Wall Street Morning Call

Long TBTF/Short Regional Banks Pair Trade Blowing Up

2010-01-21T12:17:00.005-05:00

One of the more popular trades - pushed by too big to fail firms like Goldman Sachs -has been to buy money center banks and short regionals due primarily to the TBTF funding advantage and concern about CRE exposure at regional banks. The trade is totally unraveling as we speak. You can be sure this move is creating major P&L dislocations at hedge funds and prop desks that have been piling into this theme. The trade is down 10% in a few hours and the correlation between regionals and TBTF banks has plunged. JPM, JPM, GS and MS have been the favorite longs in this trade while STI, FITB, HBAN, CMA, HBAN, RF, NYB have been among the favorite shorts. Like I said on Tuesday, Wall Street should have been careful what it wished for related to the Mass. Senate race as the death of healthcare made Wall Street an easy target and complicates the political and legislative landscape. A second stimulus package is less likely to pass without a Democratic Supermajority and what congressman is going to want to vote against restricting risk-taking at the major banks? This type of move in a "risk averse" pair trade strategy will dampen the risk appetite on Wall Street trading desks even if you are not exposed to the trade or even on the right side. Significant correlation breakdowns like this usually empower the risk managers.

Morning Call: January 20, 2010

2010-01-20T07:43:00.003-05:00

January 20, 2010: Morning Call

Fair Value: SP500 – 1146.69; NDX: 1893.84; DOW: 10,676.06

Technical Levels:

SPX: 986, 1003, 1039-1044, 1067-1075, 1098, 1122 support/ 1153 resistance

Detailed Daily Calendar of Events:
Pre-market EPS: BAC (-.52/26.8B); BK (.51/3.2B); EAT (.22/770M); COH(.72/1.0B); HCBK (.28/339M); MTB (.88/847M); MS (.37/7.8B); STT (.99/2.1B); WFC(-.02/21.9B)
02:00: German PPI (Dec): 0.2% MoM; -5.1% YoY
04:30: BOE releases monetary policy committee minutes
07:00: MBA Mortgage Applications
08:00: BK earnings call
08:30: US PPI (Dec): 0.0% MoM; 4.3% YoY; Ex-Food/Energy: 0.1% MoM; 1.1% YoY
08:30: US Housing Starts (Dec): 574,000; Building Permits: 580,000
09:30: BAC earnings call
10:30: WFC earnings call
11:00: MS earnings call
16:30: API Crude Oil Inventories
21:00: Chinese Q4 GDP (Q4): 10.5% YoY; PPI (Dec): 0.7% YoY
21:00: Chinese Retail Sales (Dec): 16.3% YoY; Industrial Production: 19.6% YoY
Post-market EPS: EBAY (.40/2.2B); FFIV (.49/185.5M); SLM (.44/626M); SBUX(.27/2.5B); XLNX (.35/491.5M)

3-Day Outlook of Key Events:

Today: BAC, BK, MS, USB, WFC, STT all report before the open. German PPI. US PPI. US Housing Starts

Thursday: GS, FCX, and PNC report before the open. Jobless Claims, Leading Indicators, Philly Fed. GOOG, AXP report after the close.

Friday: UK Retail Sales, Euro-zone Industrial New Orders, GE and SLB report before the market opens.

Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 8 points below fair value and the NASDAQ futures are trading 15 points below fair value at 7:15am ET. European markets are down 0.70% to 0.90% on concerns that China is moving aggressively to reign in monetary stimulus and a sharp break lower in Greek government bonds. China's Chief banking regulator said overnight that Chinese banks have been "asked" to reduce lending. The Euro has also broken the key 1.42-support area this morning and this can be considered a red flag for the commodity fueled reflation trade. Commodities are down 0.80% to 2% on the dollar and yen strength. Healthcare stocks are up 0.50% to 1.0% with financial, industrials, and basic material sectors down 1% to 2.5%. The Euro weakness is being exacerbated by a huge sell-off in Greek government bonds; the Greek two-year note is up 62 bp to 4.38% and the spread between German bunds is the widest since March. Greek equities are down 10% in the last week. BAC is down 1.5%% on their earnings release, which is hitting the tape as I type this. IBM down 1.7% in the pre-market and CSX is down 3% so the "sell the news" theme continues following earnings. Republican Scott Brown won the race in Massachusetts and the market better be careful what is wishes for (market rallied in part on the theme that gridlock is good and the healthcare legislation may be dead) because the loss of the Democratic super-majority in the Senate decreases the odds that a second stimulus package would pass the Congress. Market participants shouldn't need to be reminded that stimulus and monetary driven liquidity has been the key driver of equities so gridlock may not be a bullish development as yesterday's price action seemed to imply. Asian markets closed lower on renewed efforts by China to decrease lending (Japan down 0.25%, Kong Kong down 1.8%, Australia up 0.14%, Shanghai down 3.2%, South Korea up 0.40%, India down 0.07%). Australia gave up early gains although higher commodity prices left materials stocks in positive territory. Resource shares rose in Japan on higher commodity prices but the broader market fell. China and Hong Kong were spooked by newspaper reports suggesting lending may be limited in China. Hong Kong’s fall was exacerbated when the Shanghai government said a report it may allow individuals to invest abroad was a fabrication.

Research Calls/Market Moving News:

IBM (134.14): IBM reports Q4 EPS $3.59 vs Reuters $3.47, guides f10 EPS to at least $11 vs prior guidance of $10-11, expects Q1 rev growth to improve by 4-5 pts from Q4. IBM is trading down 1.8% in the pre-market.

AAPL (215.04): AAPL outperforms on two stories: 1. Increasing speculation that a 4G iPhone will be sold through Verizon starting in June. Canaccord Adams has a note out this morning saying that "We believe there is a good chance that the “One more thing...” part of next week’s presentation may include two iPhone-related announcements: namely, the release of iPhone OS 4.0 and the unveiling of iPhone 4G coming to Verizon in June." This would give a huge boost to domestic iPhone unit shipments in the 2H10. 2. Apple and Microsoft are in talks to replace the Google default browser on iPhone. Bottom line, Google is a bigger threat to Apple than Microsoft so this likely makes business sense right now. Details below.

AAPL (215.04): Apple talking with Microsoft (MSFT) about making Bing iPhone's default search engine - Business Week: People familiar with the matter say talks have been going on for weeks. A move would mean Google (GOOG)'s search engine would be bumped. Microsoft may also want Bing to become an alternative on Apple's Safari web browser, which currently offers a choice between Google and Yahoo (YHOO) search. A source familiar with Apple's thinking says the company is looking at a search function of its own, and says if it arrives at a deal with Microsoft, it would only be to buy it some time.

AAPL (215.04): Canaccord Adams says iPhone 4G likely coming to Verizon (VZ): Firm believes next week's announcement from Apple may include the release of iPhone OS 4.0 and the unveiling of iPhone 4G to Verizon in June. Canaccord sees this as being very positive for Apple, neutral for Research in Motion (RIMM), and negative for Palm (PALM). Recall, Apple Insider suggested an iPhone for Verizon would be available by Q3'10. AAPL is rated buy with a target of $250

GOOG (587.62): Google maintained outperform at Oppenheimer after channel checks: Target is $650. Firm says mixed data points suggest investors will get a better entry point in GOOG shares after the company reports 4Q earnings tomorrow. Oppenheimer says their channel checks indicate pricing remains pressured in some verticals. Firm suggests investors wait for the company to report earnings, and let management discuss implications of its China decision and the risk to its relationship with Apple.

GOOG (587.62): Google would like to retain business unit in China – NYT: It seems unlikely that the company's Chinese-language search engine will remain. But Google would like to keep its Chinese engineers, sales force, and small piece of real estate in mobile phones. Experts say arriving at a solution that allows the company to do so while saving face for the government will be difficult. But the government may actually find a solution desirable, because China's educated class puts a high value on Google. People with knowledge of the company’s finances put GOOG revenues from China at about $150M per quarter.

BAC (16.32): Bank of America reports Q4 EPS ($0.60), ex-items: Reuters is ($0.53); First Call ($0.52). Company reports total revenues of $25.08B vs Reuters $27.04B.

IBM (134.14): IBM upgraded to buy from hold at Canaccord Adams: Target increased to $150 from $130.

QCOM (49.32): Qualcomm target raised to $55 from $50 at ThinkEquity: Checks by the firm indicate good sell through and healthy inventories. The firm believes March quarter consensus estimates are conservative. ThinkEquity sees incremental upside from NOK and a potential 2H pickup with MediaFLO and Google into Verizon. Shares are buy rated.

GOOG (587.62): Computer security researcher finds what he thinks is strong evidence that attacks on Google were authored by Chinese – NYT: Evidence to this point has been circumstantial, but Joe Stewart says the main program used in the attack has a module based on an unusual algorithm from a paper that has been published exclusively on Chinese-language websites. He concedes programmers could have deliberately placed the code there in an effort to implicate the Chinese, but thinks that possibility is unlikely.

FSLR (123.94): Hapoalim Securities sees German solar PV cap in C11: Firm says support of solar by blue chip German companies may be waning, and less expensive alternative energy sources may be sought in the near term. Hapoalim notes that industry demand models assume solar generation in Germany to increase perpetually to appx 6-7GW in 2011, but the firm assumes that a solid cap of ~3GW may emerge in the coming 6-12 months as the economics of subsidized solar become less compelling.

GS (166.86): Goldman Sachs to delay news on bonuses until after earnings reports the WSJ: The firm said it wants to delay the bonus news until after it releases its earnings report because "It is important to have context of earnings" for the bonus numbers. In the past, employees were told about their bonuses in the days leading up to the earnings report

WSJ comments on the win by Republican Scott Brown in Massachusetts: Several papers are all carrying essentially the same commentary, the Brown win has made the passage of a health care bill much more complicated and difficult. But other elements of the current legislative agenda are also now at risk. Senator Dodd will face pressure to negotiate with Republicans over the financial reform measures (Note the weekend report of his possible willingness to drop the Consumer Financial Protection Agency). Several strategists say the Democrats should now focus solely on jobs and the economy.

STT (43.20): State Street reports Q4 EPS $1.00 vs Reuters $0.99: Company reports revenues of $2.28B vs Reuters $2.24B.

