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.