Friday, December 11, 2009

December 11, 2009: Morning Call

December 11, 2009: Morning Call

Fair Value: SP500 – 1097.34; NDX: 1797.91; DOW: 10343.49

Technical Levels:

SPX: 875-880, 910, 953, 986, 1003, 1039-1044, 1067-1075 support/ 1110, 1133 resistance

5-Day Event Outlook:

Today: US Retail Sales, University of Michigan Confidence, and US Import Price Index

Next Monday: Hong Kong Industrial Production, Euro-zone Employment, Euro-zone Industrial Production

Next Tuesday: French CPI, UK CPI, German ZEW Economic Sentiment, Credit Card Companies release November Master Trust Data, US PPI, US Net TIC Flows, US Industrial Production, US Capacity Utilization

Next Wednesday: German PMI Manufacturing/Services, Euro-zone PMI Manufacturing/Services, UK Jobless Claims, UK Unemployment Rate, Euro-zone CPI, US CPI, US Housing Starts, FOMC Rate Decision

Next Thursday: Ireland Q3 GDP, Initial Jobless Claims, Leading Indicators, Philly Fed, Bernanke confirmation vote in Senate Banking Committee, RIMM earnings

Detailed Daily Calendar of Events:

08:30: US Import Price Index (Nov): 1.2% MoM; 2.9% YoY
08:30: US Retail Sales (Nov): 0.6%; Less Autos: 0.4%; Less Autos/Gas: 0.5%
10:00: House oversight panel will convene a hearing entitled “Bank of America and Merrill Lynch: How Did a Private Deal Turn Into a Federal Bailout?
10:00: University of Michigan Confidence (Dec): 68.3
10:00: Business Inventories (Oct): -0.2%

Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 6 points above fair value and the NASDAQ futures are trading 10 points above fair value at 8am ET. Chinese Industrial Production came in stronger than expected (19.2% vs. 18.2%). New loans also topped forecasts (290.8B vs. 250B estimate) as the government continues to encourage banks to aggressively extend credit. Retail sales were short of expectations (15.8% vs. 16.5% estimate) but the better industrial production number appears to be trumping the weaker retail sales in early trading. Asian markets mostly rose on the Chinese data (Japan up 2.4%, Hong Kong up 0.90%, Australia up 0.62%, Shanghai down .06%, India down 0.41%). Chinese developers rebounded in Hong Kong after having been sold off yesterday, and Chinese banks broke a losing streak on news that lending grew m/m, when a decline had been expected. India erased early gains when it was revealed that October industrial output went up by less than expected. Declines were led by Bharti Airtel (BHARTI.IN), ICICI Bank (ICICIBC.IN), and ITC (ITC.IN). European markets are up 0.80% to 1.0%. Best performing sectors include Basic Resources and Chemicals, weakest are Banks and Healthcare. Moodys have said they have no current plans to lower their top debt ratings on the US and UK after a report earlier in the week said the sovereigns "may test the AAA boundaries.

Research Calls/Market Moving News:

BAC (15.21): Bank of New York Mellon (BK) CEO Robert Kelly back in mix as candidate to become Bank of America CEO – WSJ: People familiar with the matter say Kelly told BK directors this week that he is talking with BAC. His candidacy re-emerged after BAC got approval to repay its TARP funds, thus freeing it from pay restrictions and federal scrutiny. People familiar with the process say internal candidates Gregory Curl and Brian Moynihan are still being considered, and an announcement could be made next week.

AAPL (196.43); GOOG (591.50): Apple (AAPL), Google (GOOG) going mano a mano to buy Silicon Valley start-ups – WSJ: People familiar with the matters say Google was in serious discussions to buy Lala Media before Apple won it last week, and Apple chased AdMob before Google agreed to buy it in November. The overlapping hunts indicate that the titans plan to expand into each other's strengths, in contrast with their years of having had separate business fields. Recall the companies now compete in mobile phones, with the introduction of Google's Android system. People familiar with the matters say Google is talking to handset manufacturers about raising the prominence of Google branding on its phones, and Apple would like to buy iPhone technologies that it does not currently have.

UTX (67.93): United Technologies provides guidance: The company also guides f09 EPS to $4.10, which represents the midpoint of the company's $4.00-$4.20 range, as well as f09 revenues of $53B. Reuters consensus is $4.10 and $52.72B. First Call is $4.11 for f09. United Technologies guides f10 EPS to range $4.40-$4.65: F10 revenues guided to $54-$55B. Reuters consensus is $4.52 and $53.29B, respectively. First Call is $4.53 for f10 EPS. The slides are associated with UTX's analyst meeting.

C (3.87): Citigroup's TARP payback could cheer institutional investors – WSJ: WSJ reports the government's expected exit from Citigroup could trigger the re-entry of institutional investors like mutual and pension funds. Institutional ownership in Citi is roughly 20%, the bank calculates. That makes Citigroup "one of the least owned banks" by institutional investors such as mutual funds and pension funds, J.P. Morgan Chase analyst Vivek Juneja wrote in a research report. Normally, institutions hold 70% or more of large companies' shares. David Trone, an analyst with Macquarie Capital, whose co's customers are institutional investors, says, "A lot of clients I talk to are afraid" of the government ownership. Should those investors lose their fear -- and should index funds, for technical reasons, start buying more Citigroup stock -- the shares could rise, offsetting downward pressure of the dilution expected when Citigroup issues some large amount of stock as part of its exit from the government's Troubled Asset Relief Plan investment. Some hedge funds appear to have positioned themselves long in Citigroup's common stock to benefit.

Sales lull has retailers worried – WSJ: WSJ reports who will blink first: retailers or shoppers? Chain-stores are holding bigger markdowns in reserve trying to gauge how long shoppers will wait for better deals to emerge. The standoff, which experts say could be decided in favor of shoppers as soon as this weekend, could help determine whether or not this holiday season marks the second year in a row of sales declines. Nine of 10 people waiting to finish their holiday shopping are doing so to get discounts of at least 50%, according to a survey released Thursday by UBS and market researcher America's Research Group. A third of respondents said they are holding out for a 70% discount. Retailers are reluctant to hit the panic button. So far, they have avoided drastic price cuts by hewing to carefully planned promotions and limiting inventories. But if shoppers aren't out in force this weekend, many mall-based clothing retailers have arranged contingency plans for additional sales and markdowns.

China's curbs on tech purchases draw ire – WSJ: WSJ reports China has rolled out regulations that could curb billions of dollars worth of sales of high-tech gear to government agencies, raising cries from companies across the globe and from the U.S. government. More than 30 industry groups from North America, Europe and Asia -- representing most of the world's major technology companies -- sent a letter Thursday to Chinese ministries saying they were "deeply troubled" by a new Chinese rule they say discriminates against their products. The companies were responding to a notice the Chinese government posted on a Web site in late October, but didn't immediately publicize, requiring vendors to gain accreditation for their products before they can be included in a government procurement catalog of products containing "indigenous innovation." Companies that aren't listed in the catalog will theoretically be allowed to sell products to government agencies. But preference will apparently go to those listed.

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