Wednesday, October 28, 2009

October 28, 2009: Morning Call

October 28, 2009: Morning Call

Fair Value: SP500 – 1060.13; NDX: 1720.87; DOW: 9833.78

Technical Levels:

SPX: 875-880, 910, 953, 986, 1003, 1041 support/ 1110 resistance

Events:
Pre-market EPS: COP (.93/37.63B); GD (1.40/7.74B); GT (.40/4.26B); HES (.50/7.1B); IP (.24/5.92B); NYB (.26/244.4M)
07:00: MBA Mortgage Applications
08:30: Durable Goods Orders (Sep): 1.0%; Ex-Transportation: 0.7%
10:00: New Home Sales (Sep): 440,000; 2.6% MoM
10:30: DOE Crude Oil and Gasoline Inventories
11:00: MEE earnings call
16:30: FSLR Earnings Call
Post-market EPS: AFL (1.20/4.75B); ASIA (.21/62.4M): AKAM (.34/199.2M); AVB (1.08/216.0M); CBG (.10/1.04B); CERN (.59/420.4M); DNB (1.10/394.8M); FLS (2.02/1.11B); FSLR(1.69/525.3M); LNC (.80/2.42B); ORLY (.56/1.22B); RYL (-.95/351.7M); VALE(.32/6.12B)

Foreign Market Summary/Key Macro News/Commentary:

The S&P and NASDAQ futures are both 6 below fair value. The USD is stronger for the 3rd day in a row, weighing on commodities (down 1% across the board; Gold down 8 to 1032). Market sentiment also appears to be shifting toward risk aversion - VIX up to 25 from 20 a few days ago, AIG is down nearly 30% in the last 10 days, and Treasury bond auctions continue to see remarkable demand considering the yields. SAP is down 7.7% on weaker guidance. GMAC is in talks with the Treasury regarding another 3-6 billion dollar bailout. Irish banks are down 15% on concerns about potential requirements the EU may impose in return for government aid (ING ripple effect). European markets are down 1.5% with financials, technology, and basic material sectors among the weakest. Asian markets closed broadly lower for the 2nd session in a row. Keep an eye on AAPL and AMZN as they are important "risk proxies". AAPL and AMZN are clearly best of breed and both have scarcity value considering that virtually no other companies are exhibiting the same kind of secular growth. But, both stocks will be subject to increased risk aversion given that momentum investors are quick to sell. That said, I expect both stocks will continue to outperform the S&P 500 and other technology stocks given the scarcity value.

Research Calls/Market Moving News:

MEE (31.31): Massey Energy reports Q3 EPS $0.19 vs Reuters $0.18: Company reports revenues of $641.6M vs Reuters $686.4M. Q3 EBITDA $112.1M vs. Reuters $110.7M. produced coal shipments to be between 37.5 and 38.5M tons, down from prior 38.5-40.5 tons. MEE is trading down 4% in the pre-market.

GMAC in talks with the Treasury about additional financial support – WSJ: The Journal cites people familiar with the matter who say that GMAC and the Treasury are in advanced talks regarding additional financial support. These sources say that the government is likely to inject $2.8B to $5.6B into GMAC, on top of the $12.5B that the lender has already received since December of 2008. The new funds are expected to come in the form of preferred stock. Recall that the government currently owns a 34% stake in the company. The article also notes that the FDIC told GMAC on Tuesday that it will guarantee an additional $2.9B in debt in an effort to make it easier for the company to sell debt to investors. The agency backed $4.5B in GMAC-issued debt earlier this year.

AAPL (197.37): Apple says they intend to defend the Nokia patent case vigorously in 10-K filing: “Plaintiff Nokia Corporation filed this action against the Company on October 22, 2009 in the United States District Court for the District of Delaware, alleging infringement of U.S. Patent No. 5,802,465, U.S. Patent No. 5,862,178, U.S. Patent No. 5,946,651, U.S. Patent No. 6,359,904, U.S. Patent No. 6,694,135, U.S. Patent No. 6,755,548, U.S. Patent No. 6,882,727, U.S. Patent No. 7,009,940, U.S. Patent No. 7,092,672, and U.S. Patent No. 7,403,621. The complaint alleges that these patents are essential to one or more of the GSM, UMTS and 802.11 wireless communications standards, and that the Company has the right to license these patents from plaintiff on fair, reasonable, and non-discriminatory (“FRAND”) terms and conditions. Plaintiff seeks unspecified FRAND compensation and other relief. The Company’s response to the complaint is not yet due. The Company intends to defend the case vigorously.”

MT (35.56): ArcelorMittal reports Q3 EPS $0.60 vs Bloomberg $0.00 and year-ago $2.78: Company reports revenues of $16.17B vs Bloomberg $18.85B and year-ago $35.20B; reports EBITDA of $1.59B vs Bloomberg $1.96B and year-ago $8.58B. Shipments totaled 18.2M tons vs year-ago 25.6M. Guides Q4 EBITDA to $2.0-2.4B vs Bloomberg $2.62B. ArcelorMittal's CFO says 2009 not expected to be a break-even year, net loss likely.

Visa (V) reports Q4 EPS $0.74 ex-items vs Reuters $0.72, authorizes $1B share repurchase plan.

AKS (17.18); X (37.41): KeyBanc downgrades AKS, X: AK Steel (AKS) downgraded to hold from buy. U.S. Steel (X) downgraded to hold from buy. Firm notes concern that the rate of real economic recovery in NA is occurring too slowly relative to current market expectations.

