December 1, 2008: Morning Call

December 1, 2008: Morning Call

Fair Value: SP500 – 895.70; NDX: 1186.71; DOW – 8825


Technical Levels:

SPX: 685, 848-852 support/ 899-908, 1098-1100 resistance


Events:
10:00: ISM Manufacturing (November): 37; Prices Paid: 32.0
10:00: Construction Spending (October): -1.0%
11:30: Paulson speaks about the US Economy and Markets
11:45: President-elect Obama introduces National Security team
13:45: Bernanke speaks on the economic outlook
15:00: Paulson speaks on the US Economy and Markets

Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 21 points below fair value while the NASDAQ futures are trading 26 points below fair value at 7:30am ET. Foreign markets are lower due to weak manufacturing data in Europe and China. Treasury bonds are sharply higher as economic concerns and risk aversion drive the 10-year note yield to a record low of 2.87%. Crude oil is down 5.2% after OPEC deferred a decision to cut output for another two weeks. Asian markets closed lower (Nikkei down 1.3%, Australia down 1.6%, India down 2.8%) excluding Hong Kong and Shanghai, which rallied 1.6% and 1.8% respectively. European markets are down 2.7% on weak economic data (German Retail Sales down 1.5% vs. consensus of –0.3%; Euro-zone PMI 35.6 vs. 36.2; UK November Manufacturing at 34.4 vs. 39.7). Mining, energy, and financial sectors are the biggest decliners and breadth is 9 to 1 negative.


Impact Research Calls/Market Moving News:

Oppenheimer's Meredith Whitney continues cautious stance on US Banks: The firm says they are beginning to see evidence of broad-based declines in overall consumer liquidity and believe there will be expanded forced consumer de-leveraging, with a pronounced downshift in consumer spending in the coming months. In the credit card industry, Oppenheimer believes that well over $2 trillion of lines will be pulled over the next 18 months, due to risk aversion and funding challenges as well as regulatory and accounting changes. Oppenheimer views the credit card as the second key source of consumer liquidity, behind jobs.

AAPL (92.67): Apple shares reiterated overweight at Thomas Weisel, checks show strong Black Friday: The firm is incrementally more positive on the company and December quarter estimates following a round of Black Friday checks at AAPL stores, BBY, and WMT. Weisel remains below consensus for December quarter revenue and EPS. The firm reiterates their overweight rating and $160 target.

Oil Services/Drillers: Merrill Lynch downgrades NBR, HP, PDS, others, upgrades DO: NBR, PDS, BJS, CPX, and HERO downgraded to underperform from buy. HP, SLB, NE, and BHI are downgraded to neutral from buy. ESI.CN is downgraded to underperform from neutral. DO is upgraded to buy from neutral

BIDU (135.88): Baidu.com faces mass complaint about business practices – FT:: A group of lawyers says it has more than 50 companies who are willing to sue Baidu for brand infringement, fraud, and unfair competition, and the suit will be filed when the number grows to 100. Earlier this month, state TV accused Baidu of blocking websites that refused to pay for listings and giving top listings to unlicensed medical websites. The company, which denies blocking non-paying companies, says it plans to stick to its business model centered on keyword auctions.

PRU (21.70): Prudential upgraded to buy from hold at Citi: Though upgraded, the price target is decreased to $30 from $80. Valuation cited. Firm suspects that management will temper the company's outlook during an investor meeting on 4-Dec

LTD (9.31): Citibank downgrades LTD to hold from buy. Target price is 9.50. Valuation is cited.