Monday, November 10, 2008

November 10, 2008: Morning Call

November 10, 2008: Morning Call

Fair Value: SP500 – 929.95; NDX: 1273.38; DOW – 89255

Technical Levels:

SPX: 848-850, 908 support/ 998, 1098-1100 resistance

NASDAQ: 1423, 1650 support / 1890 resistance


Pre-market EPS: ACAS (.69/274.7M); DISH (.58/2.91B); GLG(.07/103.0M); SRE (1.08/2.34B); AIG (-1.37/22.47B
08:30: AIG Earnings call
10:00: Treasury’s Kashkari speaks on the TARP program
21:00: Chinese Consumer Price Index (Oct): 4.1%
Post-market EPS: ROK (.98/1.49B); SBUX (.14/2.59B)

Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 22 points above fair value while the NASDAQ futures are trading 38 points above fair value at 7:30 am ET. China announced a 586 billion dollar economic stimulus package and the Group of 20 nations recommended that central banks cut interest rates. Asian markets closed sharply higher on the Chinese stimulus news (Shanghai +7.2%, Japan + 5.8%, India + 5.74%, Hong Kong 3.52%). Resource stocks, steelmakers, and construction companies led the advance (MT, BHP, FCX are all trading 10-15% higher). European markets are up 2.4% with commodity and energy leveraged sectors leading the advance. Advancers on the FTSE 100 lead decliners 9-1.

Impact Research Calls/Market Moving News:

AIG (2.11): Fed, Treasury announced restructuring plan for American International Group bailout; Treasury to purchase $40B in AIG shares under TARP: The U.S. Treasury announced that it will purchase $40B of newly issued AIG preferred shares under the TARP. This purchase will allow the Federal Reserve to reduce from $85B to $60B the total amount available under the credit facility established by the Federal on 16-Sep. Certain other terms of the existing New York Fed credit facility, established on 16-Sep, will be modified to help achieve the objectives described above. In particular, the interest rate on the facility will be reduced to three-month Libor plus 300 basis points from the current rate of three-month Libor plus 850 basis points, and the fee on undrawn funds will be reduced to 75 basis points from the current rate of 850 basis points. The length of the facility will be extended from two years to five years. The other material terms of the facility remain unchanged

GOOG (331.14): Google estimates reduced at Barclays Capital: Recent industry checks and other data points indicate a weaker search environment QTD, and the firm now sees Q4 net revenue flat on a sequential basis, down from prior +3.4%. Rating remains overweight

AIG (2.11): American International Group reports Q3 EPS ($3.42) ex-items: Reuters is ($1.37); First Call ($0.90). Insurance premiums and other considerations grew nearly 7%. Net premiums written $11.73B vs. $11.82B y/y; net premiums earned $11.73B vs. $11.43B y/y.

GS (77.78): Goldman Sachs may post its first quarterly loss says the WSJ: A 'Heard on the Street' column says that several analysts believe the firm may post a Q4 loss because of its exposure to the equity markets. The average among analysts is for a profit of $1.62 a share but several analysts, because of the firm's positions in private equity and principal investments in stocks, believe the firm could post a loss. Notes expectations of a loss from Barclays Capital, Morgan Stanley, UBS and Merrill Lynch analysts.

LVS (7.03): Las Vegas Sands to detail financing plans early next week – AP: The AP story appears to have been published late Friday. Citing a source close to the company, the AP reports that LVS will detail its plans to handle its debt crisis early next week. The plan is not finalized, but is expected to include a capital infusion by Sheldon Adelson, as the company has previously announced on October 24.

GOOG (331.14): NY Times Saturday interview with Google CEO Eric Schmidt: He says Google is better positioned than other advertising companies to survive a recession. Since they do not know how long the economic crisis will last, they are controlling costs by watching hiring. They are also doing a fairly detailed expense review to make sure they are not wasting money. The company will continue to 'invest certainly in small teams to do wacky things.' Even in today's environment, the company would still have gone forward with things like Chrome and Android. Google decided that a long court battle over a Yahoo (YHOO) deal would be in its best interests, even though they believe they would have ultimately prevailed. They do not see any change in antitrust moves towards the company and Google will not think differently about deals in the future. He has no interest in serving as a government employee in the incoming administration.

FSLR (149.67); SPWRA (33.86): SunPower (SPWRA), First Solar (FSLR), ENER, CSIQ downgraded at Deutsche Bank: “As we assess 2009 we reiterate our view of (1) deteriorating fundamentals which have been largely, but not entirely discounted, (2) an industry shake-out precipitated by an adequate supply of c-Si modules and significant module ASP declines, (3) a strengthening dollar with respect to the Euro, and (4) restricted access to capital y/y driving a near term negative change to order patterns. These issues are not new, and although there have been opportunities to step out of solar PV stocks, we believe now is appropriate to do so as well to reset the bar. Quality is important: All companies will continue to see negative repercussions from the issues we highlight. Some will weather the storm far better than others. We believe a clearer bifurcation in company quality is apparent in stocks, and will likely become more pronounced in 2009. Consequently, we are partial to industry leaders like First Solar and SunPower - companies that have long-term, sustainable competitive advantages. And, while we are no longer recommending pure play solar PV stocks for purchase over the near term, we believe that 2009 will offer opportunity to move back into what we believe will be the higher quality, long-term winners. Timing our present exit: While there were arguably better spots to step out of solar PV company stocks earlier in the fall, several factors, the least of which is not market driven volatility, have helped spur appreciation in some names off of recent lows. We were lax to step out of solar PV stocks recently anticipating an Obama win in early November, and while timing may not be perfect (i.e. despite potential volatility driven appreciation in 4Q08), we believe appropriate positioning for 1H09 would be reduced exposure to the group. This report changes ratings on four stocks from Buy to Hold, as well as price targets, and/or estimates for several companies under coverage.

CC (0.25): Circuit City files for Chapter 11 bankruptcy protection in Virginia -- Bloomberg (0.25)

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