Friday, November 14, 2008

November 14, 2008: Morning Call

November 14, 2008: Morning Call

Fair Value: SP500 – 910.58; NDX: 1242.42; DOW – 8824.42

Technical Levels:

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

NASDAQ: 1423 support / 1650, 1890 resistance


Pre-market EPS: A (.58/1.54B); ANF (.74/922.8M); JCP (.54/4.34B)
08:30: Import Price Index (October): -4.2%
08:30: US Retail Sales (October): -1.5%; Less Autos: -1.0%
08:30: Bernanke/Trichet speak at ECB Conference
09:30: JCP earnings call
10:00: University of Michigan Confidence (Nov): 56.0
10:00: Business Inventories (Sep): 0.2%
10:00: Treasury’s Kashkari to testify to House on use of bailout funds
10:35: EIA Natural Gas Storage Change

Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 21 points below fair value while the NASDAQ futures are trading 25 points below fair value following weak earnings news from FRE, JCP, and a warning from NOK. Asian markets: Most Asian markets followed Wall Street up in somewhat muted fashion. Property developers led China up on news the government is seeking to stabilize the country’s property market. A weaker yen led exporters in Japan higher. Nippon Steel (5401.JP) and other steelmakers rose after the Nikkei reported Vale (RIO) dropped its bid for a second iron-ore price hike this year. Inpex Corp (1605.JP) climbed 9% as it won the rights to explore an Indonesian oil field. Hong Kong rose on speculation the Bank of China might cut interest rates as soon as this evening. European markets are up 2.5% but have pulled off their highs of the session following the NOK warning. Overall, gains in foreign markets have been far more muted than Wall Street was discounting on the close of trading Thursday.

Impact Research Calls/Market Moving News:

NOK (14.15): Nokia cuts Q4 guidance; sees f09 industry mobile device volumes down in 2009

FRE (.73): FRE reports a stunning 25.3 billion dollar loss in the third quarter. Collectively, FNM, FRE, and AIG have lost 78.3 billion dollars in the third quarter. This is truly hard to comprehend particularly since lots of taxpayer money is being thrown into this abyss.

JCP (19.28): Penney reports Q3 EPS $0.55 vs Reuters $0.53; guided to $0.51-0.53 on 6-Nov: Company reports revenues of $4.32B vs Reuters $4.34B. Guides Q4 EPS to $0.90-1.05 vs Reuters $1.33; guides revenues to (7%)-(9%); guides Q4 comps (9%)-(11%) vs previously reported Q3 comps of (10.1%) and Oct comps of (13

C (9.45): Citi to cut more jobs, raise credit-card interest rates – WSJ: People familiar with the matter say the company is firing at least 10K workers this week, in an effort to cut employee compensation by at least 25%. The company is also raising interest rates an average of three percentage points for less than 20% of its portfolio. American Express (AXP) similarly raised rates to some customers recently. Despite Citi's denials, the article says the paper stands by yesterday's article saying some directors are considering replacing Win Bischoff as chairman.

RIMM (43.80): Canaccord Adams cuts their price target to 60 a share and lowers estimates following weaker channel checks. “Our survey and checks with global carriers suggest that RIM has been unable to escape the worst of the macro malaise hampering both consumer and enterprise markets. We believe the company is tracking to about 6.5 million shipments for Q3, which is below guidance of 7+ million units and our prior forecast of 6.9 million. The shortfall, in our view, was driven by: i) the delayed launches of the Bold and Storm; ii) the anticipation for these new devices has stalled RIM’s upgrade cycle; iii) inroads by iPhone in the consumer market; and iv), general spending slowdown prompting enterprises and consumers to defer upgrades.

Paul Krugman editorial in the NY Times titled “Depression Economics Returns” is a must read (copy and paste):

BAC (17.10); MER (13.80): 90% of Merrill brokers who were offered bonuses to join Bank of America (BAC) have accepted deal – WSJ: No major surprise here considering most people employed on Wall Street are just happy to have a job.

WYNN (44.76): Wynn Resorts 8M share secondary priced at $43.50 a share through Deutsche Bank, BofA: The size of the offering was increased from an originally expected 5M shares.

GOOG (312.08): Google vulnerable to consumer retrenchment – WSJ: In a "Heard on the Street" column, the Journal reports that Google's consumer-driven business model is not immune to an economic slowdown. The article points out that, according to Majestic Research, consumers are cutting back on spending so much that they are even showing a dampened interest in searching for new products, much less buying them. The Journal also notes that even consumers that are still in the market are increasingly shopping around for bargains, a dynamic that leads to reduced returns on individual clicks as marketers pay less for keywords. The article goes on to highlight the Street's recent assault on Google's growth estimates.

CF (60.45): CF Industries Holdings completes $500M stock repurchase: The company had announced the repurchase authorization on October 27, 2008. The company purchased 8.5M common shares, representing 14.9% of its outstanding stock at September 30, at an average price of $58.96

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