The Technology Sector is Overbought

2010-01-07T11:13:00.004-05:00

There appears to be pretty substantial resistance right above current levels given the NDX is the only major index that is at the top of the LEH Waterfall decline; no other major sector is close to capturing all the post-LEH losses. The fundamental story in technology is better than any other sector and this sector is likely to generate the most significant earnings beats during Q4 earnings season. But, I expect to see the technology sector lag through the earnings season and take a pause given the overhead resistance at 1900-1920. Typically, financial stocks see a strong "sell the news" reaction on postive earnings and technology usually has momentum. I think that relationship could reverse in the upcoming quarter. I like PSQ long (NDX Short ETF) and trading banks with a long bias.

Morning Call: Janury 4, 2010

2010-01-04T07:42:00.001-05:00

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 Salesforce.com (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): priceline.com 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.

Morning Call: December 17, 2009

2009-12-17T08:26:00.001-05:00

December 17, 2009: Morning Call

Fair Value: SP500 – 1104.20; NDX: 1799.22; DOW: 10378.63

Technical Levels:

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

5-Day Event Outlook:

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

Friday: German IFO Business Climate, BOE Lending report.

Next Monday: BOJ Monthly Report, Hong Kong CPI, US Chicago Fed National Activity Index.

Next Tuesday: Q3 UK GDP revision, US Q3 GDP revision, Personal Consumption, Richmond Fed Manufacturing Index, House Price Index, Existing Home Sales

Detailed Daily Calendar of Events:

Pre-market EPS: DFS (.10/1.7B); FDX (1.04/8.45B)
4:30: BOE Releases Quarterly Inflation Attitudes Survey
05:00: Euro-zone Construction Output
06:00: Irish GDP (Q3):
08:30: Initial Jobless Claims (Dec 12): prior 474,000
10:00: US Leading Indicators (Nov): 0.7%
10:00: US Philly Fed (Dec): 15.8
10:00: Bernanke Confirmation Vote held in Senate Banking Committee
10:30: EIA Natural Gas Storage Change
11:00: DFS earnings call
13:00: JAVA Annual General Meeting
17:00: RIMM earnings call
17:00: NKE earnings call
Post-market EPS: NKE (.71/4.3B); ORCL (.36/5.68B); PALM (-.32/265.6M); RIMM(1.04/3.79B)

Foreign Market Summary/Key Macro News/Commentary:

The story of the morning is the continued sharp decline in the Euro, which is tumbling to 3-month lows against the dollar (1.4364). Standard and Poors downgraded their sovereign debt rating of Greece to BBB+ yesterday afternoon. The Euro barely budged on the S&P headline when it hit yesterday at 12:23pm ET. Once Asian markets began opening last night the Euro started getting hit hard as traders scrambled to unwind carry trades. Also, The sell-off appears driven in part by technical factors. 1.425-1.43 is a key level of support and a breach of these levels would likely have more substantial spillover effects in commodity and equity markets. A break of that level could rattle confidence and may suggest a disorderly unwind of the dollar carry trade (One of the preferred long assets in the short dollar carry trade is the Euro). At this point, the pace of the Euro decline is more problematic than the magnitude of the decline. Traders will begin worrying about the magnitude of the decline if the Euro support areas discussed above do not hold. The equity market reaction is fairly muted and remains incredibly resilient with the S&P futures 5 below fair value (significant short dollar/long ES1 correlation breakdown). Gold, though, is down 16 to 1122 and just above the relative lows and 50 day SMA at 1111. European markets are down 0.50% to 0.80% following weaker than expected UK retail sales and concerns about potential spillover effects from the Greece debt crisis. The S&P debt downgrade obviously reflects market skepticism regarding Greece's willingness to enact austerity measures. Greek labor unions are opposed to the austerity measures and plan a nationwide strike today. Thus far, the problems appear contained to Greece as other high-deficit countries across the region have avoided the substantial widening of credit spreads that Greece has seen because market participants appear more confident that those countries have better economic prospects or will be more disciplined on fiscal restraint. Asian markets declined (Japan down 0.13%, Hong Kong down 1.22%, Australia up 0.18%, Shanghai down 2.2%, South Korea down 1.1%, India down 0.11%). South Korea slipped as institutional investors dumped large-caps on economic uncertainty. Hong Kong was hit when its central bank said the city risked “sharp corrections” in asset prices.

Research Calls/Market Moving News:

GS (164.99); MS (30.34): Goldman Sachs (GS) and Morgan Stanley (MS) estimates reduced at Meredith Whitney Advisory Group-- CNBC, Bloomberg:
· GS
o f09 to $19.57 from $19.95; Reuters is $19.12; First Call $19.29
o f10 to $19.65 from $21.73; Reuters is $18.22; First Call $18.78
o f11 to $20.60 from $24.04
· MS
o f10 reduced to $2.60 from $2.63; Reuters is $3.32
o f11 reduced to $2.75 from $3.28

BAC (15.28): Bank of America initiated buy at UBS -- wires

BAC (15.28): Bank of America names Brian Moynihan president/CEO: Moynihan, who will assume his new post upon the 31-Dec retirement of Kenneth Lewis, is currently the bank's president of Consumer and Small Business Banking.

C (3.15): Citi confirms that it priced 5.4B common shares at $3.15 per share. US Treasury has decided not to sell any Citi shares along side Citi offering: Reuters reports that the Treasury has agreed to a lock-up prohibiting sales of any of its shares of C for 90 days, according to a source

FSLR (136.74): First Solar guides f10 EPS $6.05-$6.85 vs Reuters $6.60; sales $2.7-$2.9B vs Reuters $2.41B: The company also says it plans to invest $365M of capital to add two production plants, consisting of four manufacturing lines each, and the expansion is expected to increase the company’s annual capacity by 424 megawatts (MW), assuming Q3 2009 reported annual line run rate of 53 MW. Additionally, with the announced expansion in Malaysia and the previously announced two-line factory in France, First Solar expects to add 10 production lines during 2010 and 2011, increasing capacity by over 48% from current levels, bringing First Solar’s annual or announced production capacity to approximately.

PNC (52.00): PNC Bank initiated overweight at JPMorgan: Target is $70.

FDX (89.95): FedEx reports Q2 EPS $1.10 vs Reuters $1.10: First Call is $1.06. Company reports revenues of $8.60B vs Reuters $8.51B. Guides Q3 EPS to $0.50-$0.70 vs Reuters $0.85. Guides full year EPS to $3.45-$3.75 vs Reuters $3.61.

December 11, 2009: Morning Call

2009-12-11T08:26:00.001-05:00

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.

Morning Call: November 20, 2009

2009-11-20T08:07:00.001-05:00

November 20, 2009: Morning Call

Fair Value: SP500 – 1093.48; NDX: 1772.72; DOW: 10314.84

Technical Levels:

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

5-Day Outlook:
Today: ANN and DHI report earnings.

Next Monday: French, German, and Euro-zone PMI Manufacturing data, US Existing Home Sales.

Next Tuesday: German GDP, US GDP Revision, S&P CaseShiller Home Price Index, US Consumer Confidence, Richmond Fed Manufacturing Index

Next Wednesday: UK GDP, US Personal Income/Spending, US Durable Goods, US Initial Jobless Claims, University of Michigan Confidence, US New Home Sales

Next Thursday: Thanksgiving Holiday- Markets Closed.

Notable Earnings: Monday Pre-Market: BJS, CPB, LDK. Monday Post-Market: HPQ, BRCD. Tuesday Pre-market: AEO, HNZ. Tuesday Post-Market: JCG

Detailed Daily Calendar of Events:

Pre-market EPS: ANN (.06/475.9M); DHI (-.25/1.15B); SJM (1.04/1.24B)
10:00: DHI earnings call

Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 9 points below fair value and the NASDAQ futures are trading 13 points below fair value at 7:45am ET. There are a few developments that have contributed to sell-off in the futures market over the last 2 hours. European markets reversed modest gains on the open and are down 1% led by financial and basic material stocks after ECB President Trichet said the ECB would begin to absorb liquidity to ensure price stability and that banks must strengthen their balance sheets. Zhang Ping, chairman of the Chinese National Development and Reform Commission, said at 7am ET that domestic demand growth is not strong enough and that China's economic recovery is not solid. Also, said that China still has an industrial overcapacity problem. Zhang says China's external and domestic situation is complicated. There are also rumors circulating that Ukraine is on the verge of defaulting on their sovereign debt - this Ukraine news story is weighing on the Euro, which is trading down 0.75% against the dollar, right at the short-term uptrend line at 1.48. Gold is trading down 10 to 1134 and other commodities are down 1% to 1.25%. Asian markets closed mostly lower as DELL's disappointing results weighted on technology shares and resource stocks fell on lower commodity prices (Japan down 0.54%-4th down day in a row; Hong Kong down 0.83%, Australia down 1.33%, Shanghai down 0.31%, India up 1.4%). India reversed early declines led by banking and technology shares as traders moved to cover short positions. South Korea was flat as chipmakers weighed on the market. Gainers outnumbered losers in China, but the market still turned down by the end of the day on concerns about the country’s monetary policy.

Research Calls/Market Moving News:

DELL (15.87): Dell reports Q3 EPS $0.23 ex-items vs Reuters $0.28Company reports revenues of $12.90B vs Reuters $13.20B. For Q4, Dell expects seasonal demand improvement in its Consumer business, while demand in Public is typically lower during the quarter. The company expects Q4 revenue to improve over Q3; Reuters consensus is $13.58B. DELL shares are trading down 6.7% in the pre-market.