City minister pressuring investment banks to reduce underwriting fees for Lloyds Banking Group's rights issue – Guardian: The article says that six unnamed investment banks have reduced their fees by £100M after lobbying by the Treasury, but says that Lord Myners is pressuring them to lower their charges even more.

ING (12.96): ING Group upgraded to buy at Bank of America Merrill Lynch -- Bloomberg

WSJ discusses latest developments surrounding "too big to fail" legislation: Citing people familiar with the matter, the Journal reports that under a deal hashed out between the Treasury and House Financial Services Committee Chairman Barney Frank (D., Mass.), financial firms with more than $10B of assets would have to pay for the rescue or unwinding of a collapsed competitor. The paper adds that while the agreement fits with efforts on the part of Democrats to shift the burden of future financial crises away from taxpayers and toward the financial industry, it would not prohibit government funds from being injected into failing firms. The Journal goes on to note that roughly 120 banks currently have more than $10B of assets.

BAC (15.45): Bank of America CEO search hits a snag – WSJ: Citing people familiar with the process, the Journal reports that the BofA's search for a new CEO has slowed as directors have been frustrated by what they view as a shortage of high-profile financial executives who are right for the job. The paper adds that while the company had hoped to choose a successor to retiring CEO Ken Lewis in time for the full board to vote on the matter at its regularly scheduled meeting on Wednesday, committee members have indicated that they need additional time. According to the article, Chief Risk Officer Gregory Curl, and Brian Moynihan, the bank's consumer and small-business banking chief, remain the leading internal candidates for the job. However, some large shareholders are pushing hard for the board to seriously consider outside CEO candidates. Of interest, BlackRock (BLK) Chairman and CEO Larry Fink, who is being backed by some executives inside of BofA, has had no conversations with the board and has reportedly told people close to him that he is not interested in the job.

WYNN (56.13): Wynn Resorts upgraded to outperform from perform at Oppenheimer: Target is $73.. Recent weakness offers an attractive entry point.

BX (14.39): Blackstone Group is talks to reduce Hilton's debt load reports the WSJ: Sources say Blackstone has begun talks with lenders to cut up to $5B from the $20B debt load of Hilton Worldwide, the single biggest investment of Blackstone. The firm is considering contributing another $800M in equity to buy back debt at a discount as well as seeking to extend some debt maturities. Talks are in the preliminary stages. One complication is that about $4B in debt is held by the Federal Reserve from the Bear Stearns deal.

Wednesday, October 14, 2009

October 14, 2009: Morning Call

October 14, 2009: Morning Call

Fair Value: SP500 – 1069.66; NDX: 1728.25; DOW: 9817.54

Technical Levels:

SPX: 875-880, 910, 953, 986, 1003, 1041 support/ 1110 resistance

Events:
Pre-market EPS: ABT (.90/7.74B); ACGY (.12/552.0M); GWW (1.34/1.60B); LUFK(.20/119.0M); JPM (.52/25.05B)
08:30: Import Price Index (Sep): 0.2% MoM; -11.7% YoY
08:30: US Retail Sales (Sep): -2.1% MoM; Less Autos: 0.1%
08:30: CSX earnings call
09:00: CHK Investor Meeting
09:00: JPM earnings call
10:00: US Business Inventories (Aug): -0.8%
14:00: Minutes from the Sep 23 FOMC Meeting
14:30: Fed’s Tarullo testifies on bank industry at Senate panel
16:30: API Crude Oil and Gasoline Inventories
Post-market EPS: CCK (.79/2.33B); LSTR (.39/524.3M); STLD (.23/1.1B); XLNX(.24/414.1M)

Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 14 points above fair value and the NASDAQ futures are trading 22 points above fair value at 7:45am ET. INTC’s earnings and forward guidance were well above street consensus. JPM also beat consensus but the magnitude and quality of the upside surprise was not on the same level as INTC. European markets are up 2.0% to 2.3% on the strong earnings. Stronger earnings from INTC, ASML Holdings (ASML.NA), Burberry (BRBY.LN), BASF (BAS.GR) and Rio Tinto (RIO.LN are setting the tone in Europe. Asian markets closed higher ex-Japan, which sat out the rally (Japan down 0.16%, Hong Kong up 1.95%, Australia up 0.95%, Shanghai up 0.90%, South Korea up 1.3%, India up 1.2%). China’s export decline slowed (-15.2% vs. street at –21%) and Australian consumer sentiment continued to rise. Tech stocks were bolstered by INTC’s upbeat outlook, though some fell on profit-taking after a run-up yesterday in expectation of Intel’s results. Chip equipment makers fell when the company trimmed its capex plan for next year.

Research Calls/Market Moving News:

INTC (20.49): Intel reports Q3 EPS $0.33 vs Reuters $0.28: Company reports revenues of $9.39B vs Reuters $9.06B. Guides Q4 revenues to $10.1B, +/- $400M vs Reuters $9.53B. The effective tax rate was 27%, versus the company’s expectation of 23%. Intel reports Q3 gross margin 57.6% vs StreetAccount consensus 54.6%. Intel does not expect an enterprise rebound during Q4 - conf. call: Management notes that consumer demand has led throughout 2009, a trend that is expected to continue through the fourth quarter. In response to analyst question on the Windows 7 cycle, management highlights what they believe is a lot of enthusiasm for the release but indicates that there has been little impact on enterprise demand thus far. Notebooks and netbooks continue to drive growth. INTC is up 4.2% in the pre-market.

