February 3, 2009: Morning Call

February 3, 2009: Morning Call

Fair Value: SP500 – 822.44; NDX: 1195.61; DOW: 7894.22

Technical Levels:


SPX: 752-755, 800, 816 support/848-852, 899-908 resistance

Events:

Pre-market EPS: ADM (.68/17.64B); ADP (.56/2.16B); AVP (.60/2.87B); CAM(.75/1.52B); CME (3.53/695.6M); CMI (.41/3.23B); DHI (-.56/893.9M); DOW(.04/13.07B); KSU (.39/436.3M); MOT (-.02/7.07B); MRO (.91/17.81B); NOC(.84/8.87B); PNC (.63/1.91B); UPS (.86/13.09B)
05:00: Euro-zone PPI (Dec): -1.2% MoM; 2.1% YoY
07:45: UPS earnings call
08:30: CME earnings call
09:00: PNC earnings call
10:00: DHI earnings call
10:00: Pending Home Sales (Dec): 0.0% MoM
16:30: API Crude Oil and Gasoline Inventories
17:00: ABC Consumer Confidence
18:15: BHP earnings call
20:00: Chinese PMI Manufacturing
Post-market EPS: ACE (1.88/3.22B); CTX (-4.25/887.0M); DIS (.52/10.13B); ERTS(.89/1.91B); FISV (.86/1.07B); MEE (.79/822.6M); MET (.14/12.23B); PXD(.20/475.8M); YUM (.45/3.4B)

Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 3 points below fair value while the NASDAQ futures are trading 6 points below fair value moving in lockstep with European markets, which reversed initial gains and are now down 0.25%. European trading is subdued ahead of the interest rate decisions on Thursday. Mixed earnings reports from Vodafone (better) and BP (worse) and mixed economic data have contributed to the lackluster trade. Advancers and decliners on the FTSE 100 are about even. Vodafone (VOD.LN) reaffirmed FY underlying ranges guidance though increased guidance to reflect FX environment. BP (BP.LN) reports its first quarterly loss in 7 years. Germany Dec Retails sales (0.3%) y/y vs con +0.5%. EuroZone Dec PPI +1.8% y/y vs con +2.1%. Banks (down 1.4%) and Insurance (down 0.70%) sectors are the weakest while Telecom and Tech are the strongest. Asian markets closed mixed (Japan down 0.62%, Hong Kong down 0.66%, Australia up 0.32%, India up 0.91%, Shanghai up 2.5%). Government stimulus plans in Japan and Australia buoyed sentiment, and technology stocks gained. Australia cut interest rates lowering its cash target rate 100bps to 3.25% and also planning an additional A$41.5B fiscal stimulus. Resource stocks rose as Chinalco confirmed it was discussing cooperating with Rio Tinto (RIO.AU). PetroChina (601857.CH) rose on reports the Chinese government may submit a stimulus plans for the energy industry.


Impact Research Calls/Market Moving News:

BP (41.57): BP reports Q4 EPS ($0.18) vs Bloomberg consensus $0.17 and year-ago $0.23: Company reports revenues of $60.94B vs Bloomberg consensus $61.45B and year-ago $81.22B . Reported production for Q4 was 3,945mboe/d vs year-ago 3,907mboe/d.

DOW (11.05): Dow Chemical reports Q4 EPS ($0.62), ex-items: DOW also says Q4 earnings were reduced by a much higher effective tax rate, which produced a negative impact of $0.32. Reuters is $0.00; First Call $0.07. Company reports revenues of $10.90B vs Reuters $13.01B. Volume declined 17%, and was down in all operating segments and in all geographic areas. Price was down 6% in the quarter, as a 4% increase in the Performance segments was more than offset by a 15% decline in the Basics segments.

AFL (23.03): AFLAC reports Q4 EPS $0.98 ex-items vs Reuters $1.00: Company reports revenues of $4.26B vs Reuters $4.64B. Reaffirms f09 EPS guidance of $4.51-$4.59 vs Reuters $4.70. AFL says the yen is currently stronger to the dollar than it was in 2008. If the stronger yen persists and averages 90 to 95 for the full year, it would expect reported earnings to be in the range of $4.73 to $4.96 per diluted share. (Note: Of AFL’s 68.9 billion in investments and cash in Q4, hybrid securities exposure is 8 billion. AFL did not take any writedowns on the hybrid investments because they use a debt impairment model following comments from the SEC. Capital concerns are a major issue for AFL because the investment portfolio is heavily weighted toward the financial sector – approx. 40% of assets.)

PNC (32.18): PNC Bank reports Q4 EPS $0.32 ex-items vs Reuters $0.78: PNC issued a press release on January 21, indicating that Q4 results would be below expectations. Company reports revenues of $1.68B vs Reuters $1.91B. The estimated tier 1 risk-based capital ratio was 9.7% at December 31, 2008 vs. 21-Jan guidance of 9.5-10%.

AMZN (61.15): Amazon.com maintained hold at Citi: Firm speculates that the company will rollout its Kindle 2.0 reader on 9-Feb, and says that data indicates that the company sold 500K Kindles in 2008, vs the firm's prior estimate of 380K, likening its sales ramp to that of the iPod. Target price, $65

QCOM (35.29): Qualcomm downgraded to neutral from buy at Goldman Sachs: Price target remains $35. The firm cites valuation.

CME (168.26): CME Group reports Q4 EPS $3.58 ex-items vs Reuters $3.46: Company reports revenues of $692.0M vs Reuters $687.6M.

CAM (21.98): Cameron International reports Q4 EPS $0.75 ex-items vs Reuters $0.74: EPS excludes a non-cash, after-tax charge of $0.08, associated with the previously announced termination of the company's U.S. pension plans. Company reports revenues of $1.52B vs Reuters $1.52B. Company guides Q1 EPS to $0.59-0.62 vs Reuters $0.60. Guides f09 EPS to $1.75-2.00 vs Reuters $2.47.

ADM (27.50): Archer-Daniels reports Q2 EPS $0.91 vs Reuters $0.68: Company reports revenues of $16.67B vs Reuters $17.09B.

MGM (8.13): MGM Mirage initiated with sell at Citi: Target is $2.50. The firm cites concern about the potential default rate at CityCenter and thinks MGM may have to sell at least one other property in 2009 to raise cash.

M (8.59): Moody's places Macy's on review for possible downgrade: The review was prompted by concern that Macy's significantly lower 2009 earnings guidance would result in the company maintaining credit metrics that are more appropriate for a Ba rating level over the medium term.