Fed Makes Monitoring Capital Foremost Concern Amid Bubble Talk- Bloomberg: -- “Federal Reserve officials are stepping up scrutiny of the biggest U.S. banks to ensure the lenders can withstand a reversal of soaring global-asset prices, according to people with knowledge of the matter. Supervisors are examining whether banks such as JPMorgan Chase & Co., Morgan Stanley and Goldman Sachs Group Inc. have enough capital for the risks they take, how much they know about the strength of their counterparties and whether risk managers have authority to influence bank practices and policies. Lawmakers led by Senator Christopher Dodd have criticized the Fed for failing to prevent a decline in lending standards that contributed to the credit crisis. The central bank’s monitoring takes on renewed urgency as Chairman Ben S. Bernanke’s pledge to keep the benchmark interest rate near zero for “an extended period” is helping to fuel a surge in assets. The MSCI AC World stock index is up 71 percent since hitting a recession low on March 9. Gold reached an all-time high of $1,145.50 an ounce Nov. 18. The policy is raising the “systemic risk” of new asset bubbles, Bill Gross, who runs the world’s largest bond fund at Pacific Investment Management Co., said in a note posted on the Newport Beach, California-based company’s Web site yesterday. Finance officials in Asia say a bubble fueled by the Fed’s low rates has already arrived.”

RIMM (58.84): Research In Motion downgraded to neutral from buy at FTN Equity :Firm notes a decline in market share due to greater than expected competitive pressure.

GPS (21.84): Gap reports Q3 EPS $0.44 vs guidance $0.42-0.44 vs Reuters $0.44: Company previously reported revenues of $3.59B. Gross margin increased 380 basis points to 42.5%; operating margin increased to 13.9% compared with 11.1% last year. inventory per square foot was down 9% y/y. GPS shares are trading up 1.6%.

Treasury announces plans to sell warrants from JPM, COF, TCB in modified Dutch auctions: The auctions will be held during the next month. The warrants were obtained from the companies as part of the TARP program.

Dallas Fed President Fisher comments on too big to fail problem - wires: Fisher says that it is unrealistic to expect the government not to help systemically important firms get "out of the fire". But Fisher added that banks that are considered too big to fail might need to divest some businesses such as proprietary trading.

GS (172.83): Some of Goldman Sachs' largest investors say more profits should go to shareholders reports the WSJ: Sources familiar with the situation say that some of the firm's largest shareholders are saying the firm should reduce its bonus pool and pass along more of the earnings to shareholders. Shareholders point to expectations that the record net income and compensation that will result in EPS about 22% lower than '07 because of the 100M shares issued in the past year as the bank sought to bolster its financial position and capital. The shareholders say reigning in the bonus pool would give a boost to EPS and the share price. Some investors point to the change in the financials that now includes consultants and temp workers in the total worker count so that total pay per worker appears lower.

Morning Call: November 18, 2009

2009-11-18T07:50:00.000-05:00

November 18, 2009: Morning Call

Fair Value: SP500 – 1108.72; NDX: 1811.79; DOW: 10416.35

Technical Levels:

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

5-Day Outlook:
Today: BOE Meeting Minutes, Euro-zone Construction Output, US CPI, US Housing Starts.

Thursday: UK Retail Sales, US Initial Jobless Claims, US Leading Indicators, US Philly Fed.

Friday: ANN and DHI report earnings.

Next Monday: French, German, and Euro-zone PMI Manufacturing data, US Existing Home Sales.

Next Tuesday: German GDP, US GDP Revision, S&P CaseShiller Home Price Index, US Consumer Confidence, Richmond Fed Manufacturing Index

Notable Earnings: Tuesday Pre-market: HD, TGT. Tuesday Post-Close: CRM, ADSK. Wednesday Pre-Market: BJ, CHS, SLF. Wednesday Post-Close: NTES, LTD. Thursday Pre-market: STP, SHLD, TSL. Thursday Post-Close: DELL. Friday Pre-market: ANN, DHI

Detailed Daily Calendar of Events:

Pre-market EPS: BJ (.45/2.48B); CHS (.06/414.7M); SOLF (.15/148.3M)
08:30: US Consumer Price Index (Oct): 0.2% MoM; Ex-Food/Energy: 0.1%
08:30: US Consumer Price Index (Oct): -0.3% MoM; Ex-Food/Energy: 1.6% YoY
08:30: US Housing Starts (Oct): 598,000; Building Permits: 580,000
09:00: PHM presents at UBS Building Conference
09:15: Fed’s Bullard speaks on the economy
10:30: DOE Crude Oil and Gasoline Inventories
10:40: DVN presents at Bank of America Energy Conference
11:25: ECA presents at Bank of America Energy Conference
14:00: MSFT Analyst and Investor Meeting
15:15: HGSI presents at Lazard Capital Healthcare Conference
Post-market EPS: DCI (.34/408.7M); HOTT (.13/191.9M); JACK (.55/548.6M); LTD(-.02/1.78B); NTAP (.30/881.6M); NTES (.50/140.0M); PETM (.28/1.29B)

Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading flat with fair value and the NASDAQ futures are trading 2 points above fair value at 7:30am ET. The Euro bounced off the uptrend line in Tuesday’s session and is trading up 0.60% against the dollar, nearing the 1.50 level once again. European markets are up 0.30% to 0.70%, as basic resource, autos, and technology stocks advance. Markets rallied from unchanged at 5:45am ET after Lloyds (unch’d), ING (+1.2%) & KBC (suspended) gained EU approval for their restructuring plans. The knee jerk higher represents relief that any uncertainty has been removed over the approval, while KBC remains suspended as we gather more detail on its disposals. Sterling dropped in early trade after the BoE mins showed one MPC member voted for and increase in QE of £40bn, whilst all but one other voted for +£25bn. The committee will reassess proceedings in Feb’10. Cadburys benefit from Hershey saying they are reviewing their options regarding the co in response to Kraft’s bid. Copper hit a 14 month high as the dollar declined, with other precious & base metals advancing. ITV +5.5% appointed a new chairman, and Wolseley drop 3.6% as profits slump. Asian markets closed mixed in a tranquil trading session (Japan down 0.55%, Hong Kong down 0.32%, Australia up 0.20%, Shanghai up 0.05%, India down 0.30%) South Korea outperformed up 1.25%. Brokerages outperformed in South Korea. Chipmakers gained on a broker report that PCs and Windows 7 will remain robust through next year. Utilities performed well in China on expectations they will see a huge increase in demand over the winter and aided by a broker upgrade of Shanghai Electric (601727.CH). Solar energy stocks rallied in Taiwan on a report that they won orders from a Chinese trade delegation. Most miners rose again in Australia, and banks were mixed. HSBC (5.HK) fell in Hong Kong after saying new capital rules may reduce credit in the economy. Weakness in real estate and financial stocks pushed Japan to reverse an early rise.

Research Calls/Market Moving News:

BAC (15.77): Paulson & Co., the hedge fund firm run by billionaire John Paulson, expects Bank of America Corp.’s stock to almost double in the next two years as writedowns abate, according to a letter sent to investors. The bank, ranked first by assets and deposits in the U.S., may rise to $29.81 by the end of December 2011, Paulson said in a quarterly letter sent to investors. Paulson expects “banks will have passed the current writedown cycle and have visibility for growth in 2012,” the letter said.

MON (77.33): Cramer Positive on Ag Sector: Featured Positive: Cramer says that agriculture is the next sector that's ready to break out to the upside, noting that the Department of Agriculture raised its spot price forecast last week citing production shortfalls. Cramer is positive on MON, POT, AGU, MOS, TNH and DE.

MON (77.33): UBS says Monsanto maintains corn yield lead: Firm's analysis of Univ of Illinois field trials indicates that MON has maintained its corn yield advantage over Pioneer in the number two corn growing state. UBS believes that a growing yield advantage plus the refuge-reduction advantages of SmartStax over Pioneer's AcreMax are likely to result in renewed MON corn share gains in 2010

CRM (65.61): Salesforce.com reports Q3 EPS $0.16 vs Reuters $0.16: Company reports revenues of $330.5M vs Reuters $324.4M. Guides Q4 EPS to $0.14-0.15 vs Reuters $0.15; guides revenues to $340-342M vs Reuters $334.7M. Initial fiscal 2011 revenue outlook is for growth of +15-16%.

CRM (65.61): Salesforce.com target increased to $72 from $66 at ISI Group: Analyst Heather Bellini sees company guidance as conservative and believes if the economy continues to improve, the company will beat f11 revenue guidance. The buy rating is reiterated

RIMM (61.40): Research In Motion downgraded to market perform from outperform at BMO Capital: “We are lowering estimates, price target, and our rating to MARKET PERFORM from OUTPERFORM. While we believe the November quarter is tracking to plan, we have a number of concerns that could impact FY2011 earnings and we see a number of other overhangs for the stock. We are modeling share loss at RIM's largest customer, we think the move into the mid-tier will hurt the operating model, and cash flow needs to improve. We are less concerned about a CDMA iPhone, monthly ARPU going away, and RIM's operating system and browser, but we think each represents an overhang on the stock. We don't believe that the success of the Bold 2 and new international markets will be enough to stimulate the shares.”

AAPL (207.00): China Mobile chairman says company is still in talks with Apple (AAPL) about iPhone for China – wires:

BIDU (441.50): Baidu removed from the Conviction Buy List at Goldman Sachs: Buy rating retained. Target increased to $500 from $435.

CBY (54.00); HSY (38.41); KFT (27.64): Hershey (HSY) confirms that it is considering a potential bid for Cadbury: Hershey confirms that it is reviewing its options and at this stage there can be no assurance that any proposal or offer from Hershey will be forthcoming. A further announcement will be made in due course if appropriate. Ferrero confirms it is in the preliminary stages of evaluating its options with respect to Cadbury

FSLR (123.99): First Solar mentioned positively at RBC, recommends purchase into the 16-Dec guidance call: The firm recently met with the company's IR team in Texas and recommends purchase of the stock into the company's 16-Dec 2010 guidance conference call. RBC believes new plant details will be more important than 2010 ASP and margin erosion expectations, which are already baked into shares. FSLR remains sector perform rated with a $136 target.

November 10, 2009: Morning Call

2009-11-10T08:07:00.001-05:00

November 10, 2009: Morning Call

Fair Value: SP500 – 1090.92; NDX: 1766.35; DOW: 10193.82

Technical Levels:

SPX: 875-880, 910, 953, 986, 1003, 1039-1044 support/1081, 1110 resistance

5-Day Outlook:

Today: Bank of America Financial Conference – GS, BAC, STT, COF, AXP, MS, BK among the companies presenting. RW Baird Industrial Conference (ETN, PH, CAT, SWK, ITW among the companies presenting. MON analyst day. 3 Fed officials (Lockhart, Yellon, Rosengren) speak on the US economic outlook. Tuesday night: Chinese Economic Data releases: PPI, CPI, Retail Sales, Industrial Production.