JPM (45.66): Shares are up 3% after reporting EPS of 82 cents. Street consensus was at .52 cents. Buyside whisper number was around .65 cents. Revenues were very strong (28.8 billion vs. street at 25.1 billion). Credit losses came in higher than street views but investors are shrugging off the credit costs as higher revenues offset the increase in credit costs (9.8 billion vs. street at around 8-8.5 billion). JPM shares are trading up 3.5% in the pre-market.

LLTC (28.49): Linear Technology (LLTC) reports Q1 EPS $0.29 ex-items vs Reuters $0.25, guides Q2 rev +2-5% seq. implying a range $240.8-247.9M vs Reuters $221.0M. Shares are up 2% in the pre-market.

EMC (17.92): upgraded to overweight from market weight at Thomas Weisel Partners: Target raised to $24 from $15. Checks by the firm show improving demand trends with a recovery in storage spending. Weisel sees EMC as gaining further share following the launch of V-Max

Macau's hotel occupancy rate rises 3.7-percentage points y/y in August to 80.4%
The data is from the Macau Statistics and Census Service
.

LVS (17.74): Las Vegas Sands to launch $2.5B Hong Kong IPO next month - South China Morning Post: Sources familiar with the plans say Sands expects to complete the offering within four weeks of receiving regulatory approval, which it hopes to receive by the end of October

VLO (19.18): Valero Energy downgraded to sell from buy at Soleil Securities:
Target cut to $17 from $25.. Cites the firm's reduced refining margin forecast and the concerns of a major asset write-down along with Q3 earnings. Firm is also lowering estimates on FTO, HOC, SUN and TSO.

GG (42.88): Goldcorp upgraded to overweight from neutral at JPMorgan: The firm cites valuation and believes the dollar could experience weakness over the next one to two years. Target raised to $47 from $34.

Rising land prices may weigh on builders' margins – WSJ: In a "Heard on the Street" column, the Journal notes that signs of a recovery in housing prices suggest that some builders may soon return to profitability. However, the paper adds that with desirable land plots increasingly difficult to find, margins may not see a meaningful recovery. The article points out that while many publicly-traded builders expected to be able to restock at low prices, that dynamic has not played out even though many of their private competitors have been forced to file for bankruptcy. According to the Journal, lenders who have taken possession of land are wary about selling while the market is depressed, forcing prices higher in locations that builders are most interested in investing. Citing estimates from Jeff Spindler of land brokerage Park Place Land Advisors, the paper notes that prices for finished lots have risen 10-30% in the last four months in prime locations in California.

Some Securities Moving in early pre-market trading: Trading higher: CNO +14.2% (share sale agreement with Pauslon), AMD +6% (INTC sympathy), MYRX +5.9% (indentification of IND candidate), GPI +5.7% (guidance), INTC +5.5% (earnings), NVDA +4.2% (INTC sympathy), ALTR +3.5% (earnings), SMH +3.4% (INTC sympathy), CSX +3% (earnings), CSIQ +2% (guidance). Trading lower: Short and leveraged short ETF’s (SDS, SH, SKF, FAZ, EDZ, QID) are all on the point decliner list lower due to strength in broader markets.

Tuesday, October 13, 2009

October 13, 2009: Morning Call

October 13, 2009: Morning Call

Fair Value: SP500 – 1072.65; NDX: 1728.25; DOW: 9832.52

Technical Levels:

SPX: 875-880, 910, 953, 986, 1003, 1041 support/ 1110 resistance

Events:

Pre-market EPS: JNJ (1.13/15.19B)
08:30: Christina Romer speaks on the economy
10:00: IBD/TIPP Economic Optimism (October):
13:00: Fed’s Kohn speaks on the economy
13:15: Fed’s Dudley speaks on the economy
17:30: INTC earnings call
Post-market EPS: CSX (.71/2.34B); INTC (.27/9.0B); LLTC (.24/214.9M)


Foreign Market Summary/Key Macro News/Commentary:

The S&P and NASDAQ futures are trading 2 points above fair value at 7:30am ET. European markets have bounced to unchanged after opening down 0.50%. Strength in steel and auto stocks has been tempered by a weaker German Investor confidence number (56.0 vs. 58.8) and a Meredith Whitney downgrade of GS. Basic material and steel stocks outperform on positive comments from Goldman Sachs on Asian steel demand. The weaker US dollar is another factor triggering a bounce off the overnight session lows; The US Dollar has dropped 0.60% against the Euro in the last 2 hours to 1.4865. Asian markets closed higher but pared gains into the close (Japan up 0.60%, Hong Kong up 0.79%, Australia up 0.97%, Shanghai up 1.49%, South Korea down 0.56%). A slightly weaker yen lifted Japanese automakers, and brokerage recommendations boosted steelmakers and banks. Energy companies and automakers led China up. In Australia banks recovered from yesterday’s selloff on a report they would start to write back up to A$8B in bad-debt provisions next year. Geely Automobile (175.HK) rose on higher Sep sales. Innolux Display (3481.TT) surged by its daily limit on a rumor that it had won an order to supply components for the iPhone (AAPL). Investors in South Korea used North Korea's test-firing of short-range missiles yesterday as an excuse to sell. India was closed for General Assembly elections.

