Market Wrap Up - Feb 6

Your Market Wrap Up provides our summary and analysis of the market activity of the day and a medley of important information you should find useful. Most major U.S. market indices were higher today, while the unsteady transportation sector reflects the recent rise of oil.

OVERSEAS MARKETS

Chinese shares found some footing today, after sliding last week. The Shanghai and Shenzhen 300 Index climbed about 1.95% today, after skidding about 11% last week. The index was actually down heavy before recovering today, after a comment from Cheng Siwei, vice chairman of the National People's Congress, expressing concern about a stock market bubble. Remember, we warned you about the pricey and volatile Chinese market ahead of the "experts." The Hang Seng Index rose 0.98% today, while the NIKKEI 225 increased 0.36%. Vietnam's Ho Chi Minh Index soared 3.09%.

The DJ STOXX 50, a broad measuring stick of European share movement, edged up 0.29% today. The FTSE 100 climbed 0.45%, while the Milan MIB30 fell 0.14%. With energy prices soaring, the Venezuela Stock Market Index rocketed 4.84%, but we urge you to not be drawn in by the sirens' song. Find oil investment elsewhere, as Venezuela's government is clearly taking a dangerous geopolitical path that puts it in direct conflict with the world's greatest power.

ECONOMIC DATA & ANALYSIS

Outside of the commentary of some key officials, Tuesday was a quiet day on the economic calendar. Ben Bernanke addressed the Omaha Chamber of Commerce today, making key points regarding the gap between wages of Americans. He directed policy makers to avoid placing trade restrictions or taking protectionist measures against low-cost producing nations like China, and recommended improving educational disparities within the United States as the cure.

Treasury Secretary Henry Paulson addressed the Congress on the president's new budget, just released yesterday, and the President himself urged Congress to resist raising taxes. The President asked lawmakers to target spending in order to bring the deficit under control. Paulson indicated in his comments that the economy was slowing to a sustainable pace.

Chicago Fed President Michael Moskow spoke about his region's economy, and indicated that officials should start considering how to push growth in weaker regions of the nation. Janet Yellen, the San Francisco Fed Head, discussed the 10-year old Asian financial crisis.

COMMODITY MARKETS

Hey, we're feeling pretty smart these days, as oil and natural gas prices continue to rise on freezing cold temperatures and the reemergence of the unsolved Iranian problem, just like we said. We promise to now stop reminding you about our correct bottom call on oil about three weeks ago. Brent crude and natural gas are both up fractionally today, while heating oil and gasoline run even more, up 1.2% and 1.1%, respectively.

Oh, guess what, we were right again! Remember how we starting talking about the impact of higher corn prices on surrogate foods, wheat and soybeans, and how we theorized that the increasing price of feed would soon lead to higher poultry, hogs and cattle prices. Yeah, well we were right again. Cattle feeder futures are up 1.9% today, while live cattle futures are up slightly. So Greek, what's next you ask? The prices of proteins will rise across the board, in our view, and food inflation will drive prices high enough that the Fed will raise interest rates this year. This is not the first time we've said it, but you still have an opportunity to profit from it.

Recently, Tyson Foods and Pilgrim's Pride indicated that they would pass through the higher costs of feed, but we expect that the return of bird flu and higher costs will pressure the shares of both these firms in the months to come. And, if, God forbid, avian influenza finds its way to North America, I would heavily short PPC and not soon after, look to short Yum Brands. However, until bird flu hits the U.S. hard enough that pigeons lay dead on Broad Street, expect YUM to benefit from a decreasing price of poultry. Only when Americans stop eating poultry out of fear, will YUM see impact to its bottom line.

STOCK SPECIFIC NEWS
Cisco Systems (CSCO) reports earnings today after the close. Cisco is once again viewed as a tech bellwether, and the report will be closely watched by tech sector players.

Tyco International (TYC) reported earnings earlier today, and its shares are down 1.9% as a result. Excluding one-time and restructuring charges, TYC earned $0.45, a penny ahead of consensus estimates according to Thomson Financial. We believe the company's guidance, which laid out slower earnings growth expectations than the first quarter result is the key reason behind the shares' decline today.

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