Wednesday: UK Unemployment, Bank of America Banking Conference, TOL Q4 Guidance at 2pm ET.

Thursday: Euro-zone Industrial Production, WMT earnings, Initial Jobless Claims,

Friday: Euro-zone GDP, US Trade Balance, University of Michigan Confidence, Fed’s Evans speaks on asset-price bubbles.

Monday: Euro-zone CPI, US Retail Sales, Empire Manufacturing, Business Inventories

Notable Earnings: Tuesday Pre-market: BZH. Tuesday Post-Close: AONE. Wednesday Pre-market: M. Wednesday Post-Close: AMAT. Thursday Pre-market: WMT, KSS, ECA. Thursday Post-Close: JWN, DIS. Friday Pre-market: ANF, A, JCP. Monday Pre-Market: LOW

Detailed Daily Calendar of Events:

Pre-market EPS: ARM (-.31/1.0B); BZH (-1.24/338M); JASO (.03/136M); TYC(.54/4.3B)
02:00: AEM presents at Thomas Weisel Conference
05:00: Euro-zone ZEW Economic Sentiment Survey (Nov): 58 (weaker at 51.8)
08:00: BAC presents at Bank of America banking conference
08:50: GS presents at Bank of America banking conference
09:15: Fed’s Lockhart to speak on the US Economic Outlook
10:00: Fed’s Yellon speaks on the US Economic Outlook
10:30: COF presents at Bank of America banking conference
11:15: Fed’s Rosengren speaks on the US economy
12:10: AXP presents at Bank of America banking conference
13:30: FSYS presents at Thomas Weisel conference
13:45: MS presents at Bank of America banking conference
14:30: MON Investor Meeting
14:35: BK presents at Bank of America banking conference
14:55: CAT presents at Robert Baird Conference
16:15: NYX presents at Bank of America banking conference
16:30: API Crude Oil and Gasoline Inventories
16:30: TSO Analyst and Investor Conference
17:00: ABC Consumer Confidence
19:30: Fed’s Fisher speaks on the US economic outlook
21:00: Chinese Producer Price Index (Oct): -5.2% YoY
21:00: Chinese Consumer Price Index (Oct): -0.4% YoY
21:00: Chinese Retail Sales (Oct): 15.7% YoY
21:00: Chinese Industrial Production (Oct): 15.2% YoY
Post-market EPS: AONE (-.36/19.2M); PAAS (.21/116M); WTW (.64/318M)

Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 2 below fair value and the NASDAQ futures are trading 4 below fair value in very light overnight trading. European markets are flat after fluctuating on either side of unchanged for the early morning session. Earnings met with a mixed response as HSBC (HSBA.LN), Schroders (SDR.LN) and Imperial Tobacco (IMT.LN) rising whilst Barclays (BARC.LN), Trygvesta (TRYG.DC) and Vodafone (VOD.LN) fell. Euro-zone and German sentiment surveys came in weaker than expected, as did the French Industrial production number. Asian markets closed higher but many weakened into the close (India moved down 200 points from the opening session highs). A weaker US dollar pushed commodities prices and their associated stocks higher. Axa Asia Pacific (AXA.AU) rose again in the wake of rejecting a takeover bid yesterday and AMP (AMP.AU) rose on speculation it might become a takeover target. Trading firms rose in Japan with banks also up after the banking minister suggested the country might not strictly enforce capital requirements.

Research Calls/Market Moving News:

PCLN (173.73): priceline.com reports Q3 pro-forma EPS $3.45 vs Reuters $2.92:
Company reports revenues of $730.7M vs Reuters $699.9M. priceline.com reports Q3 gross bookings $2.72B vs StreetAccount consensus $2.56B: Represents y/y growth of +32.8% vs guidance for +20-26%. Q4 guidance: Gross bookings growth +30-40% vs SA +32%. International +50-60% vs SA +39% (local currency +37-46%). Domestic +15% vs SA +21%. PCLN shares are up 7%.

AIG (36.18): American International Group may be able to pay back Fed loan, says Moody's: Moody's says that AIG will be able to repay its credit line from the Federal reserve and "much or all" of Treasury's investment should financial markets stabilize. AIG shares are up 7.5%.

HMIN (32.89): HMIN Q3 profit .40 cents vs. street at .24 cents. Sales of 106 million exceeded consensus of 94.7 million. Guides revenues to between 98.9-101.8 million. Street at 89.4 million. Shares are indicated up 11% on tiny volume.

HBC (58.30): HBC up 4.5% after the company releases their Q3 interim management statement: Profitability for the first nine months of 2009 was stronger than expectations at the start of the year, as positive trends experienced in H1 continued into Q3. Year to date pre-tax profit was ahead of the comparable period in 2008 on an underlying basis, excluding movements in fair value on the company's own debt related to credit spreads. In the US consumer finance run-off portfolio, loan impairment allowances declined in the quarter.

BCS (23.17): BCS is trading down 3.5% following its Q3 interim management statement. The company reports it has maintained strong income momentum in Q3, particularly in Barclays Capital and across the international activities of GRCB, enabling the company to achieve consistent profitability across the first three quarters of 2009. Guides impairment for the full year currently expected to be around the bottom end of the previously referenced 2009 consensus range of £9.0-9.6B.

JASO (4.12): JA Solar reports Q3 EPADS $0.10 unclear if comparable to Reuters Reuters $0.03: Company reports revenues of $193.0M vs Reuters $137.2M. Q3 shipments: 177MW. Gross margin: 16.7% vs 11.4% seq. Mgmt expects Q4 shipments of 170-200MW. JASO shares are up 4.5%.

FLR (48.01): Fluor (FLR) reports Q3 EPS $0.89 vs Reuters $0.90, guides FY EPS to $3.75-3.90 vs prior $3.80-4.10 and Reuters $3.86. FLR is trading down 6%.

AAPL (201.46); GOOG (562.51): WSJ looks at the cooperation between Google and Verizon Wireless to take on the iPhone: Before the Droid, neither company had worked closely with the other before but now there is a growing friendship between the CEOs of the 2 companies. The largest marketing campaign in Verizon Wireless's history is backing the Droid. Argues that the deal that created the Droid was essentially the result of the growing friendship between the CEOs and that things like Verizon Wireless going with Microsoft for its phone search did not derail the deal because of the friendship.

ENER (10.93): Energy Conversion downgraded to sell from hold at Citi: Target cut to $7 from $12

WYNN (63.54); LVS (16.79): Water rationing may begin in Macau this weekend - London Times: Casino operators have not been told what to do. A drought has exacerbated what the article terms "years of mismanagement" at reservoirs that Macau relies on just across the Chinese border in Zhuhai.

2009-11-05T08:20:00.002-05:00

November 5, 2009: Morning Call

Fair Value: SP500 – 1043.70; NDX: 1679.44; DOW: 9758.71

Technical Levels:

SPX: 875-880, 910, 953, 986, 1003, 1039-1044 support/1066, 1110 resistance

5-Day Outlook:

Today: Jobless Claims, Productivity, October Same Store comps
Friday: Change in US Payrolls (-175k), Unemployment Rate: 9.9%. Consumer Credit
Next Week: Multiple Fed speakers address the economic outlook, Chinese Retail Sales and Industrial Production.

Notable Earnings: Thursday Post-close: EOG, PSA, CROX, SUN. Friday Pre-market: AIG. Monday Pre-market: DISH, WCRX. Monday Post-Close: FLR. Tuesday Pre-market: BZH, JASO. Tuesday Post-Close: AONE

Key Macro Trends: Will the highly accommodative/dovish Fed statement reinforce the “risk/reflation trade?” Or will investors “sell the news” and take profits in the near-term given the substantial relative outperformance vs. the S&P 500? Key proxies are Crude Oil, Gold, Euro, high beta technology/commodity stocks, and commodity currencies (Real, Australian Dollar, Canadian Dollar). Financial sector underperformance is another important trend. Fears about government intervention and persistently high credit costs are weighing on the sector, particularly the weaker balance sheet companies. M&A and other corporate actions: Is the BRK for BNI a one-off blockbuster deal or does this signal more mega-deals? RIMM announces a 1.2 billion dollar share buyback this morning. CSCO added 10 billion dollars to its share repurchase authorization last night. Key Short term resistance stands at 1060. Short-term support stands at 1039-1044. Intermediate/Long-term support at 998-1003. Resistance at 1098-1103.

Daily Calendar of Events:

Pre-market EPS: ALD (.07/79M); CAH (.42/24.04B); CI (1.03/4.64B); CNQ(1.23/2.51B); CVS (.64/24.57B); DTV (.40/5.42B); FSYS (.42/104.3M); HOC(.45/1.48B); KIM (.31/194.2M); NDAQ (.42/653.8M); OCR (.60/1.55B); SLE(.15/3.17B); TRI (.40/3.26B)
05:00: Euro-zone Retail Sales (Sep): 0.4% MoM; -2.1% YoY
07:00: Bank of England Announces Interest Rate Decision
07:00: Select Retailers release October Same Store Sales
07:45: ECB Announces Interest Rate Decision
08:00: GE presents at Goldman Sachs Industrials Conference
08:30: US Productivity (Q3): 6.0%; Unit Labor Costs: -3.5%
08:30: Initial Jobless Claims: 519,000; Cont. Claims: 5.8 million
10:00: CNO earnings call
10:00: JPM presents at BancAnalysts Association of Boston
10:30: EIA Natural Gas Storage Change
11:00: ICSC Chain Store Sales
18:00: G20 Finance Ministers and Central Bankers meet in Scotland
Post-market EPS: CBS (.23/3.18B); CHH (.52/168.6M); CROX (-0.08/156.4M); CSTR(.59/326.3M); EOG (.66/1.11B); NVDA (.10/834.1M); PSA (1.25/370.7M); SBUX(.21/2.39B); SUN (.03/7.83B); VRSN (.32/258.8M);

Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 4 points above fair value and the NASDAQ futures are trading 8 points above fair value at 8:00am ET. Asian markets fell led by consumer companies and banks (Japan down 1.3%, Hong Kong down 0.63%, South Korea down 1.7%, Shanghai up 0.30%, India up 0.95%). South Korea said it was unlikely that the economic recovery will be sustained. India reversed early losses on a report saying the government may lower telecom license fees. China fluctuated before ending higher with transportation stocks up after China Eastern (600115.CH) got approval for a share sale, and commodity producers fell on speculation stimulus measures may be withdrawn. Hong Kong saw profit taking. New Zealand reported its highest quarterly unemployment rate in nine years. Retailers fell in Australia after David Jones (DJS.AU) reported Q1 sales growth that missed forecasts. European markets are down 0.35% but have pared opening losses of nearly 1%. Decliners on the FTSE 100 lead advancers 7-3. Technology and basic material stocks are lagging.

