Friday, July 31, 2009

July 31, 2009: Morning Call

July 31, 2009: Morning Call

Fair Value: SP500 – 983.83; NDX: 1608.81; DOW: 9110.66

Technical Levels:

SPX: 832, 875-880, 910, 953 support/ 980, 1002, 1044 resistance


Pre-market EPS: AN (.24/2.8B); CVX (.95/32.4B); PEG (.62/3.4B); TOT (1.00/72.0B)
05:00: Euro-zone CPI (July): -0.4% YoY (actual: -0.6%)
05:00: Euro-zone Unemployment Rate (June): 9.7% (actual: 9.4%)
08:30: US GDP (Q2): -1.5%; Personal Consumption (Q2): -0.5%
08:30: GDP Price Index (Q2): 1.0%; Core PCE (Q2): 2.3%
08:30: Employment Cost Index (Q2): 0.3%
09:45: Chicago Purchasing Manager (July): 43.0
21:00: Chinese PMI Manufacturing (July)
22:30: Chinese CLSA PMI Manufacturing

Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 2 points above fair value and the NASDAQ futures are trading 4 points above fair value at 7:30am ET. Asian markets closed higher (Japan up 1.89%, Hong Kong up 1.68%, Australia up 1.28%, Shanghai up 2.75%, South Korea up 1.6%, India up 1.8%). Technology stocks outperformed. European markets are unchanged ahead of the US GDP report at 8:30am ET. Consumer product stocks were amongst the leading gainers led by L'Oreal (OR.FP) with computer service shares showing strong gains for a second day following broker upgrades for Logica (LOG.LN) and Cap Gemini (CAP.FP). Energy shares were the weakest group led by Eni (ENI.IM) dividend cut and Total (FP.FP) results.

Research Calls/Market Moving News:

FSLR (173.55): First Solar reports Q2 EPS $2.11 vs Reuters $1.67: Company reports revenues of $525.9M vs Reuters $459.5M. First Solar maintains 2009 revenue guidance of $1.9-2.0B vs Reuters $1.94B - earnings presentation. The conference call went very poorly. The company effectively acknowledged significant pricing pressure by announcing a price rebate program based on silicon module benchmark prices. The company also announced that its receivables in Q2 increased 166 million.

FSLR (173.55): First Solar downgraded to neutral from outperform at Credit Suisse: Target cut to $135 from $200. Firm says the company's earnings momentum may be peaking, though the firm notes that the company has a capable management team and compelling technology.

LVS (11.15): Las Vegas Sands reports Q2 EPS adjusted $0.01 vs Reuters ($0.01): Company reports revenues of $1.06B vs Reuters $1.09B. Las Vegas: Net revenue $291.0M vs StreetAccount consensus $310M. Adjusted property EBITDAR $78.1M vs SA $90M. LVS was light; Sands Macao was in-line; Venetian Macao better: Net revenue $443.2M vs SA $477M. Adjusted property EBITDAR $110.0M vs SA $122M. During the conference call, Sheldon Adelson repeatedly put his foot in his mouth by being arrogant and idiotic. The transcript is a must read.

SYNA (35.85): Synaptics reports Q4 EPS $0.47 vs Reuters $0.44: Company reports revenues of $115.3M vs Reuters $112.1M, and a backlog of $62.8M. Guides Q1 revenues to $113-$119 vs Reuters $127.4M. Guides f10 revenues to $495-$525M vs Reuters $522.5M. Synaptics guides Q1 non-GAAP EPS to $0.37-0.43 vs Reuters consensus of $0.55. Calyon and Jefferies downgrade the shares.

DIS (26.22): Walt Disney reports Q3 EPS $0.52 ex-items vs Reuters $0.51: Company reports revenues of $8.60B vs Reuters $8.86B. Media Networks: Revenue $3.96B vs SA $4.03B. Operating income $1.32B vs SA $1.37B. Parks and Resorts: Revenue $2.75B vs SA $2.72B. Operating income $521M vs SA $469M. Studio: Revenue $1.26B vs SA $1.32B. Operating income ($12M) vs SA $42M. Consumer: Revenue $510M vs SA $547M. Operating income $96M vs SA $103M. Interactive: Revenue $113M vs SA $152M. Operating income ($75M) vs SA ($82M).

X (38.61): U.S. Steel mentioned positively at Morgan Stanley: The firm believes the market is discounting extended weakness in the company's tubular business, underestimating recovery potential and its effect on flat rolled profits. Improving data points on rig counts, OCTG pricing, inventories, and imports could all serve as catalysts in the 2H. Shares remain overweight rated with upside to the firm's $45 target.

Federal regulators getting tougher with banks, putting more on probation - WSJ: The Fed, the FDIC, and the Office of the Comptroller of the Currency are on pace to issue almost 600 secret memorandums of understanding this year, vs 399 last year. The article discloses that Fidelity Southern Corp (LION), Berkshire Bancorp (BERK), and Mercantile Bancorp (MBR) have received them. Recall that the WSJ reported 16-Jul that Bank of America (BAC) and Citi (C) had gotten them, and that Colonial BancGroup (CNB) and Riverview Bancorp (RVSB) had disclosed they were operating under memorandums of understanding. The sanctions are typically not made public to avoid alarming depositors and investors.

Trading Higher: EGLE +2.2% (charters for four vessels). On earnings: NVTL +19.1%, ABAX +11%, GXDX +9.4%, SGY +8.7%, RST +5.6%, VSEA +3.9%, CPHD +3.7%, DRYS +2.2%, AMCC +2.2%, MET +2%. Trading Lower: VPHM -5.1% (FDA Letter). On earnings: SYNA -18.9%, LVS -10.7%, ESLR -9.6%, MPWR -9.6%, GPRO -8.9%, GERN -5.5%, VPRT -5%, ADPT -4.8%, GNW -4.2%, EXEL -3.8%, VLCM -3.8%, FSLR –6.4%, DIS -3.5%, ARRS -2.7%, TSYS -2.2%. Solar stocks lower (ESLR and FSLR earnings): SPWRA -3.2%, SOLF -3.2%, CSIQ -2.9%, ENER -2.1%, YGE -1.9%.

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