Research Calls/Market Moving News:

GS (190.15): Goldman Sachs downgraded to neutral from buy at Meredith Whitney Advisory Group: Target is $186. Bloomberg headlines. GS shares are trading down 3.15 in the pre-market to 187

C (4.77): Citi initiated buy at Deutsche Bank: Target is $5.50. The firm notes relative position vs. other banks for an economic recovery as well as the removal of the overhang of the government's stake

Goldman Sachs predicts significant pick-up in M&A activity and highlights 14 stocks that could be in play: U.S. stocks are in a “perfect storm” for a jump in mergers and acquisitions, according to Goldman Sachs Group Inc., which cited inexpensive share valuations, available cash at companies and “accommodative” capital markets to finance the deals. In a report today, analysts at the New York-based bank highlighted 14 U.S. stocks with the highest probabilities of receiving a bid, including Devon Energy Corp. and Citrix Systems Inc.

JNPR (27.91); FFIV (41.68): Jefferies upgrades FFIV, JNPR: The firm believes deal close rates have improved and customer budgets have begun to loosen. In addition to the upgrades of FFIV and JNPR, estimates and targets for CSCO, EMC, PLCM, and RVBD have been raised. F5 Networks (FFIV) upgraded to buy from hold, target raised to $50 from $37. Juniper Networks (JNPR) upgraded to buy from hold, target raised to $34 from $21.

SYNA (23.42): Synaptics downgraded to underperform from hold at Jefferies: Target cut to $16 from $26. Firm cites a round of channel checks into the capacitive touch screen market. Jefferies believes CQ4 orders are tracking below guidance with stronger headwinds in 2010 due to share loss and a negative mix shift to modules likely driving another leg down in the stock.

DELL (15.42): Dell expects to be "reasonably active" in seeking acquisitions – Bloomberg: In an interview, CEO Michael Dell says the company will seek deals as part of its turnaround plan, will look at purchases that bolster sales to corporate customers, and will consider more deals in the health-care industry. He calls the health-care industry the sector of the economy with the lowest amount of IT.

Obama administration shelves plans for $200B in new taxes on multinationals reports the WSJ: The administration has set aside for now the idea of changing how the federal government taxes money earned in other countries. Aides say the idea may come back as part of a broader tax overhaul next year but for now the federal government will not tax overseas earnings before the money is brought into the U.S. For many businesses, preventing the taxation of non-repatriated profits was a key agenda item.

VNDA (11.45): Vanda Pharmaceuticals enters exclusive license agreement with Novartis (NVS) for commercialization and development of Fanapt in US and Canada.

Deutsche Bank upgrades life science tools group to overweight from market weight:Firm cites increased confidence in the sustainability of the market recovery, and related expectations of improved cap-ex budgets. Firm says key focus names in the group include TMO, ILMN, LIFE and BRKR, and the firm would continue to avoid AFFX.

BCRX (8.31): BioCryst Pharmaceuticals initiated market outperform at JMP Securities: Target is $15

Hong Kong gambling traded lower on concerns about potential Maucau restrictions: All are off their lows, but SJM Holdings (880.HK) has been down as much as 9%, Melco International Development (200.HK) has been down as much as 5%, and Galaxy Entertainment (27.HK) has been down as much as 2%. Recall it was reported overnight (in Asia) that Macau was considering imposing restrictions on gaming there.

Monday, October 12, 2009

October 12, 2009: Morning Call

October 12, 2009: Morning Call

Fair Value: SP500 – 1067.88; NDX: 1726.37; DOW: 9811

Technical Levels:

SPX: 875-880, 910, 953, 986, 1003, 1041 support/ 1110 resistance

Events:

Pre-market EPS: FAST (.33/488.2)
12:15: NEC Chair Larry Summers speaks on the economy
13:15: Treasury’s Krueger speaks on the economy


Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 8 points above fair value and the NASDAQ futures are trading 9 points above fair value at 7:25am ET. The equity futures are reacting to strength in European markets, which are up 1.3% to 1.6%. PHG is up nearly 7% on a strong earnings report, helping to propel technology, industrial, and basic material sectors in Europe. Advancers on the FTSE 100 lead decliners 17-3. Xstrata (XTA.LN) announces divestment of its interest in El Morro project for $465M to Barrick Gold Corp (ABX). Fiat (F.IM) rose following Il Giornale reporting the company gets approval from Head of US auto task force for Chrysler plans. Nokia (NOK1V.FH) downgraded to neutral at HSBC. UK's Brown says government plans to sell £16B of assets over the next two years and ending quantitative easing program now would 'imperil recovery'. Asian markets closed mixed with India outperforming (up 2.3%) after the Prime Minister said the country’s growth would accelerate and stimulus measures will continue (Japan closed, Hong Kong down 0.93%, Australia down 0.29%, Shanghai down 0.38%, South Korea down 0.69%). Chipmakers rose in Taiwan as DRAM prices jumped on speculation a new Microsoft (MSFT) operating system will boost computer sales. Construction stocks also helped support the market. Banks weighed on Australia indices as Credit Suisse called them expensive compared to industrial options. Steelmakers and refiners dragged South Korea down.

Research Calls/Market Moving News:

GOOG (516.26): Google target increased to $620 from $530 at Thomas Weisel: The firm sees Q3 net revenue (ex-TAC) of $4.21B and sees Q3 EBITDA and pro forma EPS slightly below First Call estimates of $2.63B and $5.38, respectively. First Call consensus for revenues (ex-TAC) is $4.22B. The rating remains overweight.

GOOG (516.26): Google estimates increased at Goldman Sachs: The firm notes increasing spending by Google since June and raises estimates for 2009-11 for revenues and EPS; 6-month target increased to $585 from $560. The rating remains Conviction Buy. Deutsche Bank also raised their price target to 580 from 475.

