Thursday, March 26, 2009

March 26, 2009: Morning Call

March 26, 2009: Morning Call

Fair Value: SP500 – 810.99; NDX: 1237.81; DOW: 7706.28

Technical Levels:

SPX: 676, 719, 765 support/ 823, 898 resistance


Pre-market EPS: BBY (1.38/14.79B); CAG (.38/3.12B); CHU (.24/3.59B); GME(1.34/3.50B); LEN (-.69/544.3M); WTSLA (.08/157.4M)
05:00: Fed’s Lockhart speaks on monetary policy
08:30: US GDP QoQ (Q4): -6.6%; Personal Consumption: -4.4%
08:30: US GDP Price Index (Q4): 0.5%; Core PCE QoQ: 0.8%
08:30: Initial Jobless Claims (w/e March 21): 650k; Cont. Claims: 5.48M
09:00: LXK analyst day
10:00: Geithner testifies to house panel on regulation
12:00: Fed’s Fisher speaks on the current economic crisis
12:30: Fed’s Lacker speaks on the US economic outlook
13:00: Fed’s Stern speaks on “Too Big to Fail.”
Post-market EPS: ACN (.62/5.53B); ERJ (1.09/1.92B); TIBX (.09/142.1M)

Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 5 points above fair value while the NASDAQ futures are trading 10 points above fair value at 7:45am ET. European markets are down 0.25% in a quiet range bound trading session. The German DAX is up 0.50% due to strength in Volkswagen (VOW. GR). Trading higher after update is Man Group (EMG.LN) whilst retailers Next (NXT.LN), Kingfisher (KGF.LN) and H&M (HMB.SS) are all lower after results. Asian markets closed strong (Japan up 1.8%, Hong Kong up 3.57%, Australia up 1.03%, Shanghai up 3.27%, India up 3.47% - Sensex closes above 10,000). Asian markets rebounded after weak openings as technology shares rose on the back of overnight gains on the Nasdaq. Hong Kong was buoyed by positive earnings from Hutchison Whampoa (13.HK) and Industrial & Commercial Bank of China (1398.HK), which got several brokerage upgrades following the extension in the lock-up period for Goldman’s stake in the company.

Research Calls/Market Moving News:

China’s Zhou says Economy Recovers on Decisive Action – Bloomberg: “People’s Bank of China Governor Zhou Xiaochuan said the world’s third-largest economy is recovering and contrasted his government’s “decisive” action with delays in other countries. “Leading indicators are pointing to recovery of economic growth,” Zhou said in an article on the central bank’s Web site today. The government “has taken prompt, decisive and effective policy measures, demonstrating its superior system advantage when it comes to making vital policy decisions,” he said. Zhou called this week for the creation of a new international reserve currency, signaling concern at the dollar’s weakness and China’s ambitions for a leadership role at next week’s Group of 20 summit. Finance Minister Xie Xuren urged world leaders today to step up economic stimulus to restore market confidence and to fend off trade protectionism. “China has clearly been moving ahead of the rest of the G-20 in terms of thought leadership and laying the groundwork for what will be discussed,” said Glenn Maguire, chief Asia-Pacific economist at Societe Generale SA in Hong Kong. “China responded extremely quickly and with great vigor to the slowdown.”

BBY (33.46): BBY reports Q4 profit of 1.61 vs. street consensus of 1.40. Guides 2010 EPS to between 2.50 to 2.90. 2010 consensus is 2.46. Shares are trading up 2 points in reaction to the headlines.

RIMM (42.92): Goldman recommends buying Research In Motion ahead of fQ4 (Feb) earnings: Following checks, the firm has more confidence in its estimates for fQ1 and expects company guidance to meet expectations. Rating remains buy; 6-month target is $57. RIMM reports Q4 on 2-Apr. JP Morgan downgraded RIMM shares yesterday.

RIMM (42.92): Research In Motion: Credit Suisse previews Q4; sees in-line qtr, risks in May: Credit Suisse notes while F4Q results should be in-line with the co's Feb 11 preannouncement, per which EPS is expected to come in at the low end of prior guidance of $0.83-0.91, firm sees risk to consensus estimates of $3.4 bln/$0.82 for the May quarter. Their May quarter revenue/EPS estimates of $2.9 bln/$0.75 are predicated on units/ASP of 6.6 mln/$352 vs consensus of 7.7 mln/$361. For F1Q, firm's device est of 6.6 mln (down 12% qoq but still up 22% yoy) is driven by i) moderating net add growth, ii) a lower quarterly replacement rate, and iii) only a moderate inventory build ahead of new product launches. Firm believes this view better reflects not only a slowing smartphone market, but also the level of carrier support that RIM is currently seeing from Vodafone for the Storm.

GOOG (344.07); IACI (14.88); VCLK (8.03): Canaccord Adams upgrades GOOG, IACI, VCLK: Google (GOOG) upgraded to buy from hold; target increased to $450 from $300. InterActiveCorp (IACI) upgraded to buy from hold; target increased to $19 from $15. ValueClick (VCLK) upgraded to buy from sell; target increased to $10 from $5

VLO (18.64): Barron's Weekday Trader is positive on Valero Energy: Barron's says that Valero has a distinct advantage as the largest refiner of petroleum products in the US. The company is one of the most profitable and lowest-cost producers of refined products, has $5B in available liquidity, and no major debt obligations for two years. The article also points out that down 65% over the last twelve months to near a five-year low, the stock is trading around historically low valuations at 0.6x book and 6.5x expected 2009 EPS. In addition, Barron's highlights the competitive edge in Valero's business model in that its plants are equipped to refine heavy, sour crude, which sells at a discount to the benchmark light, sweet crude oil quoted on the NYMEX.

AAPL (106.49): China Unicom Hong Kong denies reports it has agreement to bring 3G iPhone to China - China Knowledge: A CHU spokesman says the companies are still in talks, but he has not been told an agreement has been reached.

BHP (46.12): BHP Billiton downgraded to neutral from buy at Bank of America Merrill Lynch (Pre European Open)-- Bloomberg

President Obama's auto task force to recommend more loans for struggling car companies – WSJ: The Journal reports that President Obama's auto-industry task force is set to recommend additional loans for struggling US car companies, though not without additional strings attached. Recall that Bloomberg cited comments from Sen. Levin (D-MI) earlier today that the automakers can expect more aid. According to the article, the task force expects to make an announcement within the next few days. The group is expected to say that it sees viable futures for both GM and Chrysler, but only if there are sacrifices from management, unions and bondholders.

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