Research Calls/Market Moving News:

RIMM (57.61): Research In Motion announces common share repurchase program: RIMM announced that its board has authorized a share repurchase program to purchase for common shares having an aggregate purchase price of up to $ 1.2B, or approximately 21M common shares based on current trading prices (representing approximately 3.6% of the currently outstanding common shares of RIM). The share repurchase program may commence on 9-Nov and will remain in place for up to 12 months or until the purchases are completed or the program is terminated by RIM. RIM has not repurchased any shares within the past twelve months.

CSCO (23.29): Cisco Systems reports Q1 EPS $0.36 ex-items vs Reuters $0.31: Company reports revenues of $9.02B vs Reuters $8.75B. Cisco Systems increases share repurchase program by $10B. stock. Cisco's board had previously authorized up to $62B in stock repurchases. There is no fixed termination date for the repurchase program. The remaining authorized amount for stock repurchases under this program, including the additional authorization, is approximately $13.1B. Cisco Systems guides Q2 (Jan) revenue to be up 1-4% y/y - conf. call: Implies a range of $9.18-9.45B vs Reuters $8.98B.

GS (169.50): Goldman Sachs has benefited more than most from low interest rates says the WSJ: A 'Heard on the Street' column notes that Goldman's interest rate on its long term borrowings was only 0.92% in Q3 compared to 3.53% a year ago. This is lower than many competitors but costs may be computed differently. Most of the Street uses interest-rate derivatives to effectively convert long term debt to floating rate. If the Fed keeps rates low for as long as it says, this advantage should accrue to Goldman's benefit for some time to come.

RIMM (57.61): Research In Motion is the company at risk from the Droid says the WSJ: A 'Heard on the Street' column says that the Motorola Droid from Verizon Wireless appears to be a strong competitor to the iPhone but the real loser in this fight might be RIMM and its BlackBerry phones. As long as the iPhone was the only phone with a good web browser, the BlackBerry's lack of a solid web experience was not an issue. But now there are several phones offering a robust browsing experience including the Palm Pre and the Droid. RIMM could see some defections in coming months with consumers now representing the majority of new subscribers and satisfaction with BlackBerry's dropping among both consumers and IT departments. Even if it turns things around, margins have been dropping as devices become more complex and the increased competition may lead to price competition. Even after the recent selloff, the shares may still be pricey.

COST (58.81): Costco reports Oct comps +5% vs StreetAccount +4.2: Company reports October net revenues +7% to $5.68B. US comps were +2%; international comps +17%. US comps (excluding the impact from gasoline deflation) were +3%; international (excluding the effects of foreign exchange) +7%; total comps (excluding aforementioned effects) +4%.

FSYS (33.80): Fuel Systems Solutions reports Q3 EPS $0.77 ex-$0.11 gain vs Reuters $0.43: Shares are up 10% in the pre-market. Company reports revenues of $116.2M vs Reuters $104.3M. Gross profit for Q3 2009 was $39.4M, or 34% of revenue, compared to $30.7M, or 29% of revenue a year ago, reflecting increased operating efficiencies. Operating income for the period totaled $23.1M, or 20% of revenue, compared to $18.2M, or 17% of revenue, in Q3 of 2008. Guides full year revenues to $415-425M vs Reuters $379.7M. The company is targeting 2009 gross margin between 30% and 32% and 2009 operating margin to be between 14% and 16%.

GG (39.88): Goldcorp reports Q3 adj. EPS $0.19 vs Reuters $0.16; increases full-year production guidance: Company reports revenues of $691.9M vs Reuters $614.5M . Q3 gold production was 621,100 ounces, +11% y/y. Total cash cost was $295 was $295 an ounce on a by-product basis and $297 per ounce year to date. Total cash costs on a co-product basis were $384 an ounce compared to $380 an ounce year to date. Company increases F09 gold production guidance to ~2.4M ounces from 2.3M ounces. Adds that guidance on total cash costs has also changed in light of its stronger operating performance. Total cash costs for 2009 are now expected to be ~$300 per ounce on a by-product basis compared with previous guidance of $365 per ounce. On a co-product basis, total cash costs are now expected to be less than $400 per ounce compared to previous guidance of $400 per ounce.

CF (86.38): Agrium (AGU) makes "best and final offer" for CF Industries Holdings of $45/share in cash plus 1 share AGU: The cash and stock offer totals $92.99 at yesterday's AGU close of $47.99. The offer was consistent with the report form the WSJ this morning. Also as noted by the WSJ, AGU said that it has received a "No-Action" letter from Canadian Competition Bureau and has re-filed notification under Hart-Scott-Rodino. AGU has extended the expiration of the offer to midnight on 18-Nov. CF is trading down 6 points as AGU appears willing to walk on November 18 if CF does not come to the table.

November 4, 2009: Morning Call

2009-11-04T08:10:00.000-05:00

November 4, 2009: Morning Call

Fair Value: SP500 – 1042.50; NDX: 1677.99; DOW: 9728.58

Technical Levels:

SPX: 875-880, 910, 953, 986, 1003, 1039-1044 support/1066, 1110 resistance

Events:

Pre-market EPS: ADP (.50/2.05B); BDX (1.25/1.84B); BHI (.35/2.23B); CMCSA(.25/8.83B); DVN (.89/2.01B); FWLT (.66/1.29B); GRMN (.69/706.6M); MMC(.27/2.59B); PHM (-.61/1.1B); RDN (-1.25/263.4M); RIG (2.63/2.83B); TWX(.53/7.11B)
04:00: Euro-zone PMI Services (Oct): 52.3; Composite: 53.0
05:00: Euro-zone PPI (Sep): -0.4% MoM; -7.7% YoY
07:00: MBA Mortgage Applications
08:15: ADP Employment Change (October): -190,000
08:30: PHM earnings call
08:45: JOYG presents at Goldman Sachs Industrials Conference
09:00: Treasury Announces Quarterly Refunding
09:30: PCAR presents at Goldman Sachs Industrials Conference
10:00: RIG earnings call
10:00: FWLT presents at Goldman Sachs Industrials Conference
10:30: GRMN earnings call
10:30: DOE Crude Oil and Gasoline Inventories
13:30: BNI presents at Goldman Sachs Industrials Conference
14:15: FOMC Rate Decision: 0.25%
14:15: CSX presents at Goldman Sachs Industrials Conference
15:00: UNP presents at Goldman Sachs Industrials Conference
16:00: KLAC Annual Meeting
16:30: CSCO earnings call
17:00: Select Retailers release October Same Store Sales
Post-market EPS: ALL (1.01/6.51B); CSCO (.30/8.74B); CNO (.22/1.12B); MUR(.97/4.74B); NWS (.18/7.15B); PRU (1.34/6.66B); QCOM (.52/2.72B); WFMI(.18/1.84B)

Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 5 points above fair value and the NASDAQ futures are trading 2 points above fair value at 7:45am ET. The ADP Employment Change and the FOMC statement will be a key focus today. European markets are up 0.70% to 1.4% led by a 5% gain in Marks and Spencer (MKS LN) after the company’s earnings exceeded expectations. Basic material stocks are also stronger in Europe led by continued momentum in gold. The US dollar is slightly lower on expectations that the Fed will repeat the key phrase in the policy statement that rates will say on hold for an “extended period.” France and Germany Oct Final Services PMI were revised below prelim readings at 57.7 and 50.7 respectively, whilst Eurozone Oct Final Services PMI 52.6 topped prelim estimate. UK Oct Services PMI 56.9 vs con 55.5. Eurozone Sep PPI (7.7%) y/y vs con (7.7%). Advancers on the FTSE 100 lead decliners 4-1. Asian markets closed higher led by India, which reversed 3.3% higher, snapping a 6-day losing streak. India’s finance minister said the government would maintain the stimulus measures propelling basic material and energy stocks 4.5% to 9% higher. Financials led South Korea higher following strong earnings reports. Hong Kong rebounded on bargain hunting with property developers and commodity stocks leading the way. Westpac Bank (WBC.AU) led banks up in Australia after releasing FY results. Property shares fell on a report that banks have tightened their mortgage lending on expectations Beijing may raise interest rates. Australia Sep retail sales (0.2%) m/m vs survey +0.5%.

Research Calls/Market Moving News:

WFC (27.74): Wells Fargo bets on a recovery when helping mortgage holders reports the WSJ: The bank has about $107B in debt tied to option adjustable rate mortgages. Many borrowers own homes worth less than the balances and can't afford to pay an amount that would reduce their loan principal. In response, the bank is gambling on a recovery by issuing thousands of interest only loans that defer borrowers' balances for as long as 6-19 years. It is wagering that a housing recovery and consumer income recovery will eventually cover their underwater debt. As a result, the bank is avoiding large write-downs from foreclosures but it holds billions in debt tied to distressed properties in battered markets.

MA (219.20): MasterCard target increased to $275 from $240 at Deutsche Bank: The firm recommends purchase on the weakness following Q3 earnings, which it attributes to the relative lack of visibility into 2010. F10 estimates are increased to $13.80 and $5.51B; Reuters is $13.12 and $5.55B, respectively. The rating remains buy.

GRMN (31.41): Garmin reports Q3 EPS $1.02 ex-items vs Reuters $0.69; Company reports revenues of $781.3M vs Reuters $706.6M. Net sales: Auto/Mobile $546M vs StreetAccount consensus $489M Outdoor/Fitness $132M vs SA $113M. Aviation $58M vs SA $62M. Marine $45M vs SA $42M. GRMN is trading up 5.6% in the pre-market.