INTC (20.17): Barron's Technology Trader looks towards Intel's (INTC) upcoming earnings release: Intel has rallied strongly on the improving conditions and raised outlook of the company. But to really make an impression with this week's earnings release, the company will have to show investors that the recent positive developments will continue into the seasonally weak Q1. Bulls see a positive in the coming release of Windows 7 and a possible PC upgrade cycle. But Microsoft CEO Ballmer said he is not anticipating a major surge in PC purchases from the OS release. Some analysts fear the current surge for chip makers is from catching up when orders were cut too far and double ordering over fears of shortages from reduced capacities. Barclays suggests switching into defensive chip names like ALTR and XLNX.

IBM (125.93): BMO Capital raises their estimate on IBM ahead of the quarter. “We believe IBM has the opportunity to post some revenue upside in the next few quarters (more likely the December quarter), helped by a gradually improving macro backdrop as well as FX, and continue to move EPS estimates higher. We are raising our 2010 EPS estimate to $10.80 from $10.65 (Street at $10.74), though not making any changes to our 2H09 estimates. We note that a change to non-GAAP would raise EPS by $0.25-$0.30 in 2010.”

BX (14.85): Blackstone Group to list up to eight companies, sell five others over next year - FT Alphaville: The brief writeup cites a letter sent to investors by Blackstone founder Steve Schwarzman 9-Oct. Recall the Independent on Sunday has written recently about the possibility of Blackstone's listing Merlin Entertainments Group and Hilton Hotels.

MA (214.42): V (72.94): Credit Suisse upgrades MA, V: MasterCard (MA) upgraded to outperform from neutral, target raised to $255 from $210. Visa (V) upgraded to outperform from neutral, target raised to $84 from $70.

FCX (74.34): Freeport-McMoRan to consider reinstating dividend as cash flow grows – Bloomberg:FCX CEO Richard Adkerson said in an interview in London that the company will consider reinstating its dividend as its cash flow increases.

Option grants to top executives while takeovers are being negotiated catching regulators' eyes – WSJ: Experts say the practice appears to be legal, and it usually means the executives end up with a higher payout when a deal is subsequently announced. Whether executives are unethically profiting from insider information or, rather, getting incentive to entertain takeover bids that benefit all shareholders is a subject of debate. The article looks at the following specific cases: Omniture (OMTR)'s takeover by Adobe (ADBE), Marvel Entertainment (MVL)'s takeover by Disney (DIS), Teppco Partners (TPP)'s takeover by Enterprise Products (EPD), Compass Bancshares's takeover by Banco Bilbao Vizcaya (BBVA.SM), and Electronic Data Systems's takeover by Hewlett-Packard (HPQ). Executives at the target companies tend to receive seven or eight figures worth of windfall from the options in question, though the specific cashing-out systems vary.

Wednesday, October 7, 2009

October 7, 2009: Morning Call

October 7, 2009: Morning Call

Fair Value: SP500 – 1051.09; NDX: 1703.76; DOW: 9678.20

Technical Levels:

SPX: 875-880, 910, 953, 986, 1003 support/ 1048, 1110 resistance

Events:

Pre-market EPS: COST (.76/22.26B); FDO (.41/1.84B); HELE (.39/160.7M); MON(.01/1.9B)
05:00: Euro-zone GDP (Q2 Final): -0.1% QoQ; -4.7% YoY
05:00: Euro-zone Household Consumption (Q2 Final): 0.2% QoQ
06:00: German Factory Orders (August): 1.1% MoM; -20.0% YoY
08:30: MON earnings call
10:30: DOE Crude Oil and Gasoline Inventories
11:00: COST earnings call
11:30: ADBE Analyst Meeting
13:00: ORCL Annual Meeting
13:00: Treasury auctions 20 billion of 10-year notes
15:00: US Consumer Credit (August): -10.0B
16:00: Select Retailers release September Same-Store Sales
Post-market EPS: AA (-.12/4.58B); RT (.09/295.0M)

Foreign Market Summary/Key Macro News/Commentary:

Equity futures are trading flat with fair value at 7:30am ET. Asian markets surged overnight excluding India in response to the strong gains in Europe and the United States on Tuesday (Japan up 1.1%, Hong Kong up 2.07%, Australia up 2.27%, South Korea down 0.02%, India down 0.90%). Energy shares rose on oil’s gains, gold miners were higher on record high prices, and banks benefited from broker upgrades. In Australia Brambles (BXB.AU) fell on recent management changes and increased costs coming from a strategy makeover. Steel shares, metal stocks, and trading houses all made gains in Japan. South Korea ended flat after volatile trade. Banks and technology stocks gained but automakers fell on concerns about the won’s strength. India and New Zealand reversed gains as respectively IT and telecom stocks came under selling pressure and as investors took profits in Telecom (TEL.NZ) and Fletcher Building (FBU.NZ). China remained closed for National Day. European markets are down 0.25%, fluctuating between modest gains and losses in the early morning session. Euro-zone GDP came in 1 tick below consensus (down 4.8% YoY vs. street at –4.7%). German Factory Orders for August came in better than expected (1.4% vs. 1.1% MoM) but July was revised lower to 3.1% vs. prior estimate of 3.5%. Sainsbury (SBRY.LN) announced in its Q2 trading statement that like-for-like sales up 5.4% excluding fuel and VAT. Q-Cells (QCE.GR) traded higher on renewed market talk of interest from Siemens (SIE.GR). Lloyds Banking Group (LLOY.LN) downgraded to underperform at Fox-Pitt.


