Friday, December 5, 2008

December 5, 2008: Morning Call

December 5, 2008: Morning Call

Fair Value: SP500 – 844.90; NDX: 1128.32; DOW – 8376.60

Technical Levels:

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


Pre-market EPS: BIG (.16/1.0B)
08:00: MER Extraordinary Shareholders Meeting
08:30: Change in Nonfarm Payrolls (November): -325,000
08:30: Unemployment Rate (November): 6.8%; Avg. Hourly Earnings: 0.2%
11:00: BAC Extraordinary Shareholders Meeting
15:00: Consumer Credit (October): 1.5 billion

Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 5 points below fair value while the NASDAQ futures are indicated 7 points below fair value at 7:30am ET.
Treasury bonds are modestly higher ahead of the jobs report; risk aversion and aggressive quantitative easing by the Federal Reserve has propelled bonds higher in 13 of the last 15 trading sessions. Commodities are currently flat after moving to multi-year lows in Thursday’s session on concerns about a deep global recession. Asian markets closed mixed with Hong Kong up 2.4% and India down 2.8%. Commodity leveraged sectors were weak overnight after copper declined for a 7th straight day, its longest losing streak in 10 years. . European markets are currently at the lows of the session, down 3%. Metals and Energy shares are amongst the leading decliners. Market participants await the release of the US jobless data. Decliners on the FTSE 100 lead advancers 7-3. BMW Group (BMW.GR) said November sales fell (25%). German factory orders were weaker than expected with a decline of 17.2% y/y vs. street consensus of a decline of 12.1% y/y.

Impact Research Calls/Market Moving News:

GS (67.53):Goldman Sachs estimates reduced below consensus at Morgan Stanley: Though the firm has reduced Q4 EPS estimates below Reuters consensus ($2.92), shares remain overweight rated with a $137 target.

BAC (14.34): Bank of America estimates lowered at UBS: Firm lowers Q4'08 and '09 estimates materially below consensus. UBS sees nearly $9B of credit and mark to market hits, additional NIM pressure, weak capital markets revenue, and accrual of TARP preferred dividends. Firm believes another dividend cut is possible. Target is lowered to $14 from $15. Rating is neutral

BHP (34.81); RIO (9.65); RTP (60.72): China Iron & Steel Association (CISA) wants an early end to 2008 iron ore contracts, says Steel Business Briefing -- Dow Jones: Per Dow Jones, China Iron and Steel Association has informed iron ore producers Companhia Vale do Rio Doce (RIO), BHP Billiton (BLT.LN) and Rio Tinto (RTP) that it wants to end their 2008 contract three months ahead of schedule, from 1-Jan instead of 1-Apr, a Steel Business Briefing report said. In the 2008 contract, Australian Rio Tinto and BHP won 85% price increases from the Chinese; Brazilian Vale received a 65%-71% increase in earlier negotiations. Talks to set the 2009-benchmark prices between ore producers and Chinese steelmakers have yet to begin.

INTC (12.77): Intel estimates and target lowered at UBS: Firm notes read-through of AMD's revised guidance and industry checks that suggest a further steep decline in Q1'09. Q4'08, '09, and '10 estimates are lowered. Target is lowered by $1 to $17. Rating is buy.

BG (37.29): Bunge Ltd downgraded to underperform from neutral at Merrill Lynch: Price target is decreased to $36 from $42.

ENER (25.81): Energy Conversion downgraded to underweight from equal-weight at Barclays Capital

BIG (16.28): Big Lots reports Q3 EPS $0.15, vs guidance of near or slightly below low end of prior $0.15-$0.19 range, and Reuters $0.14. Big Lots reports Q3 EPS $0.15, vs guidance of near or slightly below low end of prior $0.15-$0.19 range, and Reuters $0.14

V (50.81): MA (133.27): Visa (V), Mastercard (MA) initiated neutral at Bank of America: V price target is $59; MA price target is $150.

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