February 24, 2009: Morning Call

February 24, 2009: Morning Call

Fair Value: SP500 – 742.49; NDX: 1129.27; DOW: 7104.33

Technical Levels:


SPX: 685, 741-755 support/ 778, 800, 848-852, 899-908 resistance

Events:

Pre-market EPS: DAKT (.11/124.4M); FE (1.04/3.36B); FWLT (.97/1.81B); HD(.15/14.64B); HNZ (.65/2.58B); HSIC (.88/1.77B); M (1.01/7.86B); RSH(.73/1.38B); TGT (.83/19.6B); BX (-.27/-566.0M)
05:00: Euro-zone Industrial New Orders (Dec)
09:00: S&P/CaseShiller Home Price Index (Dec): -18.25%
09:00: HD earnings call
10:00: US Consumer Confidence (Feb): 35
10:00: US House Price Index (Dec.): -1.7%
10:00: Richmond Fed Manufacturing Index: -47
10:00: Bernanke Report on the Economy and Fed Policy/Testifies before Senate
10:30: TGT earnings call
11:00: BX earnings call
11:30: Fed’s Fisher speaks on the financial crisis
12:00: Fed’s Duke speaks about the Community Reinvestment Act
14:00: House hearing on TARP oversight and accountability
14:30: FDIC’s Bair news conference to announce bank and thrift industry results for Q4
16:30: API Crude Oil and Gasoline Inventories
16:30: FSLR earnings call
21:00: President Obama addresses joint session of Congress
Post-market EPS: DWA (.66/232.0M); FSLR (1.29/408.8M); NBR (.83/1.45B); RRC(.22/260.0M); WYNN (.41/696.4M)


Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 7 points above fair value while the NASDAQ futures are trading 12 points above fair value at 7:15 am ET. Asian markets closed lower (Japan down 1.46%, Hong Kong down 2.86%, Australia down 0.58%, Shanghai down 4.51%, South Korea down 3.47%, India down 0.24%). Banks were big losers. In Japan, Nomura Holdings (8604.JP) fell on dilution worries after announcing plans to raise ¥291.2B in share sales and Modec Inc (6269.JP) plunged on forecast of lower profits. Hong Kong was hurt by expectations of a conservative budget’s being announced tomorrow and worsening Q4 GDP figures. Earnings concerns dragged on all sectors in South Korea. Commodities producers and financials led China down. European markets are down 1.5%. Mining and insurance shares are leading the move lower and auto companies were particularly weak following broker downgrades (Daimler (DAI.GR) was downgraded at Bernstein and BMW Group (BMW.GR) downgraded at Morgan Stanley). Indices fell as much as (3%) on the open.

Impact Research Calls/Market Moving News:


JPM (19.51): JPMorgan Chase cuts quarterly dividend by 86.8% to $0.05 from $0.38. JPMorgan Chase says Q1 financial performance quarter-to-date is solidly profitable: First-quarter 2009 financial performance quarter-to-date is solidly profitable even after significant additions to reserves, and the outlook for the quarter is roughly in line with analyst expectations. The company said it hopes to re turn to a more normalized dividend payout ratio as soon as feasible after the environment has stabilized. JPMorgan says dividend cut is not directly related to TARP: The company says that while its performance and capital are already strong, today's action provides it with maximum flexibility to protect our company in a more highly stressed environment, and is not directly related to TARP. JPM says that the decision to retain additional common equity does, however, help position it to repay TARP as soon as is prudent. Repayment of TARP will ultimately be worked out in consultation with the Treasury and other regulators, and in consideration of the best interests of the banking system overall.

Washington Post discusses announcement by Obama administration regarding terms financial institutions will receive: The Obama administration has changed the terms of the emergency aid banks have received, allowing them to repay the government with common stock instead of cash. Officials say the adjustment is supposed to give banks more capital, not nationalize the banking system. Converting the government's holdings to common stock will allow the industry to save billions of dollars in dividends.

AAPL (86.95): Apple downgraded to underperform from outperform at Calyon Securities -- Dow Jones

GS (80.07): Goldman Sachs mentioned positively at Morgan Stanley: Firm says that shares may rebound in Q1, on the potential for a more rational market and improved competitive dynamics. Further, Goldman management stressed to the firm that it plans to be very mindful in its cost cutting, and not underestimate its ability to capture competitive opportunities.

COF (9.13): Capital One downgraded to neutral from overweight at JPMorgan

HD (18.71): Home Depot reports Q4 EPS $0.19 ex-items vs Reuters $0.15: Company reports revenues of $14.61B vs Reuters $14.63B. Q4 comps. (13.0%) vs. consensus (12.2%). HD sees f09 total sales ~(9%) and comps. in the negative high single digits.

JWN (11.33): Nordstrom reports Q4 EPS $0.31 vs Reuters $0.30. Total sales in Q4 were $2.30B as reported on 5-Feb. Guides 2009 EPS to $1.10-1.40 vs Reuters $1.24. For the 2009 fiscal year, Nordstrom expects same-store sales to decrease 10 to 15%

BIDU (131.76): Google China hopes to "eat up" Baidu (BIDU)'s 33% market share this year, says China Business News - JLM Pacific Epoch :Google China president Lee Kai Fu says two third of Chinese search engine users use both Baidu and Google.

GM (1.77): General Motors to release Q4 results 26-Feb at 07:00: Conference call will be at 08:30

MS (18.82): Morgan Stanley's CEO John Mack tells Charlie Rose the U.S. is "ahead in deleveraging" – Bloomberg: Mack adds that he thinks China will keep lending to the U.S. The statements were reportedly made in an interview set to air this evening on PBS.

BRCD (2.80): Brocade downgraded to hold from buy at Argus Research