January 14, 2009: Morning Call

January 13, 2009: Morning Call

Fair Value: SP500 – 867.09; NDX: 1201.32; DOW – 8430.47

Technical Levels:


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

Events:

Pre-market EPS: INFY (.55/1.18B); STT (1.05/2.49B)
08:00: Fed’s Bernanke speaks at London School of Economics
08:30: US Trade Balance (November): -52.0B
08:30: MOS Analyst Day
10:00: IBD/TIPP Economic Optimism
14:00: Monthly Budget Statement (December): -42.5B
17:00: ABC Consumer Confidence
17:00: Fed’s Lacker speaks on the economic outlook
Post-market EPS: LLTC (.34/257.4M)


Foreign Market Summary/Key Macro News/Commentary:

The S&P and NASDAQ futures are both trading 5 points below fair value at 7:30am ET. The futures were 11 below fair value at 6am ET. Asian markets closed lower (Japan down 4.8%, Australia down 0.78%, Hong Kong down 2.1%, Shanghai down 2.3%, India down 0.42%). Basic Material and Energy sectors were once again the weakest sectors in Asian trading. European markets are down 2.1% extending the losing streak to 5 sessions. Shares have extended initial declines and are current trading at session lows, currently down between (2%) and (2.5%). Mining and Steel shares were again amongst the leading decliners. Decliners on the FTSE 100 lead advancers 9-1.

Impact Research Calls/Market Moving News:

JPM (24.91): JPMorgan Chase moves Q4 earnings release to 15-Jan from 21-Jan: JPM announced it will be ready to issue Q4 earnings on Thursday, January 15, at 6:30 ET, rather than on Wednesday, January 21, the previously scheduled date. JPM IR is telling investors the reason for the changed date is to allow Jamie Dimon to attend the Presidential Inauguration. Fox Pitt is speculating that there is a chance that JPM may be involved in the MS/Citibank brokerage division joint venture deal either in competition with MS or less likely taking a stake in the joint venture. Fox-Pitt is also saying positive market commentary is unlikely. Fox-Pitt cuts their Q4 estimate to a loss of 6 cents from a profit of 25 cents (consensus is for a loss of a penny). 2009 numbers are cut to 2.47; consensus is 2.28.

FSLR (149.93): First Solar downgraded to hold from buy at Citi: Price target decreased to $170 from $205. The firm cites valuation, as well as concerns about inventories and margins.

AA (10.06): Alcoa reports Q4 EPS ($0.28) continuing ops ex-items vs Reuters ($0.14: Note the earnings figure excludes $0.88 in restructuring, impairment and special charges. GAAP EPS was ($1.49), including $1.15 in charges. Recall the company outlined expectations for $900-950M in charges with last week's restructuring announcement. Company reports revenues of $5.69B vs Reuters $5.13B.

CSX (32.22): CSX Corp guides Q4 EPS to $0.90- ex items vs Reuters $1.00: EPS excludes a noncash impairment charge of approximately $0.27 per share related to the write-down of its investment in The Greenbrier resort. The company guides Q4 revenue to $2.7B vs Reuters $2.75B.

KLAC (21.46): KLA-Tencor guides Q2 revenue to $390-$400M vs Reuters $420.0M: Company also sees new bookings in the quarter of $235-$245M. KLAC says global economic uncertainty, weak consumer demand, and turbulent financial markets have led customers to scale back production operations and reduce capital expenditures, adding that business conditions in its markets have deteriorated sharply in recent weeks, leading to unanticipated shortfall in quarterly new orders, revenues and earnings for KLA-Tencor. KLA-Tencor guides Q2 (Dec) bookings $235-245M. Represents a sequential decline of 26% versus 30-Oct guidance for flat plus/minus 10 points. Full results will be reported on 29-Jan after the market closes

LXK (28.35): Lexmark guides Q4 EPS to $0.71-0.76 vs prior $0.70-0.80, both ex-items and Reuters $0.80. The company guides Q1 EPS to $0.65-0.75 vs Reuters $0.73. Sees Q4 revs down appx 17% y/y, or $1.087B (from calculation) vs Reuters $1.14B. Sees Q1 revenues lower by mid to high teens on a percentage basis, or under $1B (from calculations) Reuters $1.06B

Oppenheimer remains cautious on semiconductors after checks: The firm says their recent checks reveal continued order weakness and cancellations. Oppenheimer expects the January earnings season to be one of the ugliest on record, with IDM inventories and DSO up and Q1 revenues down Q/Q roughly twice-normal seasonality. Oppenheimer cuts estimates for the group ahead of Q4 earnings reports and is now at or near Street lows across most names.

DE (41.56): Deere & Company comments on December retail sales: Utility tractors: Deere sales were down more than the 21% decrease for the industry; November inventories were lower than the industry's level of 47% of ttm sales. Row crop tractors: sales were flat versus the industry's 2% decrease; November inventories were lower than the industry's level of 25% of ttm sales. 4WD tractors: sales were up more than the industry's 23% increase; November inventories were lower than the industry's level of 16% of ttm sales. Combines: sales were down double digits compared to the industry's 2% increase; November inventories were lower than the industry's level of 8% of ttm sales. In Western Europe, retail tractor sales were down low double digits while combine retail sales saw a double-digit increase. Construction and forestry equipment sales were down double digits on both a first in the dirt and settlement basis. Commercial and consumer equipment sales were down double digits.

DE (41.56): JP Morgan downgrades DE to neutral from overweight.

RYL (17.64): Ryland Group downgraded to hold from buy at Deutsche Bank

Regional Banks sector lowered to underweight from market weight at Keefe, Bruyette & Woods: Firm believes regional banks are not pricing in a long and deep recession, which the firm expects

NVDA (7.61): NVIDIA estimates lowered at UBS following checks
Firm's latest industry checks suggest weak GPU sell-in. Estimates for '09/'10 are lowered. UBS reiterates sell rating. Target is $7.50.

CEOs increasingly on the chopping block – WSJ: The Journal notes that CEOs at six major US companies - Seagate (STX), Tyson Foods (TSN), Borders (BGP), Orbitz (OWW), Chicos (CHS) and Bebe Stores (BEBE) - have lost their jobs in the last eight days. The paper adds that an informal survey of management consultants, recruiters, investors and governance specialists suggests that several other CEOs may be vulnerable, including Rick Wagoner of General Motors (GM); Vikram Pandit of Citigroup (C); Jonathan Schwartz of Sun Microsystems (JAVA); Steve Odland of Office Depot (ODP) and Ken Lewis of Bank of America (BAC). According to the article, 61 companies in the S&P 500 changed CEOs last year, up from 56 a year earlier.

INFY (25.88): Infosys reports Q3 EPS $0.58 vs Reuters $0.55: Company reports revenues of $1.17B vs Reuters $1.18B. Company added 30 new clients and 2,772 net employees during Q3. Guides Q4 EPS to $0.55 vs Reuters $0.55; guides revenues to $1.13-1.17B vs Reuters $1.18B. Guides full year EPS to $2.23 vs prior $2.24 and Reuters $2.19; guides revenues to $4.67-4.71B vs prior $4.72-4.81B and Reuters $4.71B.

MS (18.79); C (5.60): Morgan Stanley (MS) and Citigroup (C) to set aside up to $3B to keep top brokers -- NY Post: Without citing its source, the NY Post reports Morgan Stanley and Citigroup are looking at setting aside between $2B and $3B to keep top brokers at the wealth-management shop the two banking giants are close to combining.