June 16, 2009: Morning Call

June 16, 2009: Morning Call

Fair Value: SP500 – 919.80; NDX: 1456.86; DOW: 8559.64

Technical Levels:

SPX: 765, 788, 832, 875-880 support/ 935-943 resistance

Events:

Pre-market EPS: BBY (.33/10.16B); FDS (.72/155.4M); SFD (-.56/3.07B)
05:00: Euro-zone CPI (May): 0.0% MoM; 0.0% YoY; Core CPI (May): 1.6% YoY
05:00: Euro-zone ZEW Economic Sentiment Survey (June): 34.0 (actual: better at 42.7)
08:30: US Producer Price Index (May): 0.6% MoM; Ex-Food/Energy: 0.1% MoM
08:30: US Producer Price Index (May): -4.4% YoY; Ex-Food/Energy: 3.2% YoY
08:30: US Housing Starts (May): 480,000; Building Permits: 500,000
09:15: Industrial Production (May): -0.8%; Capacity Utilization: 68.5%
10:00: BBY earnings call
13:00: NVDA Analyst Day
14:15: ORCL presents at Knight Capital Investor Conference
14:15: IBM presents at Knight Capital Investor Conference
15:15: GS presents at Knight Capital Investor Conference
16:30: API Crude Oil and Gasoline Inventories
17:00: ADBE earnings call
Post-market EPS: ADBE (.34/695.8M)


Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 2 points above fair value while the NASDAQ futures are trading 7 points above fair value at 7:30am ET. The US dollar snapped a two-day rally (Euro is up 0.75% to 1.3903; British Pound is up 0.87% to 1.6461) due to stronger German and Euro-zone confidence, higher UK CPI, and chatter that BRIC countries may diversify their reserves among themselves in order to reduce dollar dependence. Commodities have reversed some of Monday’s decline on the weaker dollar (Crude is up 1.8% to 71.94). Treasury bonds are little changed. Asian markets closed lower except for India, which reversed opening losses (Japan down 2.8%, Hong Kong down 1.8%, Australia down 1.7%, South Korea down 0.95%, India up 0.55%). Financial, commodity, and energy shares led the decline in Asia following the sell-off on Wall Street on Monday. European markets are up 0.50% near the highs of the session. Mining shares (down 0.25%) continue to lag while banks (up 1.0%) and defensive sectors (food retail and pharmaceuticals) outperform. (UBSN.VX) traded lower after being placed on review for possible downgrade by Moody's. Natl Bank of Greece (ETE.GA) proposes a rights issue to raise approx €1.25B. The shares fell and pressured other Greek bank shares. Rio Tinto (RIO.LN) said trading outlook for rest of 2009 remains uncertain.

Research Calls/Market Moving News:

BAC (13.33): Sandler O’Neill analyst Jeff Harte comments on BAC’s May Master Trust data: “BAC: Net charge-offs were 12.50%, compared with 10.47% in April and the current three month average of 10.76%. This 203 basis point sequential monthly increase was more than we anticipated and suggests that our 10.75% domestic credit card net charge-off rate for 2Q09 may be low. It is noteworthy that BAC's 1Q09 reported domestic NCO ratio of 9.81% was 91 basis points below the trust's same period average. Delinquencies (30+ days) reported were 7.95%, versus 8.01% in April and the current three-month average of 7.94%. The portfolio yield increased to 19.40%, compared with 18.41% in April and a current three-month average of 18.73%. The excess spread decreased to 3.77%, from 4.72% last month and the three-month average of 4.76%.

RIMM (80.38): Research In Motion target increased to $92 from $85 at Thomas Weisel Partners: Firm sees a solid May quarter and an in line Aug outlook, with continued market share gains as RIMM rolls out several upgrades and "new" platforms. Target increased due to recent increases in the market multiple. Rating is overweight.

RIMM (80.38): Research In Motion to sell BlackBerry Tour later this summer: The smartphone will be available at Sprint (S) for $199.99 with a new line of service or eligible upgrade, two-year service agreement, and $50 instant rebate and $100 mail-in rebate. The phone will operate globally. Bloomberg reports that co-CEO Jim Balsillie says the Tour will be sold in Canada through BCE (BCE.CN) and Telus (T.CN). Balsillie declines to comment on when RIMM might introduce a touchscreen Storm with a pullout keyboard.

IBM (107.62): IBM target raised to $140 from $120 at Thomas Weisel Partners: Firm notes the company's recurring revenue base makes IBM less cyclical, and believes low single digit revenue growth, modest margin expansion, acquisitions, and share repurchases support high single digit EPS growth. Estimates are unchanged. Rating is overweight.

Canaccord Adams initiates FFIV, BRCD, CSCO, EMC, NTAP with buy ratings: F5 Networks (FFIV) initiated speculative buy with $41.50 target. Brocade (BRCD) initiated buy with $10 target. Cisco Systems (CSCO) initiated buy with $23 target. EMC (EMC) initiated buy with $15 target. NetApp (NTAP) initiated buy with $22.50 target.

MSFT (23.42): Microsoft target increased to $26 from $22 at Jefferies: Firm notes that Windows 7 is due out on 22-Oct and expects a large, rapid PC upgrade cycle starting in late in 2010. Buy rating is reiterated

CMI (34.02): Cummins initiated buy at Goldman Sachs: Target is $42.

LZB (3.64): La-Z-Boy reports Q4 EPS $0.07 ex-items vs Reuters ($0.11): Company reports revenues of $284.5M vs Reuters $296.5M. Shares are trading up 25%.

Secondary Issuance: HAR (9M share secondary); MMR (11M share secondary); BRKR (35M share secondary), GWR (4M share secondary).