Thursday, April 2, 2009

April 2, 2009: Morning Call

April 2, 2009: Morning Call

Fair Value: SP500 – 808.27; NDX: 1253.24; DOW: 7717.11

Technical Levels:

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


G-20 Meeting in London
Pre-market EPS: MON (2.08/4.18B)
04:30: BOE releases Quarterly Credit Conditions Survey
07:45: ECB Interest Rate Decision
08:00: NYX Annual Meeting
08:00: FASB hearing on mark-to-market accounting
08:30: Initial Jobless Claims (w/e March 28): 653,000; Cont. Claims: 5.56M
09:30: MON earnings call
10:00: Factory Orders (Feb): -0.3%
10:30: EIA Natural Gas Storage Change
11:00: FASB resolution vote on mark-to-market accounting
17:00: RIMM earnings call
Post-market EPS: GPN (.42/375.4M); RIMM (.84/3.4B)

Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 15 points above fair value to 824 due to substantial strength in Asian and European markets amid continued speculation that the FASB vote on mark to market accounting (today at 11am) will boost Q1 bank earnings. Short covering in the financials began mid-day on Tuesday due to chatter that Meredith Whitney was telling clients to cover shorts and wait for a better entry point after the sector releases earnings. In addition, Interfax is reporting that the G20 is set to approve a 500 billion IMF funding boost (widely expected) and Geithner said overnight that global economies are showing "traction" amid widening stimulus efforts. Although economic data has been weaker on balance in the last few weeks, global markets have been rallying because the pace of the global contraction appears to be decelerating and there have been a few glimmers of stabilization in housing and retail sales. Obviously, the key risk in the near term is the "green shoots" showing up in the economic data may be a mirage. Although the recent gains in financial stocks have garnered most of the attention in the press, I would note that cash-rich technology companies (AMZN, AAPL, IBM, CSCO, ADBE, INTC, GOOG) continue to outperform by a wide margin YTD. European markets are up 2.5% to 4.0%. Asian markets closed sharply higher (Japan up 4.4%, Hong Kong 7.4% - biggest gain since October 30, 2008, Australia up 2.8%, India up 4.5%, South Korea up 3.58%). Financial, energy, technology, and basic material stocks are the leading sectors around the world. Defensive sectors (Healthcare, Consumer Staples, Gold) are the lagging sectors.

Research Calls/Market Moving News:

Mark-to-market accounting changes could boost quarterly earnings by up to 20% at some large banks – FT: The FT cites Wall Street executives and auditors. Recall that FASB will vote on Thursday to change its mark-to-market accounting rules to allow hard-to-value assets to be marked down only by expected losses, rather than market prices. The article goes on to highlight some of the biggest concerns surrounding the proposed changes (most of which have already been widely reported), particularly when it comes to the possibility that investor confidence in the banking sector could be further undermined by heightened transparency issues.

BIDU (174.77): Baidu target raised at Bernstein: The firm says Baidu's share of search queries picked up significantly in February to 27% from 23% of total in the Asia Pacific region. Bernstein now sees revenue growth for 2009 of 33% vs. consensus 29% with 2010 growth of 28% vs. consensus 32%. Target is raised to $230 from $170. Shares remain outperform rated.

ADBE (21.96): Adobe Systems target increased to $25 from $21 at UBS: Firm notes stabilization in end market demand and a focus on costs. UBS sees a chance for an upside to May quarter expectations and to FY'09/'10 if current demand patterns hold. Estimates are raised. Buy rating is reiterated.

AMZN (73.50): downgraded to equal-weight from overweight at Barclays Capital: Target remains $70. The firm cites valuation

BLK (130.69): BlackRock removed from Conviction Buy List at Goldman Sachs: Rating remains buy; target is $135. The firm notes top buys ahead of earnings: WDR and IVZ. Top sells: FII, TROW, GBL and CNS.

MGM (2.63): Colony Capital discussing possible investment in MGM's CityCenter project – WSJ: A source close to Colony told the WSJ that the company is talking to both MGM Mirage and Dubai World about a possible investment. The source characterized the talks as "sporadic, but fairly recent wide-ranging discussions", and said that Colony is considering an investment "as well as just brokering a strained relationship" between MGM and Dubai World

China plans to extend lockup period on bank investments held by foreigners by at least two years – FT: The FT cites people familiar with the matter and state media reports that say that foreign investors in Chinese banks will in the future be forced to accept a lockup period of at least five years. According to Liu Mingkang, chairman of the China Banking Regulatory Commission, the new five-year minimum is designed to protect the safety of the country's banking system

NYX (18.39): NYSE Euronext executive believes Chinese companies have interest in listing on NYSE - South China Morning Post: At a briefing in Hong Kong, the executive does not specify companies or numbers, but says many would like to raise funds on the exchange. He also says that if they could get Chinese regulatory approval, about 10K small- and medium-sized companies would consider listing on NYSE Amex and NYSE Alternext.

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