Research Calls/Market Moving News:

AAPL (190.01): Piper Jaffray’s bi-annual Teen Survey results were released last night after the market closed and showed Apple’s lead widening. “Apple's dominance in the CE and online music markets is going seemingly unchecked, capped by market saturation for iPod and iTunes usage. Also, interest in the iPhone remains high. In our most recent survey, those who plan on purchasing an iPhone in the next six months was up to 22%. We believe that the teen demographic is a critical component of long-term growth in the digital music and mobile markets, and Apple is taking its leading position in music and mobile markets. iPhone Interest Solid, $99 iPhone Appears Meaningful For Share Gains. In our spring-09 survey (before the $99 iPhone 3G was available), 8% of students surveyed owned iPhones and an additional 16% expected to buy an iPhone in the next 6 months. In our most recent survey, the iPhone's share amongst teens rose to 15%, and interest was up to 22% planning on purchasing an iPhone in the next six months. We believe the $99 iPhone 3G has been a meaningful part of share gains in the last six months. Previously, teens were indicating that the plan pricing and handset pricing were too high for them (and their parents) to buy iPhones. The lower pricing appears to have been a catalyst for share gains. Also, the popularity of the App Store and the quality of games available for the iPhone have likely led to the gains among the teen demographic in recent months.” Reiterate Overweight and 235 target.

COST (57.93): Costco reports Q4 EPS $0.85 vs Reuters $0.77: Company reports revenues of $22.38B vs Reuters $22.27B. US comps were (6%); international comps (3%); total comps (5%). US comps (excluding the impact from gasoline deflation) were (1%); international (excluding the effects of foreign exchange) +7%; total comps (excluding aforementioned effects) +1%. Q4 results benefited from a $0.02/share LIFO credit, and were adversely impacted by previously reported factors including on-going softness in US sales, higher employee benefit costs, and lower US dollar amounts of international profits as a result of weaker foreign currencies.

BAC (17.00): Bank of America upgraded to outperform from market perform at Wells Fargo: Valuation range increased to $24-$27 from $14-$16. Firm believes BAC’s potential share price appreciation compared to “normalized” EPS is the strongest of their coverage universe.

GOOG (498.74): Google's target increased at Oppenheimer: Shares are rated outperform and the target is increased to $565 from $490. Following conversations with a leading PPC vendor and recently released paid click data, the firm expects GOOG to report better than expected 3Q results on 15-Oct after the close. Oppenheimer believes paid clicks and pricing have improved vs. 2Q, and that advertisers are less focused on ROI, instead looking to drive higher sales and market share.

CSCO (23.35): Cisco Systems upgraded to outperform from market perform at William Blair

VALE (23.87): Companhia Vale do Rio Doce (CVRD) upgraded to buy from neutral at Goldman Sachs -- Bloomberg ($23.87)

YUM (34.86): YUM! Brands reports Q3 EPS $0.70 ex-items vs Reuters $0.58, raises f09 EPS guidance to $2.14 vs prior guidance $2.10, Reuters $2.12, FC $2.13.

Fed is concerned about banks' sluggishness in taking losses on commercial real-estate loans – WSJ: A 29-Sep presentation suggests the Fed fears a repeat of the housing-related losses that have recently hit banks. WSJ analysis shows banks with heavy exposure to commercial real-estate loans have only set aside $0.38 in reserves for every $1 in bad loans, vs $1.58 in reserves for every $1 of bad loans at the beginning of 2007. Recall CNBC reported 16-Sep that the Fed had undertaken a broad review of commercial-real-estate exposure at the largest regional banks.

Cable/Satellite sector upgraded to overweight at Wells Fargo: Firm sees the most upside for Time Warner Cable (TWC), followed by Comcast (CMCSA) and then Cablevision (CVC). TWC upgraded to outperform from market perform. Valuation range increased to $50-54 from $30-33.

Tuesday, October 6, 2009

October 6, 2009: Morning Call

October 6, 2009: Morning Call

Fair Value: SP500 – 1036.30; NDX: 1674.18; DOW: 9540.16

Technical Levels:

SPX: 875-880, 910, 953, 986, 1003 support/ 1048, 1110 resistance

Events:
Pre-market EPS: PBG (1.07/3.76B)
04:30: UK Industrial Production (August): 0.2% MoM; -8.7% YoY
04:30: UK Manufacturing Production (August): 0.3% MoM; -9.3% YoY
09:00: MOS earnings call
09:00: CHK presents at Johnson Rice Energy Conference
09:00: TDW presents at Johnson Rice Energy Conference
11:15: SGR presents at Johnson Rice Energy Conference
13:00: Treasury auctions 39 billion of 3-year notes
15:30: BCRX presents at JMP Securities Healthcare Focus Conference
16:30: API Crude Oil and Gasoline Inventories
17:00: ABC Consumer Confidence
19:01: UK Nationwide Consumer Confidence (Sep): 68
21:45: Fed’s Hoenig speaks on the economy
Post-market EPS: YUM (.58/2.79B)

Foreign Market Summary/Key Macro News/Commentary:

