Tuesday, March 17, 2009

March 17, 2009: Morning Call

March 17, 2009: Morning Call

Fair Value: SP500 – 751.08; NDX: 1147.11; DOW: 7174.94

Technical Levels:

SPX: 639, 676 support/ 778, 800 resistance


Pre-market EPS: FDS (.69/156.4M)
06:00: ZEW Economic Survey
08:00: CELG presents at Cowen Healthcare Conference
08:30: US Producer Price Index (Feb): 0.4% MoM; Ex-Food/Energy: 0.1% MoM
08:30: US Producer Price Index (Feb): -1.4% YoY; Ex-Food/Energy: 3.8% YoY
08:30: Housing Starts (Feb): 453,000; Building Permits (Feb): 510,000
13:40: CEPH presents at Cowen Healthcare Conference
16:10: Bank of England Governor Mervyn King to make speech
16:30: API Crude Oil and Gasoline Inventories
17:00: ADBE earnings call
Post-market EPS: ADBE (.44/784.1M); DRI (.68/1.81B); GES (.52/529.0M)

Foreign Market Summary/Key Macro News/Commentary:

The S&P and NASDAQ futures are flat with fair value at 8:15am ET. The S&P futures were 9 points above fair value at 6:15am ET. Asian markets closed mostly higher (Japan up 3.18%, Hong Kong down 0.76%, Shanghai up 3.6%, South Korea up 3.5%, Australia up 3%, India down 0.89%). Japan was boosted by reports that Prime Minister Taro Aso has convened a panel of experts to generate ideas for a new ¥20T economic stimulus package. Banks continued to rise on hopes for new policy steps by the Bank of Japan and Federal Reserve. In Australia, retailers advanced after the Reserve Bank of Australia said further interest-rate cuts were possible. European markets are down 1.5% near the lows of the session after a brief rally that took the markets to break-even following the better than expected Euro-zone economic sentiment survey (-6.5 vs. consensus of –12) at 6am ET. Energy and material sectors are down 2%. European financials are down 0.50%.

Research Calls/Market Moving News:

Fed Meeting speculation: the top Bloomberg story this morning notes the possibility that the Federal Reserve will announce a more aggressive monetary expansion to fight deflation. Speculation is primarily centered around the Fed expanding the size of the 600 billion dollar MBS re-purchase program and the outright buying of Treasuries and even corporate bonds. Once again, market participants appear to be raising “expectations” ahead of the meeting.

GS (93.90); MS (23.04): Goldman Sachs (GS) estimates raised, Morgan Stanley (MS) estimates lowered at UBS: Firm raises Q1'09 estimates on GS materially above consensus given expectations for principal investment losses on corporate and real estate investments to be partially offset by some gains. UBS is also positive on the company's equity trading, prop desk, and FICC. MS estimates for Q1'09 and FY'09 are lowered substantially below consensus. Firm attributes losses to write-downs on legacy assets.

AIG (.83): Populist rage (justifiable) is building on the 165 million dollar in bonuses that AIG paid to employees. The story is on the cover of most national and local newspapers this morning. Stories like this are extremely damaging to investor psychology. Although the markets gave up the gains yesterday primarily on the weak credit card trust data, the AIG bonus story also played a role as “looting” of this kind is extremely damaging to long-term investor psychology.

Meredith Whitney says the large banks in this country are “not investable”- CNBC: Whitney says the company’s legacy loans and existing lines of business were based on “bad math.”

Goldman Sachs offers loans to stretched employees – New York Times: The NYT is reporting that Goldman has provided loans ranging from 1,000 to several hundred thousand dollars so that employees can meet contractual commitments to the Whitehall investment funds run by Goldman. “At least one of the vehicles, in a group known as the Whitehall funds, sank more than 50 percent last year. Another let its investors withdraw their money this year — at a significant loss. But one former Goldman partner estimated that a quarter of the bank’s roughly 100 partners are now worth $5 million or less because of losses on their company stock and other investments.”

MS (23.04): Morgan Stanley downgraded to underperform from buy at Bank of America Merrill Lynch: Price objective reduced to $21 from $25

GS (93.90): Goldman Sachs downgraded to market perform from outperform at Keefe, Bruyette & Woods: The firm sees more upside potential for Morgan Stanley (MS), which remains rated outperform. MS target increased to $28 from $24.

CSCO (15.45): Cisco Systems added to Conviction Buy List at Goldman Sachs: Target increased to $18 from $16.50. The firm believes fQ3 (Apr) will modestly beat consensus expectations.

AA (6.12): AA shares are down 10% after the company cut its dividend 82% and announced a 1.1 billion dollar capital raise.

WYNN (19.65): Wynn Resorts announces 7M share secondary offering through Deutsche and Merrill Lynch: Over allotment is and additional 1.1M shares

UTX (41.12): United Technologies estimates reduced at Bernstein: F09 EPS is reduced to $4.19 from $4.63 vs. Reuters $4.32. A weaker economic outlook and large restructuring costs are cited for the reduction to EPS. Target reduced to $45 from $46

Jefferies upgrades select retailers: Best Buy (BBY) upgraded to buy from hold. Costco (COST) upgraded to buy from hold. Kohl's (KSS) upgraded to buy from hold. Lowe's (LOW) upgraded to buy from hold. Target (TGT) upgraded to buy from hold. Home Depot (HD) upgraded to buy from hold.

ENER (18.43): Energy Conversion says Q3 and full-year guidance is no longer applicable given the lack of visibility: ENER announced that it is slowing the pace of its "demand-driven" production and expansion plan to better reflect the present impact of credit availability on project flow in the global pipeline for photovoltaic’s. ENER also announced that, because of the lack of visibility caused by the current economic conditions, its prior Q3 and full fiscal year 2009 guidance is no longer applicable

ENER (18.43): Energy Conversion downgraded to neutral from buy at Merriman Curhan Ford: Firm cites reduced outlook.

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