Wednesday, February 25, 2009

February 25, 2009: Morning Call

February 25, 2009: Morning Call

Fair Value: SP500 – 772.44; NDX: 1172.03; DOW: 7339.97

Technical Levels:

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


Pre-market EPS: CMS (.24/1.64B); ABK (-.68/406.1M); CNP (.27/2.86B); DISCA(.29/937.4M); DLM (.22/953.3M); GRMN (.96/1.12B); HK (.02/226.7M); KBR (.41/2.96B); DLTR (1.13/1.42B); RRD (.56/2.71B); TJX (.52/5.42B)
07:00: MBA Mortgage Applications
08:35: ALL presents at Merrill Lynch Insurance Conference
10:00: Existing Home Sales (Jan): 4.81M; 1.4% MoM
10:30: DOE Crude Oil and Gasoline Inventories
11:45: CSCO presents at Goldman Sachs Tech and Internet Conference
14:00: AFL presents at Merrill Lynch Insurance Conference
15:20: INTC presents at Goldman Sachs Tech and Internet Conference
16:00: YHOO presents at Goldman Sachs Tech and Internet Conference
20:20: GOOG presents at Goldman Sachs Tech and Internet Conference
Post-market EPS: CRM (.18/285.4M); ESRX (.83/5.48B); FLR (.92/5.87B); FLS(1.92/1.31B); GEF (.35/698.9M); LTD (.64/3.05B); TEG (1.60/3.78B); URI(.45/792.1M)

*****Potential Events: Treasury could make an announcement on the “stress test” plan details/metrics. Citibank capital injection plan also rumored to potentially occur today.

Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 5.50 points below fair value while the NASDAQ futures are trading 12 points below fair value at 7:45am ET. US equity futures have been closely tracking the intra-day pattern in European markets this morning. European markets are up 0.50% but off the opening highs of 1.5%-2.0%. The pullback in Europe seemed to be caused by weakness in the British pound, which reversed early gains at around 6am following a report that EU officials are concerned by a “very rapid” drop in the pound that “raises questions about the financial stability of the British economy.” Asian markets closed higher (Japan up 2.65%, Hong Kong up 1.61%, Australia down 0.12%, Shanghai up 0.10%, India up 0.91%). Exporters rose in Japan on a weaker yen. Honda (7267.JP) jumped after an official said it had vastly exceeded its sales target for Insight hybrid cars. But investors remained wary of news the government might expand share buying to support the stock market. Hong Kong pared gains when the city’s Financial Secretary predicted the economy would shrink (2-3%) this year.

Impact Research Calls/Market Moving News:

FSLR (137.68): First Solar trades lower: FSLR guided f09 GAAP revenue to $1.8-$1.9B. FSLR also guided Q1 revenues flat to slightly down. Q4 reported revenues were $433.7M. Reuters consensus for Q1 is $408.1M; First Call $405.8M. FSLR says that 10-15% of 2009 volumes are at risk of default, says inventory may increase in 1H09, and sees serious risk from oversupply conditions. FSLR also said it is lowering module pricing on a "selective basis." FSLR shares are trading down 23 dollars to 114. Other solar stocks moved lower after hours in reaction to the FSLR decline.

FSLR (137.68): First Solar downgraded to sell from source of funds at ThinkEquity: Target reduced to $60. Kaufman Brothers also downgraded the shares to sell from hold.

WYNN: Wynn Resorts reports Q4 adjusted EPS $0.07 vs Bloomberg .43 cents: Wynn says that it experienced a dramatic deceleration in business from the casino and non-gaming departments starting in October. In addition, the 15.3% table games hold was the lowest experienced by its Las Vegas properties since Wynn Las Vegas' opening in April 2005. Average Daily Rate (ADR) was $281 compared to $298 in Q4 of 2007 and occupancy was 79.7% compared to 94.3%, generating RevPAR of $224, (20.3%) y/y. Wynn Resorts says it is seeing changing behavior patterns at the gaming tables - conf call : Chairman and CEO Steve Wynn notes that gamblers are playing for shorter amounts of time and are less inclined to let winners run. Also points out that casinos catering to lower-end customers seem to be holding up better, fitting with the consumer trade-down theme. Wynn extremely concerned about rhetoric out of Washington towards Las Vegas as Obama administration seems to be looking for a pound of flesh from business. Only good news out of Las Vegas is the fact that the company controls $5B worth of assets, but only owes $2.8B against them, leaving its balance sheet under-leveraged. Company much more upbeat about China, where Macau volumes have been decent. Company concedes that it has not been able to hold room rates, but does point out that it has found ways to save up to $45M in costs in Macau. WYNN shares are trading down 4 dollars to 21.75.

C (2.60): Citi's relationship with the government off to a rocky start – WSJ: One government official says Citi is so huge as to be "unmanageable." Executives are having trouble pleasing the government while simultaneously trying to rebound from five consecutive quarterly losses. But it's not obvious whom they should be trying to please: No single person or entity is in charge of the federal oversight of the bank, and the government is trying to be neither an active nor a passive investor. The article details frustrations arising from government directives that can be either conflicting or inscrutable. Officials told regulators the bank was profitable in January.

Housing downturn spurs increase in all-cash sales – WSJ: Citing a report from Raymond James, the Journal notes that homes financed with cash comprised one-third of sales in Phoenix last moth, up from 19% in the year-earlier period. According to the Sacramento Association of Realtors, all-cash sales accounted for 24% of home sales in Sacramento last month, up from 8% in January 2008 and 3% in January 2007. The paper adds that cash sales are up even more in many Florida markets. The Journal suggests that this trend is an indication that bargain hunters have descended on some of the most severely depressed housing markets in search of great deals.

ALL (18.64): Allstate cuts quarterly dividend to .20 cents from .41 cents.

LNC (13.04): LNC cuts quarterly dividend to .01 cent from .21 cents.

T (23.25): AT&T (T) upgraded to overweight from neutral at JPMorgan.

WFC (13.05): WSJ encourages Wells Fargo to cut its dividend: A "Heard on the Street" column notes the stock yields 10% now, and the bank has a Tier 1 capital ratio of only 7.9%. The column wonders why Wells Fargo has not already followed JPMorgan Chase's lead when it slashed its dividend 87% yesterday.

MSFT (17.17): Microsoft estimates and target lowered at UBS: Target lowered to $21 from $23. Firm lowers FY10 estimates below consensus to reflect lower revenue growth and share buyback assumptions. Rating is buy

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