Wednesday, November 19, 2008

November 19, 2008: Morning Call

November 19, 2008: Morning Call

Fair Value: SP500 – 858.26; NDX: 1157.06; DOW – 8414.89

Technical Levels:

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

NASDAQ: 1423 support / 1650, 1890 resistance


Pre-market EPS: LDK (.71/512.3M); ROST (.43/1.58B)
04:30: Bank of England Minutes of Interest Rate Decision
07:00: MBA Mortgage Applications
08:30: Consumer Price Index (Oct): -0.8% MoM; Ex-Food/Energy: 0.2% MoM
08:30: Consumer Price Index (Oct): 4.1% YoY; Ex-Food/Energy: 2.4% YoY
08:30: Housing Starts (Oct): 780,000; Building Permits: 773,000
10:35: DOE/API Crude Oil and Gasoline Inventories
11:00: MSFT Annual Meeting
11:30: CSCO presents at Morgan Stanley TMT Conference
13:30: Fed’s Lacker speaks on subprime crisis
14:00: FOMC Minutes from the October 28-29 Meeting
Post-market EPS: GYMB (1.03/276.7M); INTU (-.12/485.6M); MW (.25/477.5M)

Foreign Market Summary/Key Macro News/Commentary:

The S&P and NASDAQ futures are both trading 4 points below fair value at 7:30am. Asian markets closed lower with the exception of Shanghai, which rallied 6.2%. Indian markets fell 1.8%, Japan dropped 0.66%, and Hong Kong fell 0.77%. Evidence of further economic slowing in the region pressured commodity and technology shares, while banks were also lower still hurt by Mitsubishi UFJ Financial Group's (8306.JP) weak H1 earnings yesterday. Sumitomo Mitsui Financial Group dropped 7.9% on plans to raise capital. Automakers were lower after Nissan (7201.JP) said H2 profits will fall to zero and Toyota (7203.JP) further cut production in the US. Telecom equipment makers and service providers outperformed the market after China Mobile (0941.HK) confirmed it had awarded contracts worth $4B to build the second phase of the country's third generation network. Australian Oct new motor vehicles sales fell (10.6%) y/y and (0.5%) q/q. European markets are down 1.52% led by financial and mining stocks. LloydsTSB (LLOY.LN) is little changed ahead of its shareholders vote on its proposed HBOS (HBOS.LN) acquisition and capital raising. HBOS shares rose. Irish banks rose on speculation that the Irish government may inject capital to boost capital ratios. BOE November Minutes voted 9-0 for BOE rate cut to 3.0%. BOE forecasts implied cut to lower than 2.5% maybe needed

Impact Research Calls/Market Moving News:

RIMM (47.25): Research In Motion added to the Conviction Buy List at Goldman Sachs

CSCO (16.45): Cisco Systems removed from Conviction Buy List at Goldman Sachs
Shares remain buy rated

GE (16.06): General Electric may delay wind turbine deliveries as clients are cautious – Bloomberg: Comments are from company's head of Power and Water, Steve Bolze. Says wind order backlogs remain "healthy" through 2010, but that some wind clients are looking to delay amid the credit crisis. No wind, gas turbine orders have been cancelled.

C (8.36): Citi liquidating hedge fund that lost 53% in October – FT: The FT reports that the move related to the Corporate Special Opportunities ("CSO") hedge fund marks the ninth time in recent months that the bank has had to shut down or rescue a fund in its alternative investment unit. Citing people familiar with the matter, the paper adds that CSO, which managed nearly $4.2B at its peak, has an NAV of about $58M and debt of roughly $880M. Investors are likely to receive no more than 10 cents on the dollar following liquidation. The fund largely invested in European private equity deals.

BBY (20.97): Best Buy corporate credit rating downgraded to BBB- from BBB by S&P: Outlook is stable; ratings are now one notch above junk status.

FNM (.62); FRE (.47): WSJ discusses the debate surrounding the future of Fannie and Freddie: The Journal notes that some banks would like to see Fannie and Freddie ultimately disappear, at least in their current form, a transformation that is vehemently opposed by home builders and the National Association of Realtors. The article notes that BofA CEO Ken Lewis recently called for scrapping the business model of the two firms, and instead moving in the direction of a system that relies more on private-sector institutions, without government guarantees. That said, Lewis has argued that over the near-term, the government should make its backing of the firms more explicit to bolster investor confidence and push down mortgage rates.

JBX (15.21): Jack In The Box reports Q4 EPS from cont ops $0.46 vs Reuters $0.45: Guides Q1 EPS to $0.50-0.55 vs Reuters $0.61. Diluted EPS are expected to be lower than prior year results due to higher commodity costs and continued volatility in the financial markets, which is expected to impact SG&A and the tax rate. Company expects flat to 2% same-store sales increase at Jack in the Box company restaurants on top of a 1.5% increase in the year-ago quarter. Approximately flat same-store sales at Qdoba system restaurants on top of a 4.5% increase in the year-ago quarter. Overall commodity costs are expected to increase in the 7 to 8% range, including an approximate 20% increase in beef costs. Restaurant operating margin is expected to be between 15.0 and 15.5%

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