say about deals.
>> historically, about 30% of our revenue has come from outside pfizer. licensing, small acquisitions, partnership with other companies, i suspect that will be true going forward. we’re really focused on what we call targeted acquisitions, those that bring additional products or technology without bringing a lot of infrastructure, because we have the infrastructure we need around the world right now.
>> fieser is a biggest struggle. lipitor, sales slowed to 6-8% the fourth quarter, mr.―the c.e.o. is optimistic would you see 15 percent over the next few years.
>> pfizer closed down 2.5% today. much more ahead. lower oil prices helped turn stocks around. we’ll have a look with our next guest. stay with us.
