Monday, November 3, 2008

November 3, 2008: Morning Call

November 3, 2008: Morning Call

Fair Value: SP500 – 967.74; NDX: 1337.91; DOW – 9304.06

Technical Levels:

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

NASDAQ: 1423, 1650 support / 1890 resistance


Pre-market EPS: AMT (.14/400.7M); GT (.32/5.13B); PMI (-2.69/303.9M); SRP(.62/1.27B); STO (.90/30.02B)
10:00: ISM Manufacturing (October): 42; Prices Paid: 48.0
10:00: Construction Spending (Sep): -0.8%
11:00: BOE Governor King testifies to UK Parliament
14:00: GM October 2008 Sales and Revenue Call
17:00: MA earnings call
Post-market EPS: ADP (.50/2.14B); APC (1.47/3.73B); EOG (2.28/1.72B); FST(1.41/459.6M); MA (2.27/1.27B); MHK (1.11/1.78B); PBI (.70/1.60B); SF(.51/201M); VIA (.54/3.28B)

Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 5 points above fair value while the NASDAQ futures are trading 2 points above fair value at 7:30am ET. European markets have pared modest gains and are currently up 0.25% in a very calm trading session. The modest pullback occurred after the European Commission lowered their 2009 economic forecast to 0.1% growth versus a prior forecast of 1.5% growth. French, German and Euro-zone October Final PMI Manufacturing were all slightly weaker than the preliminary forecast. Best groups include Materials, Utilities, Computer Services, and Tech with the laggards including Banks, Consumer Good, and Oil and Gas. Asian markets: Most of Asia rose following Friday's gains on Wall Street, led by Financials and property firms. South Korea gained when the government said it would pump an extra KRW14T ($10.8B) into its economy next year. Hong Kong rebounded from Friday’s loss with Chinese banks leading the market up after a Chinese central bank official indicated Beijing had abandoned its strict caps on lending. India surged early after the Reserve Bank of India cut interest rates 50 bps over the weekend. Indonesia and Thailand also climbed quickly on hopes their central banks would follow suit. Lenders in Australia rose in anticipation that interest rates will be cut tomorrow. China was the lone laggard, falling in the afternoon on a report showing the country’s manufacturing has contracted. Japan was closed for Culture Day.

Impact Research Calls/Market Moving News:

BIDU (206.00): announces $200M ADS repurchase plan: The plan will be in place through the end of 2009.

SLB (51.65): Schlumberger upgraded to buy from neutral at Goldman Sachs. Shares also added to firm's Conviction Buy List.

HAL (19.79): Halliburton downgraded to neutral from buy at Goldman Sachs

JPM (41.25): Barron’s Follow Up Column is positive on JPM. JPMorgan's (JPM) shares could jump by 50% once the economy improves. One analyst says the bank has among the best earnings power in 2010 and 2011. The bank says it is well reserved for the current environment and could emerge more formidable than ever after the Bear Stearns and WaMu acquisitions. If earnings rise as expected and the stock returns to a historic multiple, it would go to $60, and it yields 3.68% in the meantime.

AAPL (107.59: Friedman Billings comments on Apple, says iPhone production under pressure: The firm believes iPhone production could fall more than 40% sequentially in Q4 vs. their prior estimate of about 10% after a recent round of checks. BRCM, MRVL, and LLTC could see a negative revenue impact due to the reduced production.

UBS cautious on steel names: Firm lowers US benchmark hot-rolled coil (HRC) prices in '09/'10 to reflect a deeper global recession outlook and falling commodity input prices. UBS is very cautious on Q4 results given that the lack of demand will not only hurt sales, but also the ability to work down inventory. Firm likes value for CMC, NUE, and STLD, but is cautious ahead of NUE's update.

WMT (55.81): JP Morgan upgrades WMT to overweight from neutral.

BA (52.42): Boeing added to Conviction Sell List at Goldman Sachs: The firm sees production rates declining, that BA will repurchase less of its stock and that another delay to the 787 Dreamliner is possible.

CSCO (17.77): UBS previews Q1 earnings at Cisco Systems: Firm believes revenues will be below consensus and thinks orders were below plan in Sep and Oct. UBS expects the company to guide the Jan quarter down 3-5% sequentially, or +/-1% y/y. Firm's checks indicate the company has begun to moderate hiring and reduce staff in certain areas. Firm also expects operating margins to contract in the next couple of quarters. Rating is neutral with a target of $18.

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