August 28, Morning Call

August 28, 2008: Morning Call

Fair Value: SP500 – 1281.76; NDX- 1903.31; DOW – 11503

Technical Levels:

SPX: 1205, 1235, 1250, 1262 support/1298-1300, 1337, 1365 resistance
NASDAQ: 2210, 2341, 2386 support / 2456, 2479, 2521, 2553 resistance:

Events:
Pre-market EPS: DLM (.-0.05/742.7M); ENER (.23/77.4M); SHLD (.33/11.72B); TIF(.54/728.0M)
035:55: German Unemployment Rate: slightly weaker than expected
07:30: Wholesale Price Index
08:30: Q2 GDP Revision (Annualized): 2.8%; GDP Price Index: 1.1%
08:30: Core PCE QoQ: 2.1%
08:30: Initial Jobless Claims; Continuing Claims
10:30: Natural Gas Storage Change
16:30: NVLS Q3 2008 Guidance
17:00: DELL earnings call
Post-market EPS: ATVI (.13/513.8M; DELL (.36/15.91B);

Foreign Market Summary/Key Macro News:

SP futures are trading flat with fair value while the NASDAQ futures are 5 points below fair value ahead of the Q2 GDP, Q2 GDP Price Index, Q2 Personal Consumption, Initial Jobless Claims all released at 8:30 ET. European markets have paired early gains and are currently unchanged Credit Agricole, France’s third-biggest bank, rallied 6.1% after the company said its Tier 1 capital ratio held steady. Germany August Unemployment rate +7.6% vs consensus +7.8% with unemployment (40k) vs consensus (10k). Nationwide UK Aug change in house prices (10.5%) y/y vs consensus (9.6%) the largest annual fall since 1991 and the UK CBI August survey of retailers showed pessimism deepened to levels not seen since the survey started in 1983. MBI and ABK are also up in Europe after MBI was able to win new muni-bond insurance business despite losing the AAA rating. Asian markets: Asian markets were mixed. Oil stocks rose on higher crude and technology stocks retreated after Morgan Stanley cut its rating on Samsung Electronics (005930.KS). Japan wavered between gains and losses. Exporters and real-estate shares dropped on concerns about economic slowdowns domestically and globally. Hong Kong declined as China Mobile (941.HK) and Esprit Holdings (330.HK) went down on downgrades and worries about their earnings outlooks. Commodities: Crude Oil is trading up 1.50 to nearly 120 a barrel on continued fears about Hurricane Gustav; the latest weather models show the most likely path will take the Hurricane along the Gulf Coast near New Orleans. Natural Gas is up 2% to 8.80 as is Gold and Silver. There appears to be a 7-dollar premium built into Crude on worries that supplies will be disrupted due to offshore platforms being shut-in. Natural Gas has a 10% premium built in as well.

Impact Research Calls/Market Moving News:

TIF (39.61): TIF reports Q2 EPS of .63 cents versus consensus of .55 cents and revenues of 732.4 million vs. consensus of 728 million. TIF guides the FY to between 2.82 and 2.92 vs. prior guidance of 2.80-2.90. Street consensus for the FY is 2.83. Q2 worldwide constant dollar comps were down 1%. US, Japan, and Other Asia/Pacific comps were weaker than expected while Europe was stronger than expected. TIF shares are indicated 2 dollars higher in the pre-market.

SHLD (86.98): Sears Holdings reports Q2 EPS $0.21 ex-items vs Reuters $0.33: Company reports revenues of $11.76B vs. Reuters $11.72B. Total domestic comps (6.2%) vs. Street Account consensus (3 firms) (7.9%). Company expects to generate higher EBITDA in 2H of this year as compared to the corresponding period in 2007 due to benefits from lower domestic inventory levels and continued expense management. SHLD have not traded in the pre-market.

MBI (11.98): MBIA and FGIC Corp in pact to provide reinsurance to $184B of municipal bonds currently insured by FGIC—Reuters: MBI shares are indicated up almost 2 dollar in the pre-market.

ENER (78.34): Energy Conversion reports Q4 EPS $0.24 vs. Reuters $0.23 (78.34)Company reports revenues of $82.4M vs. Reuters $77.4M. As of 30-Jun, the solar product sales pipeline was $1.8B, as compared to $1.2B at the end of the fiscal Q3. Guides Q1 revenues to $95-98M vs. Reuters $88.5M. Guides next year revenues to $455-485M vs. Reuters $444.9M. Guides Q1 gross margin to ~31% and between 33-35% for H2 of the year. ENER shares are indicated up 5 bucks in the pre-market.

CHL (61.51): China Mobile, a key Chinese stock, is down 3 bucks after JPM cut their rating. The decline erased Wednesday’s gain following CHL’s earnings release. JP Morgan is concerned about rising competition in China’s telecommunications market, which may restrict earnings growth.

CAT (69.56): Caterpillar to consider price increases to cover higher raw materials costs – Bloomberg: At a press briefing, chairman James Owens says the increases will be similar to those by competitors. He adds that the company's order book for mining is full until 2010.

AAPL (174.67): More artists, record companies choosing not to offer releases on iTunes – WSJ: The concerned parties believe selling single songs on iTunes is penny-wise, pound-foolish for the music industry. In some cases, they want the options, which Apple refuses, to sell albums as a whole or charge more than $0.99 per song. This is an old story.

KO (53.79): Coca-Cola downgraded to neutral from outperform at Credit Suisse, removed from Focus List