February 19, 2009: Morning Call

February 19, 2009: Morning Call

Fair Value: SP500 – 787.51; NDX: 1189.14; DOW: 7542.72

Technical Levels:


SPX: 685, 745-755 support/800, 848-852, 874, 899-908 resistance

Events:

Pre-market EPS: APA (1.27/2.19B); CVS (.65/23.35B); EXPE (.24/635.1M); GG (.12/626.9M); NEM (.23/1.37B); PDCO (.44/807.4M); PDE (1.05/618.5M); S (-.03/8.55B); PQ (.09/73.2M); XTO (.79/2.08B)
08:30: US Producer Prices (Jan): 0.2% MoM; Ex-Food/Energy: 0.1% MoM
08:30: US Producer Prices (Jan): -2.6% YoY; Ex-Food/Energy: 3.8% YoY
08:30: Initial Jobless Claims (Feb 14): 615,000; Cont. Claims: 4.8 million
08:30: SPWRA presents at Piper Jaffray Clean Tech. Conference
09:30: AMAT presents at Piper Jaffray Clean Tech. Conference
10:00: Leading Indicators (Jan): 0.0%
10:00: Philly Fed (Feb): -25.0
10:30: EIA Natural Gas Storage Change
11:00: DOE Crude Oil and Gasoline Inventories
13:15: Fed’s Lockhart speaks on the US economy
Post-market EPS: BRCD (.15/413.9M); CECO (.26/437.0M); FFH (14.27/1.57B); GFIG (.13/235.0M); INTU (.27/795.4M); SPN (.97/479.4M); TSO (.98/5.16B)

Foreign Market Summary/Key Macro News/Commentary:

The S&P and NASDAQ futures are trading flat with fair value at 7:15am despite weakness in HPQ shares following a disappointing earnings report. Equity futures were 10 below fair value after the HPQ earnings report last night but have bounced back to fair value following a rally in Eastern European stock markets. European markets are modestly lower (down 0.25%) and have been in a tight trading range all morning; Eastern European markets are seeing a nice bounce from the sharp selling after Germany signaled they will assist other euro-zone countries that are at risk of economic collapse (Poland up 3.3%, Austria up 2.1%, Hungary up 2.5%, Romania up 4.2%, Russia up 3.0%, Czech Republic up 3.0%). The Euro is up 1.2% against the dollar (1.27) snapping a 3-day losing streak and bouncing off a 3 month low. Asian markets closed mixed (Japan up 0.30%, Hong Kong up 0.06%, Australia up 1.05%, India up 0.30%).

Impact Research Calls/Market Moving News:

BIDU (128.09): Baidu reports Q4 EPS $1.31 ex-items vs First Call 1.32: Company reports revenues of $132.2M vs Reuters $133.1M. Guides Q1 revenues to $114-117M vs Reuters 119.5M.

HPQ (34.08): Hewlett-Packard reports Q1 results; lowers full year guidance: Company reports revenues of $28.80B vs Reuters $31.87B. Guides Q2 EPS to $0.84-0.86 vs Bloomberg .88 cents. Guides full year EPS to $3.76-3.88 vs Bloomberg 3.77, and lowered from previous $3.88-4.03. Q2 guidance: revenue is expected to be down 2-3%, which implies a range of $27.45-27.73B vs Reuters $30.97B. Full year 2009 guidance: revenue is now expected to be down 2-5%, which implies a range of $112.48-116.03B vs Reuters $126.49B and is lowered from the previous target of $127.5-130.0B. The currency impact is now expected to be 7-8 points for the year versus 6-7 points previously.

AAPL (94.37): Premium pricing may be weighing on Apple's computer sales – WSJ: Citing data from market research firm NPD Group, the Journal notes that Apple's unit sales of computers through US retail channels fell 6% y/y in January, the first decline in three years. The dollar value of those sales fell an even greater 11% during the month. According to the article, this dynamic suggests that Apple's premium pricing strategy may be hurting the company as consumers increasingly look to trade down. NPD notes that the average price of Apple computers stood at $1,480 for its laptops and $1,500 for desktops in January - more than twice as high as computers based on Microsoft's Windows operating system.

PCLN (68.74): priceline.com reports Q4 EPS $1.29 ex-items vs Reuters $1.06: Company reports revenues of $406.0M vs Reuters $377.5M. Guides Q1 EPS to $0.85-0.95 vs Reuters $0.80; guides revenues to increase 5-10% y/y. Given the current macro-economic conditions, the company stated that it would not provide earnings guidance beyond Q1 and noted that its actual performance during Q1'09 against the guidance above is subject to greater variability than it had been in the past.

XOM (71.94): Two Downgrades: Barclays Capital and Sanford Bernstein downgrade Exxon Mobil (XOM): XOM downgraded to equal-weight from overweight; target remains $92. Sanford Bernstein downgraded XOM to market perform from outperform.

ADBE (20.39): Adobe Systems estimates reduced below consensus at RBC following checks: Checks by the firm indicate that end markets of enterprises, knowledge workers, designers, OEM partners and developers remain under pressure. F09 revenue and EPS estimates are reduced to $3.09B and $1.69 vs. Reuters $3.29B and $1.76. F10 revenue and EPS is reduced to $3.205B and $1.76 vs. Reuters $3.55B and $1.96. Shares remain sector perform rated. Target is reduced to $21 from $24.

NEM (42.76): Newmont Mining reports Q4 EPS $0.26 ex-items vs Reuters $0.25: Company reports revenues of $1.34B vs Reuters $1.37B. Equity gold sales of 1.35M ounces; copper sales of 40M pounds. Equity gold sales in 2009 are expected to increase to between 5.2 and 5.5M ounces at lower costs applicable to sales of between $400 and $440 per ounce.

USO (22.86): WSJ discusses oil ETF's move to tweak its rolling policy: On Wednesday, the $3.4B US Oil Fund LP, which allows investors trade oil prices like a stock, announced that it will renew expiring crude futures positions over the course of four days each month, scrapping its traditional practice of rolling its entire oil futures position in a single day. The Journal notes that the shift comes amid a barrage of criticism that the fund's size has distorted oil prices and allowed traders to front-run the widely known days it rolls front-month oil futures, weighing on the price the fund's investors receive. The fund's roll has also been negatively impacted by the severe contango in the market, a condition in which front-month crude trades at a discount to outer-month futures contracts