Wednesday, April 29, 2009

April 29, 2009: Morning Call

Fair Value: SP500 – 852.68; NDX: 1361.84; DOW: 7978.46

Technical Levels:

SPX: 676, 719, 765, 788 support/869, 898 resistance


Pre-market EPS: AMT (.15/408.8M); BHI (.77/2.56B); AET (.93/8.47B); CNP(.31/3.17B); GD (1.46/7.83B); GT (-1.38/4.07B); HES (-.24/6.58B); MCO (.34/393.3M); MHS (.62/13.7B); MWV (-.24/1.44B); PX (.92/2.38B); ROK (.29/1.07B); SEE (.28/1.03B); SI (1.54/24.49B); RD (1.07/56.01B); NYB (.26/227.5M); TWI(.23/256.6M); TXT (.01/2.78B); WYE (.89/5.53B); MT (-.36/15.5B)
04:00: Euro-zone M3 (March): 5.8% YoY
04:00: Bloomberg Eurozone Retail PMI
05:00: Euro-zone Consumer Confidence (April): -34
05:00: Euro-zone Economic Confidence (April): 65.0; Industrial Confidence: -37
07:00: MBA Mortgage Applications
08:30: GDP QoQ (Q1): -4.7%; GDP Price Index (Q1): 1.7%
08:30: Personal Consumption (Q1): 0.9%; Core PCE QoQ: 0.9%
10:00: BAC Annual Meeting
10:30: DOE Crude Oil and Gasoline Inventories
12:30: WMT presents at Barclay’s Retail Conference
14:15: FOMC Decision on Interest Rates
16:30: FSLR earnings call
17:00: V earnings call
Post-market EPS: AFL (1.16/4.76B); AKAM (.40/208.4M); AVB (1.19/217.4M); BXP(1.25/367.3M); CBG (.02/982.8M); CLF (-.05/497.2M); DST (.94/404.0M); EQR(.55/499.3M); ESRX (.82/5.41B); FLS (1.58/1.04B); FSLR (1.52/403.0M); OI(.36/1.66B); PLD (.71/254.3M); SBUX (.15/2.37B); STR (.80/965.0M); V (.64/1.6B)

Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 7 points above fair value while the NASDAQ futures are trading 10 points above fair value. Bloomberg is reporting that the stress tests results signal that “at least” six of the nations largest banks require additional capital. The change in the market’s character is worth noting given that the Bloomberg story would have likely caused a sharp sell-off just a month or two ago. The fact that the capital markets have absorbed a broad range of secondary issuance (REITs, casinos, steel, banks) is alleviating concerns that government capital will be needed. Although the market has been in a trading range over the last 3 weeks, the underlying bid is far more resilient than I anticipated, particularly in reaction to bad news. The stock market has adopted the thesis that the recent stabilization in some economic data presages a stronger economy in the second half. Although I doubt the thesis, I don’t have the conviction to fight it. I would also caution that many market participants appear to be leaning long simply because the stock market “acts well.” This group of market participants will be extremely quick to sell if sentiment shifts even modestly.

European markets: initially rose bouyed earnings from the likes of Allianz (ALV.GR), Siemens (SIE.GR), Banco Santander (SAN.SM) and Royal Dutch Shell (RDSA.LN), which outweighted disappointments from SAP (SAP.GR) and ArcelorMittal (MT.NA). Major indices extended gains to trade and are trading at session highs. Advancers on the FTSE 100 lead decliners 9-1. Asian markets: mainly rose led by commodity and consumer-related stocks. Samsung SDI (006400.KS) led South Korea higher, rising on a brokerage upgrade despite reporting a Q1 loss. Shanghai Pudong Development Bank (600000.CH) rose in anticipation of a government announcement about plans to bolster Shanghai’s status as a financial and transportation center. Sinopec (386.HK) rose after saying H1 profit will rise. Bank of China (3988.HK) and Bank of Communications (3328.HK) rose when H1 results beat estimates

Research Calls/Market Moving News:

Bloomberg reported earlier that at least 6 of the 19 largest US banks will require additional capital: Citing people briefed on the matter, Bloomberg reported at 12:01 ET that "at least" six of the 19 largest U.S. banks require additional capital based on preliminary results of government stress tests. The report said that while some of the banks may need additional cash injections from the government, most of the capital is likely to come from converting preferred shares to common equity. The 19 banks subject to the stress test are: JPM, C, BAC, WFC, GS, MS, MET, PNC, USB, BNY, GMAC LLC, STI, STT, COF, BBT, RF, AXP, FITB, and KEY.

Banks increasingly bristling at government prescriptions - NYT: The article amalgamates objections large banks are raising with more and more volume. People briefed on the exams say Citigroup (C), Bank of America (BAC), PNC Financial (PNC), and Wells Fargo (WFC) are disputing some stress-test conclusions.

TWX (21.77): Time Warner reports Q1 EPS $0.45 ex-items vs Reuters $0.39: First Call is $0.38. Company reports revenues of $6.95B vs Reuters $6.75B. TWX reaffirms its f09 outlook.

Fox-Pitt Kelton upgrades US bank stocks to market weight from underweight: The firm believes the upcoming stress test results will not be as bad as expected and believes the risk of dilution is already priced into shares.

C (2.89): Citi seeking approval from Treasury to pay special bonuses; also looking to loosen restrictions on Phibro unit – WSJ: The Journal cites people familiar with the matter who say that CEO Vikram Pandit made the case for the stock-based bonuses. Executives at the firm are describing the bonuses as "retention" awards designed to bolster morale and help stave off rivals' poaching efforts. A source tells the paper that Treasury Secretary Geithner has not made a decision on whether to allow the bonuses.

TXT (11.20): Textron (TXT) reports Q1 EPS $0.26 ex-items vs Reuters $0.01, announces 19M share secondary offering and $300M convertible note offering through Goldman and JPMorgan

SPWRA (22.61): SunPower 9M share secondary offering priced at $22 a share through Deutsche Bank - Dow Jones.

X (26.16): U.S. Steel 23.6M share secondary offering priced at $25.50 per share through JPMorgan, Morgan Stanley and Merrill Lynch - Dow Jones:
The size of the offering was increased from an originally expected 18M shares.

M (12.58): Macy's downgraded to neutral from overweight at JPMorgan : The firm notes valuation and says the catalyst for further stock appreciation is better-than-expected top-line and earnings results.

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