STEC (23.15): STEC reports Q3 EPS $0.50 ex-items vs Reuters $0.47: Company reports revenues of $98.3M vs Reuters $94.1M; reports non-GAAP gross profit margin of 49.8% vs 34.1% y/y. Guides Q4 EPS to $0.51-0.53 ex-items vs Reuters $0.52; guides revenues to $101-103M vs Reuters $106.0M. Shares are down 30%.

STEC (23.15): Think Equity downgrades STEC to hold from buy. “STEC reported September-quarter results ahead of the Street. But, revenue guidance for F4Q09(Dec) at $102M is below the consensus of $106M. STEC attributed weak guidance to Zeus Inventory at EMC. Also, STEC said it will probably take through 1Q10 to clear out inventory. We believe new competing solutions in 1Q/1H10 could make ZeusIOPs a tougher sell, with solutions at SAS, PCIe from Seagate, Micron, SMOD, Pliant, FusionIO, Samsung, and Intel and alternative solutions from the storage OEMs Sun, NetApp. We got this one wrong, and lower our rating from Buy to Hold. STEC guiding December quarter to $101-103M versus consensus of $106M. Company saying weaker guidance due to inventory of ZeusIOPS storage solutions at EMC as it has not been able to sell through all the solutions. STEC saying the slower sell through on the ZeusIOPS has been due to customer perception of a longer payback period on the more expensive SSD investment. STEC is therefore setting up a sales team to jointly market the SSD solutions with EMC and other storage OEMs to potential customers. We believe 1) the fact that the ZeusIOPs SSD has not been able to sell through on its lower cost of ownership merits could imply more pricing pressure on the Zeus solutions, which combined with higher marketing expense make for a less profitable enterprise opportunity. 2) STEC also saying could take through 1Q10 to clear out the ZeusIOPs SSD at EMC, which could enable the competition to close the technology gap. 3) By 1Q/1H10, we believe there would be multiple solutions in the market from Seagate, Micron, SMOD, Intel, Pliant, FusionIO and Samsung for both the Server and storage markets in SAS and PCIe to compete with ZeusIOPS FC SSDs. 4) We believe the competitive offerings could imply market share and pricing risk for STEC, also 5) other Storage OEMs not as keen on SSDs. Given the increasing competitive pressures and risk of pricing, market share, inventory risk, continuous pressures on lowering cost of ownership from competing solutions the risk to the downside.”

RIG (85.91): Transocean reports Q3 EPS $2.65 ex-items vs Reuters $2.65: First Call is $2.67. Company reports revenues of $2.82B vs Reuters $2.84B. Total drilling fleet dayrate $283,800 vs. $255,900 seq. and $242,200 y/y Total drilling fleet utilization 75% vs. 84% seq. and 89% y/y.

WYNN (56.13); LVS (15.14): Macau casino revenue rises 42% y/y in October to MOP12.6B ($1.58B), says Macao Daily News – Bloomberg: The paper cites the news agency Lusa.

BAC (14.80): Bernstein comments on Bank of America, continues to rate the shares outperform: The firm believes the market's fear of an imminent capital raise ahead of an announcement regarding the CEO position is premature and notes most reasonable capital raise scenarios are not EPS dilutive given the extinguishing of TARP dividends.

November 3, 2009: Morning Call

2009-11-03T08:32:00.001-05:00

November 3, 2009: Morning Call

Fair Value: SP500 – 1039.69; NDX: 1671.43; DOW: 9740.68

Technical Levels:

SPX: 875-880, 910, 953, 986, 1003, 1039-1044 support/1066, 1110 resistance

Events:

Pre-market EPS: ABC (.40/17.85B); ANR (.35/756.2M); ADM (.55/16.96B); AMT (.17/430.9M); CTSH(.41/805.6M); EMR (.60/5.29B); ENR (1.16/1.06B); ICE (1.14/255.6M); MA(2.92/1.34B); MRO (.57/13.24B); MLM (1.20/483.6M); VIA (.56/3.28B); VNO(1.14/604.1M); UBS (.18/6.5B)
09:00: MA earnings call
10:00: US Factory Orders (Sep): 1.0%
13:00: Domestic Vehicle Sales (Oct): F, GM should release sales stats
15:00: UBS earnings call
16:30: API Crude Oil and Gasoline Inventories
Post-market EPS: CNW (.53/1.14B); DVA (.99/1.53B); HIG (1.15/6.13B); KFT(.48/10.3B); STEC (.47/96.7M)

Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 8 points below fair value and the NASDAQ futures are trading 12 points below fair value at 8am ET. Warren Buffett’s Berkshire Hathaway announces a blockbuster $34 billion dollar offer for BNI. I find it surprising that the S&P futures have only moved 3 points higher since the Berkshire for Burlington transaction news was announced. I would have predicted a much sharper gain given the size of the transaction and signal of confidence from Buffett. The muted reaction is the result of weakness in European markets, which are down 2% following poor earnings from UBS (down 7%). The Euro and British pound are under pressure following news that RBS and Lloyds will receive 31.3 billion pounds in a second bailout from the UK government. There is a building narrative in the market that global financial stocks will face serious headwinds in the form of government orders and or legislation; this storyline is particularly strong in Europe, where the government has forced asset sales and have taken a much harder line on compensation practices than in the US. Asian markets closed lower with India the weakest major market in the region (Japan closed, India down 3.1%, Shanghai up 1.2%, Hong Kong down 1.8%). India fell on disappointing earnings from Hindalco and Reliance Communications. Hindalco, India’s largest aluminum company, fell 11% and Reliance Communications, India’s second largest mobile phone operator, fell 5.7%. China rose in active trade as growth in bank lending raised expectations of sustained economic growth. Gold stocks rose in Australia, but banks fell as the central bank raised interest rates for the second time in a month. Banks in Indonesia were hurt when the IMF said it expects the economy to grow at a lower rate in 2010 than the government had targeted. IMF raised its 2009 and 2010 forecasts for Hong Kong.

Research Calls/Market Moving News:

BNI (76.70): Berkshire Hathaway agrees to acquire Burlington Northern for $100/share in cash and stock: The boards of Berkshire Hathaway (BRK.A) and Burlington Northern Santa Fe announced a definitive agreement for Berkshire Hathaway to acquire for $100 per share in cash and stock the remaining 77.4% of outstanding BNI shares not currently owned. Based on the number of outstanding BNI shares, the transaction is valued at approximately $44B, including $10B of outstanding BNSF debt.

UBS (16.78): UBS reports Q3 EPS (CHF 564M) vs Bloomberg (CHF 345.0M) and year-ago CHF283M: Results include charges totaling CHF 2,150M. Company reports operating income of CHF5.77B vs year-ago CHF5.54B.

MA (222.65): MasterCard reports Q3 EPS $3.48 ex-items vs Reuters $2.93: First Call is $2.94. Company reports revenues of $1.36B vs Reuters $1.35B.

Federal reserve regulators want banks to begin to overhaul compensation before rules are finalized reports the WSJ: The Federal Reserve has informed top bankers that they should start to overhaul employee compensation as soon as possible, even before the Federal Reserve finishes the proposed rules on compensation. Executives at the top 28 domestic and foreign banks were told to turn over by 1-Feb a list of the changes they will make to align their compensation practices with the Fed's rules. The rules will be finalized by year's end. The Federal Reserve wants the banks to consider the rules when they decide on 2009 bonuses. Several Federal Reserve branches held talks with bank officials from their areas.

AAPL (189.31): Apple wants TV networks to join it in iTunes service to let subscribers download unlimited TV shows for $30/month - NY Post: Sources familiar with the talks say they are still at an early phase, although Apple has been trying to sell the idea to cable and broadcast networks for months. A source familiar with Apple's plans says it is trying to sell broadcasters on a revenue-sharing structure based on usage, meaning it would pay more for popular shows and less for less popular ones. Network sources say the idea offers no support for niche shows.

ANR (34.29): Alpha Natural Resources reports Q3 EPS $0.47 ex-items vs Reuters $0.35: Company reports revenues of $729.2M vs Reuters $758.6M. ANR increased guidance for metallurgical coal shipments in 2010 to a range of 10 to 12M tons, a one million ton increase from the previous guidance range of 9 to 11M tons.

November 2, 2009: Morning Call

2009-11-02T08:08:00.001-05:00

November 2, 2009: Morning Call

Fair Value: SP500 – 1033.01; NDX: 1665.66; DOW: 9664.03

Technical Levels:

SPX: 875-880, 910, 953, 986, 1003, 1039-1044 support/1066, 1110 resistance

Events:

Pre-market EPS: CLX (.95/1.37B); F (-.13/27.41B); HUM (1.77/7.77B); SYY(.45/9.18B)
04:00: Euro-zone PMI Manufacturing (Oct. Final): 50.7
08:15: HGSI BENLYSTA Pivotal Phase 3 Trial Results
10:00: ISM Manufacturing (Oct): 53.0; Prices Paid: 64.0
10:00: Pending Home Sales (Sep): 0.4% MoM
10:00: Construction Spending (Sep): -0.3%
11:00: F earnings call
11:45: SPWRA presents at Wedbush Clean Technology Conference
15:15: Fed’s Tarullo speaks on executive pay
16:30: STP presents at Wedbush Clean Technology Conference
Post-market EPS: APC (-.34/1.92B); CHK (.65/1.81B); KGC (.12/562.8M); PFG(.65/2.49B); VMC (.38/808M)

Foreign Market Summary/Key Macro News/Commentary:

The S&P and NASDAQ futures are both trading 5 points above fair value at 7:30am ET. The Euro is bouncing against the dollar after trading lower 5 of the previous six sessions. Basic material, energy, and gold stocks are rallying in Europe following a better than expected Chinese PMI report (55.2 vs. 54.7). The Australian dollar is also trading higher on expectations the central bank will raise interest rates tomorrow. European markets are trading modestly higher (up 0.20% to 0.50%) after opening down 0.25% to 0.50%. Strength in commodities and the Euro is offsetting weakness in some financial stocks; RBS is trading down 7% on concerns that the EU will force the bank to sell more assets than previously planned. Asian markets closed lower with the exception of Shanghai, which rallied 3% (Japan down 2.3%, Hong Kong down 0.61%, South Korea down 1.3%). Markets in China bucked the trend lower due to the strong PMI data. HSBC (5.HK) fell on a report the bank’s provisions for bad debts in the US may stay high for the near future, and Hong Kong fell as home sales dropped. Steelmaker, technology, and automobile sectors all took South Korea lower. Most financial and resources stocks led Australia lower. The yen’s strength and a desire to avoid risk took Japan down in advance of tomorrow’s holiday. India was closed for Gurunanak Jayanti.