Futures are trading sharply higher due to significant strength in Europe and a strong session overnight in Asia. Commodity prices are also up 1%-2% due to weakness in the dollar following a report in the Independent that Arab states are launching secret moves with China, Russia and France to stop using the U.S. dollar for oil trading. Kuwait's oil minister denied the story but also said that he expected stronger demand for crude from the United States and Europe. Gold is up 10 bucks to 1026 triggering strong pre-market gains in gold mining stocks. European markets are up 1.5% - 1.7%, near the highs of the session. UK Industrial production came in much weaker than consensus but market participants ignored the data point. Advancers lead decliners on the FTSE 100 by a margin of 19 to 1. Financials are strong after BofA upgraded their view on the sector to overweight. Asian markets closed higher (Japan up 0.18%, Hong Kong up 1.87%, Australia up 0.40%, Taiwan up 1.3%, South Korea down 0.56%, India up 0.55%). Financial stocks were the strongest across the region. Developers led Hong Kong up as luxury home sales almost tripled m/m. PC shares led Taiwan higher. Banking shares pared or reversed their gains, and Australia came off its highs after the central bank announced an unexpected 25bps increase in the cash rate. Banks gained in Japan when the country’s financial services minister said they would not need to raise provisions for bad loans if borrowers delay repayments. Mazda (7261.JP) and Takeuchi (6432.JP) rose after narrowing their FY loss forecasts. South Korea reversed gains following Australia's rate hike on fears it might be the next to raise rates. China remained closed for National Day.

Research Calls/Market Moving News:

RIMM (65.42): Research In Motion initiated underperform at Bernstein: Target is $60. This report came out last night after the market closed and could explain some of the relative weakness in RIMM shares yesterday.

NTRI (15.05): NTRI signs a distribution deal with WMT. Shares are trading up 25%. Short squeeze is in motion in the pre-market as there are 7.5 million shares short as of September 15 versus a float of 28.3 million shares.

AVCT (20.52): Emerson (EMR) to acquire Avocent for ~$1.2B Emerson and Avocent announced they have reached agreement for Emerson to acquire Avocent. The Avocent board unanimously endorsed the terms of an all-cash tender offer of $25 per share, or approximately $1.2B. The purchase is expected to close around 1-Jan-2010 pending customary regulatory approvals and acceptance of the offer by Avocent stockholders holding a majority of Avocent shares.

MOS (45.96): Mosaic reports Q1 EPS $0.23 vs Reuters $0.36: Company reports revenues of $1.46B vs Reuters $1.54B. Sales volumes for the Phosphates segment are expected to range from 1.8 to 2.2M ton for Q2 of fiscal 2010. Mosaic's realized DAP price, FOB plant, for Q2 of fiscal 2010 is estimated to be $265 to $305 per ton. Mosaic is not providing financial guidance on potash sales volumes or MOP selling price until market conditions normalize. Capital spending for fiscal 2010 is expected to grow to a range of $1.0B to $1.2B. Mosaic is executing its multi-year potash expansion plan as well as investing substantial funds to further improve operating performance of its existing plants and mines. SG&A is estimated to range from $350M to $370M in fiscal 2010 and the effective income tax rate is estimated in the high 20% range for the year. MOS shares are trading slightly higher despite the EPS miss.

DVN (66.34): Devon Energy downgraded to underperform from neutral at Credit Suisse: Target increased however to $59 from $54. Firm cites an expected loss of operational momentum due to a sharp fall in 2009 drilling activity, which could translate to significantly declining volumes for 2010.

INTC (19.10): Intel should report Q3 revenues above the midpoint of its guidance range, says Morgan Stanley: Q3 revenue estimate increased to $9.20B, vs. Reuters consensus of $9.00B and company guidance of $8.80-$9.20B. 2010 revenue estimate increased to $37.1B from $35.9B. Reuters is $36.74B; First Call $36.78B. The rating remains overweight; target $24.

ADBE (32.55): Oppenheimer is positive on Adobe Systems ahead of the upcoming analyst meeting: The firm would be buyers ahead of the 7-Oct meeting saying that investor focus has shifted from its upcoming product release by the OMTR acquisition. Believes the meeting will provide 'a more comprehensive overview' of the deal's benefits and preview new features in the upcoming CS5 release. The firm sees the multiple expanding back to historical levels in the near future because of improving fundamentals, a dominant market position and the upcoming product releases.

EXTR (2.87): Extreme Networks (EXTR) guides Q1 revenue to ~$66M vs Reuters $80.4M; FC $80.6M. Extreme shares are trading down 13% in the pre-market.

CHK (27.50): Chesapeake Energy downgraded to underperform from neutral at Credit Suisse: Target is $24. Firm notes valuation and risks to growth from light hedges and a potential loss of flexibility.

EMC (17.00): EMC reiterated overweight at Barclays after checks: Firm says their checks indicate that EMC is benefiting from a new product cycle and stronger storage demand in general. Barclays continues to believe that EMC is one of the primary beneficiaries of the "Utilization Era" with exposure to cloud computing, storage efficiency, server virtualization and desktop virtualization trends.

