Monday, January 4, 2010

Morning Call: Janury 4, 2010

January 4, 2010: Morning Call

Fair Value: SP500 – 1110.79; NDX: 1858.81; DOW: 10,365.37

Technical Levels:

SPX: 986, 1003, 1039-1044, 1067-1075, 1098 support/ 1133 resistance

Detailed Daily Calendar of Events:

***09:00: BAC CEO Moynihan speaks to North Carolina Bankers Association. (timing not certain)
10:00: ISM Manufacturing (Dec): 54.0; Prices Paid: 60
10:00: US Construction Spending (Nov): -0.5%
10:15: Fed’s Lockhart moderates financial crisis panel
13:15: Fed’s Duke speaks on the US economic outlook

Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 7 points above fair value and the NASDAQ futures are trading 22 points above fair value at 7:15am ET. European markets started the year on a positive note with gains of between 0.50% and 1.0%, inline with US futures. M&A activity made the headlines early this morning with Novartis (NOVN.VX) announcing it will acquire 52% Alcon (ACL) stake from Nestle (NESN.VX). The London Times reported Kraft Foods (KFT) is preparing to increase bid for Cadbury (CBRY.LN). European PMI data came in better than expected on balance: UK Dec Final Manf PMI 54.1 vs prelim 52.0. Eurozone Dec Final Manf PMI 51.6 vs prelim 51.6. Germany Dec Final Manf PMI 52.7 vs prelim 53.1 . France Dec Final Manf PMI 54.7 vs prelim 54.4. Asian markets closed mostly higher (Japan up 1.03%, Hong Kong down 0.23%, Australia up 0.12%, Shanghai down 0.46%, South Korea up 0.77%, India up 0.54%). Japanese exporters advanced after the yen weakened to the lowest since 7-Sep before recovering. South Korea went up after exports increased. China developers took Hong Kong down slightly after strong manufacturing data from the country raised fears monetary policy might be tightened sooner than expected. Developers declined in China as the country passed new tax and mortgage rules making a tightening of the sector appear more likely. The market was also hurt by profit-taking and concerns about inflation. Banks were weak as people feared pending fundraising. China Dec HSBC Manf PMI 56.1 vs prior 55.7.

Research Calls/Market Moving News:

CBY (51.39): Kraft Foods preparing to increase bid for Cadbury reports the London Times: Without citing sources or by how much the offer will be raised, the paper says the offer will be raised within the next 2 weeks. If it waits until after 19-Jan, it can only make a higher bid if a rival takeover bid is made.

AAPL (210.73): Apple COO Tim Cook rumored to be a target of search firm seeking GM CEO candidates - Silicon Alley Insider: Citing a tip from an unnamed reader, Silicon Alley Insider reported last Thursday afternoon that Apple COO Tim Cook is executive search firm Spencer Stuart's first choice for the open CEO spot at General Motors. The reader claims to have an inside source at Spencer Stuart, and does not know if Cook has been contacted yet. As the article notes, GM recently hired former Microsoft CFO Chris Liddell as its new CFO.

GOOG (619.98): Barron's The Trader reviews the Google Nexus One smartphone: The Google Nexus One smartphone is slim, fast and has a nice big screen. The iPhone has more spit and polish and far more apps but the Nexus One is a fine choice for many users. One problem is it feels very similar to other Android smartphones. The phone is unlikely to move Google's stock or those of rivals. The phone faces a tough fight to differentiate itself among the growing field of competitors.

Barron's Cover says Cloud Computing will be as revolutionary as the internet itself The importance and hyperbole surrounding cloud computing echoes what surrounded the internet just about a decade ago. There are skeptics, such as Oracle's Larry Ellison and HP's Mark Hurd, but each company is still working on cloud stories because of the obvious benefits that include flexibility, cost savings and higher performance. It is much too early to pick winners and losers from the trend. For investors today, there are some areas to focus on. Companies that sell the technology to build clouds include RVBD, PAR and VMW. There are cloud service providers like T, AMZN, SVVS or TMRK. Major names like GOOG, AAPL and MSFT could be winners, or losers, as each is expected to enter one or more aspects of cloud computing (see Apple's recent purchase of Lala Media). The current technology consolidation among the majors is largely in anticipation of cloud computing. Some companies that have already succeeded include (CRM) and NetSuite (N) but they will face increasing competition from names like SAP and Oracle.

MS (29.60): Morgan Stanley upgraded to buy from neutral at UBS:
Target is $37. Firm believes the company is nearing a turning point with EPS/ROE will start to show some improvement.

MS (29.60): Morgan Stanley upgraded to outperform from neutral at Credit Suisse: Target raised to $38 from $32. Shares were also upgraded at UBS this morning

PCLN (218.41): estimates and target raised at Piper: The firm raises their target to $272 given conviction that the company can continue to take share and post upside to consensus estimates. Piper believes the Street continues to underestimate the earnings power of PCLN. F10 EPS is raised to $10.63 vs. Reuters $10.27. F11 EPS is initiated at $13.20.

CHK (25.88): Total (FP.FP) and Chesapeake (CHK) sign JV for Total to purchase 25% stake in Barnett Shale assets: Total and Chesapeake sign agreement for a $2.25B joint venture to acquire a 25% interest in Chesapeake’s upstream Barnett Shale assets. Total will pay $800M in cash and pay an additional $1.45B by funding 60% of Chesapeake’s share of drilling and completion expenditures until the $1.45B obligation has been funded, which Chesapeake expects to occur by year-end 2012.

LVS (14.93): Las Vegas Sands upgraded to buy from neutral at UBS: Target increased to $20 from $19. Firm notes Macau growth and sees a potential upside to its Q4 estimate.

WYNN (58.23): Wynn Resorts upgraded to buy from neutral at UBS: Target is $76. Firm cites valuation.

INTC (20.40): Intel upgraded to outperform from neutral at RW Baird: Target increased to $26 from $24. The firm sees an upcycle for enterprise in 2010 and says its checks indicate tier-one PC OEMs raising procurement forecasts for 1H10.

FSLR (135.40): First Solar reiterated sell at Hapoalim Securities: Firm checks indicate that a significant percentage of solar 'pipeline' projects acquired from Optisolar have been rejected by the Bureau of Land Management, or will not receive U.S. grant funds. Target price, $90.

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