Research Calls/Market Moving News:

AAPL (188.50): Chinese reception of Apple's iPhone is tepid says the WSJ: There were no signs of the sort of sellout reception that met the launch of the phone in other countries. As of Sunday night, many stores still had the phone in stock. Apple and China Unicom declined to disclose sales figures.

F (7.00): Ford reports Q3 EPS $0.26 ex-items vs Reuters ($0.12): Company reports revenues of $30.90B vs Reuters $27.62B.

RIMM (58.73); PALM (11.61); MOT (8.57): Citi upgrades MOT; downgrades PALM, RIMM: Upgrade: Motorola (MOT) upgraded to buy from hold; target increased to $10.50 from $9. Shares area also added to Top Picks Live List. Downgrade: Palm (PALM) downgraded to sell from hold; target cut to $10 from $19.50. Research In Motion (RIMM) downgraded to sell from hold; target cut to $50 from $100.

TRA (31.77): CF Industries Holdings (CF) offers to acquire Terra Industries for more than $40.50/share: The offer of $32 in cash and 0.1034 of a CF share, including a $7.50 per share dividend declared by Terra, is worth $40.61/share based on CF's 30-Oct closing price

EAC (37.07): Denbury Resources (DNR) to acquire Encore Acquisition (EAC) for $50/share.

CIT (0.72): CIT Group files for bankruptcy; no operating subsidiaries, including Utah bank, will be included in the filings: The company will proceed with the prepackaged plan of reorganization. All operating entities are expected to continue normal operations. The company has filed in the U.S. Bankruptcy Court for the Southern District of New York and expects to reduce total debt by approx $10B.

HGSI (18.69): Human Genome (HGSI), GlaxoSmithKline (GSK.LN) announce positive results in Phase 3 trial of Benlysta (belimumab): The 819-patient BLISS-76 study met its primary efficacy endpoint by achieving a statistically significant improvement in patient response rate vs placebo plus standard of care at Week 52. Study results also showed that the drug was generally well tolerated.

HGSI (18.69): Human Genome fair value estimate raised to $40 from $30 at Leerink: The firm sees probability of approval for Benlysta of 95%, up from 85% previously. Leerink says the drug continues to show a nice response and does not believe the 1mg/kg does will be approved, removing a potential concern that physicians would use the lower dose to save money. Shares reiterated outperform.

HGSI (18.69): Bernstein comments on Human Genome following BLISS 76 interim data: The firm expects controversy about the data as it was not the unconditional success seen in the BLISS 52 trial. Bernstein does believe there is enough for the company to proceed to filing and presumably approval and launch in 2011. Though shares will likely be volatile, the firm believes the overall trend is higher. Shares remain outperform rated with a $32 target.

Barron's latest Big Money Poll is still bullish: Almost 60% are bullish or very bullish with a mean prediction of 10,187 on the Dow by the end of the year and 10,771 by the middle of 2010. They see the S&P ending the year at 1121 and 1190 by the middle of next while the Nasdaq will rise to 2371 by the middle of 2010. But almost 80% see stocks are fairly valued or overvalued today. They see three sectors outperforming in the next 6-12 months: technology, energy and health care. Expected poor performers are financials and consumer cyclicals. Favorite stock: MSFT, ABT, BAC, BRK.A, CVS, GE, GS, LM and QCOM. Most overvalued: AIG, AAPL, GOOG, CAT, AMZN, C, GE, GMCR, VZ and YHOO.

GOOG (536.12): Google seeks profit from YouTube by convincing rights holders to monetize rather than remove their copyrighted content – Guardian: The company is trying to get rights holders to use ContentID, a fingerprinting system that allows them to identify their material even when it has been altered. Rights holders can either block the rest of the world from using their content or put ads alongside it, generating revenue that YouTube takes a small piece of. They can also link to sites that sell DVDs or CDs. Without being more specific, Google says the majority of rights holders are choosing to monetize their content. Roughly 333M of 7B videos streamed per week on YouTube use ContentID.

GS (170.17): Goldman Sachs in talks to buy millions in tax credits from Fannie Mae reports the WSJ: The talks are running into opposition from the Treasury Department which may block any deal. The administration is leery of approving a deal that would allow Goldman to reduce its tax bill even though a deal would bring some respite to Fannie. Goldman is hopeful it will win approval this week. Exact details were not learned but some on Wall Street believe Goldman is seeking to buy $1B in credits.

C (4.09): NY Times wonders if Citi can stand on its own without government help: The government has bailed out the entity now known as Citigroup at least 4 times in the past. CEO Pandit says it is not a troubled bank but they have received a lot of government assistance. The bank hopes to sell off or get rid of the asset management unit, consumer lending and some companies recently acquired. With government help, the financial cushion at the bank has increased significantly. But the bank is not generating the profits to cover the potentially devastating write-downs to come. Says Citi was managed horribly over the last decade and regulators missed the many problems. Generally cautious article.

WSJ notes the large amount of cash on the books of U.S. companies: The cash level on balance sheets is the highest in 40 years. There is more cash and more as a percentage of assets. Nothing particularly new, the large amount of cash on the books of U.S. companies has been frequently mentioned for several months now. In Q2, at the 500 largest nonfinancial firms, there was about $994B in cash and short term investments totaling 9.8% of assets compared to $846B or 7.9% a year before. In Q3, of the 248 of those companies that have reported, cash has increased to 11.1% of assets from 10.1% in Q2. The increase has happened at a diverse selection of companies from Alcoa to Google to PepsiCo to Texas Instruments.

October 28, 2009: Morning Call

2009-10-28T08:38:00.003-04:00

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.

October 14, 2009: Morning Call

2009-10-14T08:16:00.001-04:00

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.

October 13, 2009: Morning Call

2009-10-13T07:48:00.002-04:00

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.

October 12, 2009: Morning Call

2009-10-12T07:41:00.000-04:00

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.

October 7, 2009: Morning Call

2009-10-07T07:46:00.000-04:00

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.

October 6, 2009: Morning Call

2009-10-06T07:51:00.002-04:00

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.

October 5, 2009: Morning Call

2009-10-05T07:48:00.001-04:00

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."

September 23, 2009: Morning Call

2009-09-23T08:09:00.001-04:00

September 23, 2009: Morning Call

Fair Value: SP500 – 1067.09; NDX: 1732.69; DOW: 9767.36

Technical Levels:

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

Events:

Pre-market EPS: AZO (4.45/2.2B); GIS (1.03/3.48B)
07:00: MBA Mortgage Applications
09:30: GENZ presents at UBS Healthcare conference
09:30: Treasury Secretary Geithner testifies on regulatory reform
10:00: President Obama addresses UN General Assembly
10:30: DOE Crude Oil and Gasoline Inventories
13:00: DNDN presents at UBS Healthcare conference
13:00: Treasury Auctions 40 billion in 5-year notes
14:15: FOMC Interest Rate Decision: 0.25%
16:15: HPQ Analyst Meeting
Post-market EPS: NKE (.97/4.9B); BBBY (.47/1.9B); CTAS (.39/880.0M); PAYX (.34/504M); RHT(.15/179.0M)

Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 3 points above fair value and the NASDAQ futures are trading 7 points above fair value at 7:45am ET. European markets are up 0.50% led once again by basic material and technology stocks. Economic data in Europe was mixed (France Sep Business Conf Indicator 85 vs con 81. France Sep Prelim Manf PMI 52.5 vs con 51.4. France Sep Prelim Svcs PMI 52.2 vs con 50.2. Germany Sep adv Svcs PMI 52.2 vs con 54.0. Germany Sep adv Manf PMI 49.6 vs con 50.8. Eurozone Sep adv Manf PMI 49.0 vs con 49.7. Eurozone Sep adv Svcs PMI 50.6 vs con 50.5. BOE voted 9-0 to keep £175B purchase plan and said data suggests a likely upward revision to UK Q2 GDP. EuroZone Jul Ind New Orders -24.3% y/y vs consensus –25.9%). Asian markets closed lower with the exception of Australia (Hong Kong down 0.49%, Australia up 1.51%, Shanghai down 2.2%, Taiwan down 1.2%, South Korea down 0.07%, India down 1.0%). Weakness in Shanghai weighed on markets across the region. Gains in energy, materials, and financial stocks led Australia up. Hong Kong’s performance was restrained by China’s. Geely Auto (175.HK) surged 19% after raising HK$2.59B from Goldman Sachs (GS). Japan was closed for the Autumnal Equinox.

Research Calls/Market Moving News:

GIS (60.97): General Mills reports Q1 EPS $1.28 ex-items vs Reuters $1.03: Company reports revenues of $3.52B vs Reuters $3.50B. Pound volume matched year-ago levels, reflecting the loss of 2 points of growth from divested product lines. Raises f10 EPS guidance to $4.40-4.45 ex-items from $4.20-4.25 vs Reuters $4.27.

PALM (17.07): Jefferies comments on speculation of a Nokia acquisition of Palm: The firm says PALM would give a potential buyer a PC class OS and US centric high-end handset. Jefferies says investors fear a hefty bid premium, which could cloud the strategic rationale for such a deal. The firm says PC OEMs could create a bidding war for the company with a hefty premium to the company's current market cap but says for NOK strategic merits could outweigh the price as it would leave the company roughly 1 yr behind AAPL regarding software development vs 2-3.