Monday, October 5, 2009

October 5, 2009: Morning Call

October 5, 2009: Morning Call

Fair Value: SP500 – 1021.05; NDX: 1661.03; DOW: 9428.08

Technical Levels:

SPX: 875-880, 910, 953, 986, 1003 support/ 1044, 1110 resistance

Events:

03:45: Italian PMI Services (Sep): 47.2 (actual: 48.5)
03:50: French PMI Services (Sep): 52.2 (actual: 53.2)
03:55: German PMI services (Sep): 52.2 (actual: 52.1)
04:00: Eurozone PMI Services, Composite (Sep): 50.6, 50.9 (actual: 50.9, 51.1)
04:30: Euro-zone Investor Confidence (Sep): -11.8 (actual: -12.6)
04:30: UK PMI Services (Sep): 54.5 (actual: 55.3)
05:00: Euro-zone Retail Sales (Aug): -0.5% MoM; -2.4% YoY (actual: -0.2%, -2.6%)
10:00: ISM Non-Manufacturing Index.
18:30: Fed's Dudley speaks on the economy
Post-market EPS: MOS (.36/1.54B)

Foreign Market Summary/Key Macro News/Commentary:

Futures are following Euro-zone markets higher this morning. S&Ps are 6 above fair value moving in lock step with European markets. Euro-zone markets are up 0.50% after opening slightly lower. Markets react positively to better than expected economic data out of Europe (Italian, French, Euro-zone PMI, and Euro-zone Retail Sales all beat consensus). Treasury Bonds are up 1/2 point. FOREX quiet as G7 statements over the weekend were a non-event, and commodities are mixed with crude off 1% but industrial commodities (Copper, lead, nickel) trading up. Basic materials are leading the advance after bearing the brunt of the sell-off last week. AA kicks off Q3 EPS season on Wednesday. Asian markets mostly declined (Japan down 0.60%, Hong Kong up 0.26%, Australia down 0.63%, South Korea down 2.6%, India down 1.56%). Hong Kong ended slightly up in volatile trading as China-related shares rose on optimism the country will not rein in its stimulus measures. Exporters like Nikon (7731.JP) were the main losers in Japan, but banks climbed 2-3% as worries about a loan-repayment moratorium subsided. Financials led Australia down. South Korea dropped sharply as investors priced in weakness from the 2-Oct holiday. China remained closed for National Day

Research Calls/Market Moving News:

BRCD (7.65): Brocade quietly puts itself on the block – WSJ: People familiar with the matter say no deal is imminent, but Hewlett-Packard (HPQ) is interested, and Oracle (ORCL) might be. Brocade's market cap is $3.2B. BRCD shares are up 16% in the pre-market.

RIMM (65.42): Research In Motion upgraded to buy from hold at Needham: The firm believes current sentiment is too pessimistic and has a price target of $85. “From being overly optimistic on RIM’s outlook, we believe investors have become unduly pessimistic following the release of second quarter earnings. Our previous hold rating was based on the premise that new competitors, such as forthcoming Android phones, would capture share from BlackBerry and dramatically slow its growth. We’re not rejecting the prospect of a more competitive environment, but we believe the impact on BlackBerry’s growth should be muted relative to its impact on other smartphone platforms. In contrast with its competitors, BlackBerry and the iPhone have demonstrated that the integrated software/hardware model is superior to the operating system license model embraced by Windows Mobile and other smartphones. The integrated model has enabled the two companies to construct platforms that trump competitors in terms of services, features and ease of use. RIM has the additional benefit of an email service that no competitor can come close to matching. We’re raising our fiscal 2010 earnings estimate from $4.55 to $4.60 on revenues of $15.5 billion (vs. consensus of $4.16 on revenues of $14.9 billion) and our 2011 estimate from $5.50 to $5.70 on revenues of $21.4 billion (vs. consensus of $4.87 on revenues of $18.3 billion). The major risk in our Buy rating is that with the advent of new competitors running on Google’s android platform, RIM’s growth rate could deteriorate far more quickly than we’ve assumed.”

WFC (26.28); CMA (28.78); COF (33.19): Goldman Sachs upgrades CMA, WFC; adds COF to Conviction Buy List: Wells Fargo (WFC) upgraded to buy from neutral; target increased to $35 from $31. Comerica (CMA) upgraded to neutral from sell; target increased to $31 from $19. Capital One (COF) is added to the Conviction Buy List. Target increased to $44 from $37.

MTW (8.14): MTW is upgraded to buy from hold at Deutsche Bank. Shares are one of the biggest percent gainers in the pre-market (up 8%).

AAPL (184.90): Blu-ray iMacs may arrive in a few weeks -- Silicon Alley Insider: The site speculates that the new machines could be announced this month. Sources indicate that licensing may finally have been worked out and the prices of the drives are now more reasonable. Separately, AppleInsider notes ads in Europe that appear to have been placed online premature and may indicate that in a few days there will be thinner iMacs, new thinner and lighter plastic Macbooks and speed-bumped Mac minis.

JPM (41.86); BAC (16.34): Barron's Follow Up is positive on JPMorgan (JPM) and Bank of America (BAC): The executive shuffle at JPMorgan (JPM) last week shows investors one more reason to be positive on the shares because the moves highlight the talent pool at the top of the bank for when Jamie Dimon eventually steps down. The stock could rise to more than $70 over the next few years. Bank of America (BAC) is emerging from the financial crisis in surprisingly strong shape. The bank is ready to deliver strong profits and big gains to investors. The stock could climb as high as $30 over the next 2 years.

BAC (16.34): Bank of America to pick "emergency CEO" this week in case Ken Lewis has to leave early – WSJ: A person familiar with the situation says work on the contingency plan, in case legal trouble forces Lewis to step down before 31-Dec, began after Lewis announced his retirement. A five-person board committee formed earlier this year to address concerns raised by regulators is in charge of the process.

GS (179.61): Goldman Sachs to receive $1B if CIT Group (CIT) files for bankruptcy – FT: People familiar with the matter say the payment arises from the structure of a $3B rescue finance package Goldman gave CIT 6-Jun-2008. The sources say Goldman would be likely to agree to postpone payment on part of the "make-whole amount."