Quadruple Witching: What Does It Mean To You?

Stocks are shrugging off higher oil on this
quadruple witching Friday.
The major indices are just off multi-year
highs. S&P 500 is 1% off, and the Dow is 3% under its multi-year highs. The S&P
turned positive for the year. So far this quarter, guidance has been strong and
many companies have announced stock buyback programs.

The current account deficit widened 3.6% to $195.1 billion, hotter
than expected and a new record. The deficit amounts to a record 6.4% of gross
domestic product. The University of Michigan Consumer Sentiment Index
rebounded to 94.8 in June vs. 86.9 in May.

Crude rose above $57, to double top territory and to levels not seen
since April. The U.S. embassy in Nigeria was closed, adding to geopolitical
concerns. Nigerian light sweet crude is highly prized by refiners because it can
easily be turned into gasoline. Nigerian is an OPEC member, the largest producer
in Africa and the 11th largest in the world. Demand for gasoline is 3% higher
than this time last year. Distillate demand is up  6.5%. Refiners are
operating near capacity and with inventories 9% over last year, traders are
worried not about supply, but about output.

Adobe
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beat by a penny, ex-items and beat on revenues, but
guidance was a disappointment.

Circuit City
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reported a loss of 0.07 for Q1, wider than
expected. CC has been losing market share to Best Buy and Wal-Mart recently.
Earlier this week, Best Buy
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reported blowout numbers.

KB Homes
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beat by 0.28 and raised 2005 guidance; revenues were
in-line. Sales jumped nearly 80%.  Many homebuilders are making historic
highs.

Genentech
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is buying a plant in San Francisco from Biogen
Idec

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. Price tag: $408 million. The plant was originally built to
manufacture the recalled drug Tysabri.

Smith Barney upgraded the hombuilders–after downgrading the sector in
February.

An FDA advisory committee recommended NitroMed’s
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heart
drug for African Americans be approved. 

What is quadruple witching? It’s when stock index futures, stock index
options, stock options and single stock futures all expire. It happens four
times a year, on the third Friday of March, June, September and December.
Sometimes you will see wild gyrations and false price moves as contracts are
covered and rolled over. Some traders either trade lightly or not at all on
options expiration days.

Strong sectors are:  Homebuilders

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+2.36%    Biotech  
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+1.81%    Oil
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+1.34%    

      

Weak sectors are:  Airlines
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-1.29%    Disk Drives
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-1.34%      Software

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-0.65%   

Dow +40.65 10,619.30
Nasdaq -1.14 2088.01
S&P 500 +4.32 1215.28

The dollar is -0.64 at
88.08

Crude Oil is +0.92 at
58.35

Gold is +1.70 at 437.80

ce=”Arial” size=”2″ face=”Arial”>Volume is 1.1 billion on the NYSE and 1
billion on the Nasdaq.

Market breadth is mixed.

NYSE Issues
Advancing 1831 Up Vol 661
Declining 1105 Down Vol 355
1.65 1.86
Nasdaq
Advancing 1228 Up Vol 438
Declining 1568 Down Vol 538
1.27 1.22

Stocks in the News

FedEx
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was mentioned positively in Business Week.

Wachovia downgraded Goldman Sachs
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to market perform from
outperform.

Bank of America
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is acquiring a 9% stake in China
Construction Bank
for $2.5 billion. IT is the largest single investment to
date in the Chinese banking sector. The company plans to sell shares to the
public later this year.

Host Marriot
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increased its dividend by 25%.

Valero
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upped Q2 and 2005 guidance, saying the $7.51 estimate
is too low.

Canada gave 7-years licenses to XM Satellite Radio
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and
Sirius Satellite

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. The Canadian market is only 1/10 the size of
the U.S. market.

Brice Wightman