Monday, September 21, 2009

September 21, 2009: Morning Call

September 21, 2009: Morning Call

Fair Value: SP500 – 1063.71; NDX: 1723.85; DOW: 9758.10

Technical Levels:

SPX: 875-880, 910, 953, 986 support/ 1044, 1110 resistance


Pre-market EPS: LEN (-.51/772.9M)
08:30: AMGN presents at UBS Healthcare conference
09:30: GILD presents at UBS Healthcare conference
09:30: HGSI presents at UBS Healthcare conference
10:00: US Leading Indicators (August): 0.7%
10:00: AMAT Investor Meeting
11:00: LEN earnings call
13:00: Treasury Auctions 29 billion in 3 month bills and 29 billion in 6 month bills
13:00: NKE Annual General Meeting
14:00: ISRG presents at UBS Healthcare Conference
15:00: BCRX presents at UBS Healthcare Conference
15:30: VVUS presents at UBS Healthcare Conference
17:30: New York Fed’s Cummings speaks on economic recovery

Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 9 points below fair value and the NASDAQ futures are trading 12 points below fair value. European markets are down 0.8% to 1.25%, with the basic resource sector bearing the brunt, as gold dropped below $1,000/oz and copper fell to a one-week low. Profit takers step in as fears equity moves have been overdone are tempered by the threat of increased share issuance, with weekend press talk of an impending RBS placement. Comments from President Obama ahead of G20 meeting Thurs/Fri highlighted his expectations that “the jobs picture is not going to improve considerably,” possibly getting “a little bit worse.” The US dollar rose to a one week high against the yen, and gained against the €uro, on speculation that the Fed will begin preparing the market for the end of quantitative easing. The two-day FOMC meeting starts tomorrow. Asian markets closed lower (Hong Kong down 0.70%, Australia down 0.34%, Shanghai up 0.28%, South Korea down 0.32%). Japan and India were closed for holidays.

Research Calls/Market Moving News:

PER (17.91): Dell (DELL) to purchase Perot Systems (PER) for $30/share cash: Dell and Perot Systems have entered a definitive agreement for Dell to acquire Perot Systems in a transaction valued at approximately $3.9B. Terms of the agreement were approved yesterday by the boards of directors of both companies. Over the past four quarters Dell and Perot Systems had a combined $16B in enterprise-hardware and IT-services revenue, with about $8B from enhanced services and support. Under the terms of the agreement, Dell will commence a tender offer to acquire all of the outstanding Class A common stock of Perot Systems for $30 per share in cash. The transaction is not subject to a financing condition. The transaction, which is subject to customary government approvals and the satisfaction of other customary conditions, is expected to close in Dell’s November-January fiscal quarter. Once the acquisition is complete, Perot Systems will become Dell’s services unit and be led from Plano by Peter Altabef, the current Perot Systems CEO. At the same time, Dell directors are expected to consider Ross Perot Jr., Perot Systems’ chairman of the board, for appointment to the Dell board. Based on current estimates, the transaction is expected to be accretive to Dell’s GAAP earnings in its fiscal 2012. Company will hold an analysts call with Dell and Perot Systems executives at 8:30ET at

POT (97.14): Potash guides f09 EPS to $3.25-3.75 vs prior $4.00-5.00 and Reuters $4.06: Potash inventories that can be measured in the retail chain - this excludes less easily identified inventories in China - have been largely eliminated and potash levels in soils around the world have been significantly reduced. This creates a progressively higher risk to crop yields as soil fertility is continually diminished. While the immediate impact has been masked by good weather and residual soil nutrient levels in markets with healthy long-term fertilization and agronomic practices, such as the US and Australia, yields for key crops in several other major growing regions are expected to be substantially below 2008 levels. A significant rebound is required to address this situation and POT expects 2010 global potash demand to be in the range of 50-55M tonnes.

