December 24, 2008: Morning Call

December 24, 2008: Morning Call

Fair Value: SP500 – 859.67; NDX: 1184.80; DOW – 8374.31

Technical Levels:

SPX: 685, 752-755, 848-852 support/ 899-908, 998-1002 resistance


Events:

Shortened Trading Day
08:30: Personal Income (November): 0.0%; Personal Spending: -0.8%
08:30: PCE Deflator (YoY): 1.2%; PCE Core: 0.1% MoM; 2.0% YoY
08:30: Durable Goods Orders (November): -3.0%; Ex-Trans: -3.0%
08:30: Initial Jobless Claims
10:35: DOE/API Crude Oil and Gasoline Inventories
12:00: EIA Natural Gas Storage Change

Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 2 points below fair value while the NASDAQ futures are flat with fair value at 7:45 am ET. The majority of Asian markets closed lower in very light volume (Japan down 2.3%, Hong Kong down 0.25%, India down 1.2%). Automakers were among the leading decliners in Asia overnight. Markets in London and France are down 0.75% and 0.85% respectively while most other European markets are closed for a two-day Christmas break. February Crude Oil is down 2 bucks to 37 ahead of the 10:35 supply data.

Impact Research Calls/Market Moving News:

Retailers now looking to government for help – WSJ: The Journal reports that the country's largest retail trade association, the National Retail Federation, asked President-Elect Obama on Tuesday to add several tax-exempt shopping days to his upcoming economic stimulus package. According to the article, the group wants three periods of sales tax-free shopping that would last 10 days each in March, July and October 2009. The group estimates that the tax reprieve would save consumers roughly $20B, or about $175 per family. Under the terms of the proposal, which excludes alcohol and tobacco sales, the government would reimburse states for the lost tax revenues.

TM (60.37): Toyota Motor November worldwide production (24.8%) y/y to 665,583 vehicles: For all brands, including Toyota, Daihatsu, and Hino: Overseas production (25.6%) y/y to 308,821 vehicles. Domestic production (24.1%) y/y to 356,762 vehicles.

PBR (21.71): Barron's Weekday Trader is positive on Petrobras: Barron's argues that the recent weakness in oil prices does not alter the world's long-term energy needs or Petrobras' vast reserves (which the company estimates at 11.7B boe), most of which sits off the coast of Brazil. The article also notes that the Petrobras figure excludes 2007 and 2008 discoveries in the pre-salt region off the cost of Brazil. The company believes that recoverable volumes in these fields could total another 14B barrels, the bulk of which is under its control. Barron's says that valuation is attractive at just 7.2x forward earnings, vs 12x for Exxon (XOM) and 10.8x for Chevron (CVX).

AMZN (51.08); COST (51.47): S&P 500 constituent Amazon.com Inc. (AMZN) will replace Merrill Lynch & Co. Inc. (MER) in the S&P 100. S&P 500 constituent Costco Wholesale Corp. (COST) will replace Wachovia Corp. (WB) in the S&P 100.

FLIR (26.77): Systems Inc. (FLIR) will replace National City Corp. (NCC) in the S&P 500.