February 11, 2009: Morning Call

February 11, 2009: Morning Call

Fair Value: SP500 – 825.35; NDX: 1229.36; DOW: 7862.27

Technical Levels:


SPX: 752-755, 800, 816, 848 support/ 874, 899-908 resistance

Events:

Pre-market EPS: AYE (.52/1.13B); BCE (.50/4.52B); DF (.39/3.22B); GENZ (1.03/1.19B); IR (.26/3.69B); JNY (-.05/820.6M); MICC (1.18/942.5M); MMC(.33/2.98B); SF (.56/214.0M); MT (.46/20.4B)
05:30: Bank of England releases Quarterly Inflation report
07:00: MBA Mortgage Applications
07:00: Bloomberg Global Confidence
08:00: BBT Analyst Day
08:30: Trade Balance (Dec): -36.0B
08:30: NYX Investor Day
09:30: MT earnings call
09:30: BNI presents at BB&T Transport Conference
09:50: Fed’s Duke speaks on stabilizing the Housing Market
10:00: Treasury’s Geithner testifies on TARP at Senate Budget Panel
10:00: Bank Executives testify on their use of funds from TARP: CEO’s from BAC, C, JPM, STT, BK, WFC, MS, and GS are expected to testify)
10:30: DOE Crude Oil and Gasoline Inventories
11:00: YRCW presents at BB&T Transport Conference
11:00: BRCM presents at Thomas Weisel Tech Conference
12:45: MSFT presents at Thomas Weisel Tech Conference
13:00: Fed’s Evans speaks on the US economic outlook
14:00: US Monthly Budget Statement (Jan): -78.0B
14:00: INTC provides 4G WiMax Mobile Broadband Update
14:00: TOL Q1 2009 Guidance Call
15:15: INTC presents at Thomas Weisel Tech. Conference
Post-market EPS: ATVI (.29/2.15B); CMG (.48/340.9M); GIL (.04/216.8M); PAA(.74/8.56B); TEX (.60/2.23B)


Foreign Market Summary/Key Macro News/Commentary:

The S&P and NASDAQ futures are both trading flat with fair value. Equity futures have been closely tracking the intra-day pattern in Europe, which is down 0.50% this morning. European markets are being lead lower by the financial sector. Advancers just edge decliners on the FTSE 100. Trading lower post results were Credit Suisse (CSGN.VX), Peugeot Citroen (UG.FP) and Groupe Danone (BN.FP). Trading higher were Sanofi-Aventis (SAN.FP), ArcelorMittal (MT.NA). Asian markets mostly declined due to weakness in financial and industrial stocks (Japan down 0.29%, Hong Kong down 2.4%, Australia down 0.40%, India down 0.30%).

Impact Research Calls/Market Moving News:

RIMM (57.03): Research In Motion guides fQ4 gross margin and EPS to be at the low end of prior ranges: Recall RIMM had guided Q4 EPS to $0.83-$0.91 and Q4 gross margins to 40-41% on 18-Dec vs. the 45.6% in fQ3. Reuters consensus for EPS is $0.86; First Call $0.85. RIMM guides Q4 revenues to be at or near the midpoint of the previously guided range of $3.30-$3.50B. Reuters is $3.40B; First Call $3.41B. RIMM cites a variety of factors, including product mix, lowered channel inventory levels and an increased ratio of new subscriber sales to upgrade and replacement sales, for the outperformance in subscriber growth relative to revenue and earnings performance in Q4 (My take: As I have pointed out several times in this blog over the last year, gross margin compression continues to hurt RIMM’s growth. The pace of commoditization in the smartphone market appears to be accelerating rapidly and a $99 dollar iPhone would be a negative catalyst for RIMM. Although AAPL could potentially grow iPhone unit shipments fast enough to offset the margin pressure, the shares will be weak in the short-term on gross margin concerns. AAPL is down 1 dollar to 96.80. RIMM Is down 4 to 53).

AMAT (9.69): Applied Materials (AMAT) reports Q1 EPS ($0.02) ex-items vs Reuters $0.00, says Q2 (Apr) revenue will be down more than 30%

CF (53.60): CF Industries Holdings reports Q4 EPS $3.59 including items, EPS excluding items was $3.87

MS (20.79): GS (90.40): Bernstein believes Morgan Stanley (MS) and Goldman Sachs (GS) are less likely to need additional capital relative to the others: The firm believes that GS and MS have less pressure from the government to lend than do other banks such as JPM, C and BAC. Bernstein believes more clarity is needed into the bank rescue plan before investing in the banking sector.

TOL (18.58): Toll Brothers reports preliminary Q1 home building revenues of ~$409.3M vs. Reuters $446.7M: First Call is $442.6M

WSJ discusses criticism of the Public-Private Investment Fund: The Journal points out that some investors fear that program will be too small to stimulate purchases of toxic assets, while other investors complain that the plan is far too vague to get them to come off the sidelines. Citing people familiar with the matter, the paper adds that one possibility being considered involves the government and private investors putting up equal amounts of capital, with the Fed lending money to the fund, allowing it to significantly increase is purchasing power. Any profits would be divided between taxpayers and investors.

Technology companies to benefit from stimulus package – NYT: Without naming which ones, the article says President Obama recently had a dozen CEOs, seven from technology and energy companies, to the Oval Office to discuss the plan. Tech and clean energy companies have been helping shape the bill since as early as September. The Senate version of the bill provides $7B to expand high-speed Internet access, $20B to build a smart-grid power network, and $20B to digitize health records

European banks may need to file weekly reports on portfolio values – NYT: European finance ministers have agreed to produce guidelines within the next two weeks that will allow governments to use different means of dealing with banks' bad debt. The European Commission is suggesting weekly reporting and a six-month deadline to accept help. The commission is also suggesting that governments be allowed to choose from a bad bank, asset-management programs, an insurance plan, or a combination. Mandatory participation or at least mandatory disclosure is under consideration.