BCRX (10.02): BioCryst Pharmaceuticals, Inc. today announced that it has received a request for proposal (RFP) from the U.S. Department of Health & Human Services (HHS) for the supply of intravenous (i.v) peramivir for the treatment of critically ill influenza patients under Emergency Use Authorization (EUA). The RFP indicates that the minimum and maximum order quantities to be ordered by the government are 1,000 and 40,000 courses of anti-viral treatment. The RFP specifies that BioCryst would also be required to maintain the ability to manufacture additional treatment courses dependent on the volume and size of anti-viral orders received from HHS for additional needs for either treatment or prophylaxis. The current RFP process may or may not result in a government order for peramivir and does not guarantee issuance of an EUA.

VVUS (10.94): Vivus still plans to present at UBS Global Life Sciences Conference today at 15:30 ET, we're told: Though the company is still expected to present at the conference, our sources have indicated that VVUS has cancelled 1-on-1 meetings and the breakout session. The reason for those cancellations is unclear.

ARNA (5.18): Arena Pharmaceuticals downgraded to market perform from outperform at Leerink Swann

BK (30.30): Bank of New York Mellon (BK) downgraded to neutral from buy at Goldman Sachs: Trust Bank sector is downgraded to neutral from attractive. The firm is positive on Northern Trust (NTRS), given its equity market leverage. The rating is buy; target $68.

MA (223.57); V (73.79): Transaction Processing sector downgraded to neutral from attractive at Goldman Sachs: The firm cites limited upside. Buy-rated stocks remain V, MA and WU. Note TSS was removed from the Conviction Sell List, as previously reported.

EMC (17.00): EMC downgraded to neutral from overweight at Piper Jaffray: The firm cites valuation and relatively high exposure to the European market for the downgrade of the shares.

WFC (28.49); RF (6.13); MI (8.10); CMA (30.65): Bernstein upgrades MI, RF, WFC; downgrades CMA: Upgrade: Marshall & Ilsley (MI) upgraded to outperform from market perform. Regions Financial (RF) upgraded to outperform from market perform. Wells Fargo (WFC) upgraded to outperform from market perform. Downgrade: Comerica (CMA) downgraded to market perform from outperform.

COST (47.55): Costco upgraded to outperform from market perform at William Blair - wires

POT (97.14); MOS (54.25): Soleil Securities downgrades MOS, POT: Mosaic (MOS) downgraded to hold from buy; target cut to $56 from $65. Potash (POT) downgraded to hold from buy; target cut to $88 from $105

New financial rules to be discussed at G20 summit in Pittsburgh will surely put the hurt on banks – WSJ: The plan is intended to make risk-taking by banks that are too big to fail so painful that they won't be inclined to take them. Such banks, as well as banks that engage in a lot of short-term borrowing or invest in hard-to-sell assets will need to keep larger capital cushions. Without details on things like exactly how much larger these capital cushions will need to be, their exact effect on banks' profits isn't known. But using some guesses, an analysis suggests profits could be reduced by 30% at large banks, or more at the largest ones.

BAC (17.63): Bank of America directors to be briefed today on options should CEO Kenneth Lewis be charged with fraud – WSJ: A person familiar with the situation says the board backs Lewis and has not been surprised by any of the allegations leveled by New York Attorney General Andrew Cuomo, but the board has confirmed a just-in-case new succession plan. Sources say options include either choosing from internal candidates or bringing in an outsider

GOOG (491.46): LA Times looks at challenges facing Google in China: While Google's ongoing struggles with the Chinese government are well documented, a growing band of critics say the company's biggest problem is that China requires it to play a game it has never played before and market itself. While the company has largely grown by word of mouth elsewhere, most Chinese people can't even pronounce Google's name, which has undergone several iterations in the country as a result. Baidu (BIDU) ran an effective ad a few years ago sending the message to the Chinese net populace that it spoke their language and understood their needs, while Google was a foreign company that didn't. While in the west, "to Google" means "to search for something online," the verb in China is "to Baidu." Google has a couple of aces up its sleeve, however, in that China Mobile (941.HK) is introducing cellphones that use the Android operating system, and Google has a partnership with music labels to offer legal free downloads of songs.

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