PALM (17.07): Susquehanna initiates PALM with a neutral rating: "Palm is still a turnaround story with its financial success reliant on the newly released webOS operating system and new devices in an increasingly competitive smartphone market. While we anticipate Palm to expand its carrier partners both in the U.S. and internationally, and expect sell-in unit shipment growth to ramp accordingly, we believe the current valuation reflects an optimistic adoption rate of webOS devices. We initiate with a Neutral rating as Palm’s estimated earnings power is within the range of our Bull- Bear scenario. In our view, Palm’s new webOS platform is well developed and robust; however, its success will be limited in the near term due to Palm’s exclusive distribution through Sprint. We view the recent price decrease for the Pre to $149 (from $199 at launch) with caution as it may signal that it needed to be repositioned in order to achieve the price elasticity required to reinvigorate unit sales. Longer term, we are cautious regarding the webOS platform’s sustainable competitive advantage, especially compared to RIM in enterprise and Apple in retail with more than 75,000 applications in its App Store. Positively, we expect Palm to return to cash flow positive in 2HFY10 predicated on the successful sell-in of webOS products to an expanding base of wireless carriers, hitting operating profit inflection point volume targets, and a streamlined operating structure. Shares are trading at 1.1x FY11 EV/Sales, and 19x our $0.90 earnings power estimate."

ETFC (1.92): Company announces the completion of the ATM offering of 80.2 million shares of stock with net proceeds of 147 million, implying an average price of 1.83.

Life Insurance Sector Downgraded to in-line from attractive at Morgan Stanley. PRU cut to equal weight from overweight.

FDX (76.16): FedEx estimates raised at Morgan Stanley: The firm believes that even if there was a gradual macro recovery, the company's current run rate implies large EPS and volume gains in 2H f10. Morgan Stanley says consensus estimates are still underestimating the growth potential and operating leverage at FDX. Shares remain equal weight rated. F11 EPS estimates are raised to $4.85 with f12raised to $5.72.

AMZN (93.75): Amazon.com estimates and target raised at Bernstein: The firm notes questions regarding the company's longer term growth prospects given decelerating media revenues but says overall, they believe the category will begin to recover in late 2009. The video game segment is expected to benefit from lower console prices and a strong lineup of new titles. F10 EPS estimates are raised to $2.29 from $2.27 with the target for the shares raised to $95 from $90.

X (50.24); AKS (23.06); STLD (17.77): UBS comments on North American Steel: Firm notes that sudden 2H auto demand has driven near-term sheet forecast higher. UBS raises Q4 steel price forecast to reflect the higher value. Firm cautions that it sees downside risks for sheet prices amid capacity restarts and excess global supply signaled by China's recent shift to a net exporter. Firm sees a stronger Q4 for X and AKS. Firm sees a potential upside into 2010 for SCHN, RS. Top pick is STLD. Construction exposure likely pressures GNA, CMC.

U.S. and Europe differ over capital requirements for banks says the WSJ: This will be a topic for discussion at the G20 meeting and European leaders are saying the U.S. proposals will put European banks at a disadvantage. The U.S. wants to create stricter rules and force banks to hold more capital on hand. French and German regulators say the U.S. proposals would force their banks to raise much more capital than U.S. firms. U.S. banks were required to hold more capital than European institutions before the crisis, giving them more ground to make up. Another issue is the efforts of the banks to resist tighter regulation. Government officials will not try to reach an agreement at the G20 meeting but only to create some momentum behind talks on the issue.

Secondary’s: Goodrich Petroleum (GDP) announces $150M convertible offering through JP Morgan; ATP Oil & Gas (ATPG) announces 5.3M share secondary offering through JPMorgan and Credit Suisse, commenced $125M convertible pref offering, provides operations update; PennantPark Investment (PNNT) announces 8M share secondary offering through SunTrust and BMO; Qiagen (QGEN) to issue 27.5M shares in private placement through Deutsche, Goldman, JPMorgan; Incyte (INCY) announces 18M share secondary offering through Goldman, announces $250M convertible note offering; Gaylord Entertainment (GET) proposes $200M convertible private placement. RailAmerica (RA) increases IPO to $450M from $300M through JPM, Citi, Deutsche and Morgan Stanley; US Airways Group (LCC) annouces 26.3M share secondary offering through Citi; Calpine Corporation (CPN) announced a 20M share offering by holder Harbinger Capital through Morgan Stanley.

September 22, 2009: Morning Call

2009-09-22T08:31:00.001-04:00

September 22, 2009: Morning Call

Fair Value: SP500 – 1060.10; NDX: 1730.17; DOW: 9716.56

Technical Levels:

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

Events:

Pre-market EPS: KMX (.18/1.7B); CCL (1.18/4.04B); CAG (.34/3.09B); FDS(.74/154.0M)
03:00: EU’s Lowe speaks at Anti-trust conference
04:00: CS Investor/Analyst Day
10:00: Richmond Fed Manufacturing Index (Sep): 15
10:00: US House Price Index (July): 0.5%
10:00: LOW Analyst/Investor Day
10:30: LH presents at UBS Healthcare conference
11:00: MSFT Business Update Call
12:30: MYGN presents at UBS Healthcare conference
13:00: BRCD analyst day
13:00: Treasury Auctions 43 billion in 2-year notes and 27 billion in 1year notes
13:30: CELG presents at UBS Healthcare Conference
14:30: VRTS presents at UBS Healthcare Conference
16:30: API Crude Oil and Gasoline Inventories

Foreign Market Summary/Key Macro News/Commentary:

The S&P and NASDAQ futures are trading 8 points above fair value and close to the highs of the overnight session. European markets are up 0.80% to 1.25% with basic material, energy, and technology stocks leading the rally. The Euro is breaking out to fresh relative highs against the dollar on expectations of faster global economic growth, which is lending a solid bid to commodities and gold (commodities are up 1.5% to 3.0%). Russian markets are the strongest in Europe (up 3.3%), a sign that market participants continue to reach for risky assets. Asian markets closed mixed (Hong Kong up 1.06%, Australia down 0.30%, Shanghai down 2.4%, South Korea up 1.56%, India up 0.87%). According to Bloomberg, Asian Development Bank said Asia, excluding Japan, would grow 3.9% this year, better than the March estimate of 3.4%. In addition, government data showed net crude oil imports by China last month was the second-highest on record.

Research Calls/Market Moving News:

GOOG (497.00): Google target increased to $560 from $480 at Canaccord Adams: Firm expects Q3 to be seasonally in line with expectations, but sees more upside growth to Q4 than consensus is modeling. Rating is buy.

Calyon analyst Mike Mayo remains cautious on the banking sector -- CNBC: Even if the downside in the credit cycle may be over, which is not clear, Mayo notes several differences as compared to the emergence from normal credit cycles, including potential disinflation, deleveraging, de-risking, the deposit insurance fund to decipher, and a decline in deposit service charges.

DNDN (29.46): Dendreon initiated outperform at Leerink Swann

Banks benefiting from CDO liquidations – FT: The FT reports that billions of dollars of worth of collateralized debt obligations (CDOs) are bing liquidated, allowing banks, insurance companies and other investors to clear toxic assets from their balance sheets. According to the article, while hundreds of billions of dollars of CDOs have defaulted, the structures can only be liquidated if the underlying collateral can be sold. In recent weeks, more investors have been purchasing the underlying assets at deep discounts, leading to better liquidity in the market and helping to boost prices for some existing CDOs. The FT goes on to note that the recent rally has been particularly significant for CDOs backed by corporate bonds and loans.

C (4.43): Government of Singapore reduces stake in Citi to below 5% -- wires: In a statement, GIC said that it had reduced its stake below 5% through open market sales and that the stake was consistent with what it had intended when it invested in Citi through convertible securities. GIC had held more than 9% as a result of the exchange of convertible securities on 11-Sep, together with the U.S. Government and other private investors. GIC said it would continue its investment in Citi as it was confident in its long-term prospects.

BAC (17.25): Bank of America to pay $425M to terminate asset guarantee term sheet: BAC announced that it has reached an agreement with the U.S. Government to terminate its term sheet with respect to the guarantee of up to $118B in assets by the U.S. Government. The term sheet was executed in connection with Bank of America's acquisition of Merrill Lynch in January 2009. Bank of America also announced that it had received FDIC approval to exit the debt guarantee program under the FDIC's Temporary Liquidity Guarantee Program.

Citi upgrades ANR, BTU: Alpha Natural Resources (ANR) upgraded to buy from hold; target increased to $46 from $32. Peabody Energy (BTU) upgraded to buy from hold; target increased to $46 from $34. The firm has a more positive stance on met coal, raising its forecast for met to $200/ton from $140/ton for 2010-11. Citi prefers CONSOL Energy (CNX), ANR and BTU. ACI, MEE and PCX remain rated hold.

M (17.79): Macy's upgraded to buy from hold at Citi: Target increased to $30 from $15. The firm sees revenue improvement from the My Macy's initiative, as well as potential operating margin improvement, following meetings with management.

HPQ (46.35); DELL (16.01): Hewlett Packard (HPQ) upgraded, DELL downgraded at Credit Suisse: HPQ upgraded to outperform from neutral, target increased to $55 from $44. Cost-cutting and leverage from opex, as well as a potential catalyst in the analyst day on Thursday, are cited. DELL downgraded to neutral from outperform, target reduced to $16 from $19. The firm is concerned about DELL's acquisition strategy, noting the difficulty of integrating Perot (PER).

September 21, 2009: Morning Call

2009-09-21T07:52:00.000-04:00

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

Events:

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 www.dell.com/investor

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.

September 16, 2009: Morning Call

2009-09-16T07:59:00.002-04:00

September 16, 2009: Morning Call

Fair Value: SP500 – 1047.92; NDX: 1698.15; DOW: 9621.08

Technical Levels:

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

Events:

Pre-market EPS: ZLC (-.72/363.4M)
05:00: Euro-zone CPI (August): 0.3% MoM; -0.2% YoY
07:00: Bloomberg Global Confidence Index
07:30: WFC presents at Barclay’s Financial Services Conference
08:15: DE presents at JP Morgan Diversified Industries Conference
08:30: US CPI (August): 0.3% MoM; Ex-Food/Energy: 0.1% MoM
08:30: US CPI (August): -1.7% MoM; Ex-Food/Energy: 1.4% YoY
08:30: US Current Account Balance (Q2): -91.0B
09:00: Net Long-term TIC Flows (July): estimate not available yet
09:15: US Industrial Production (August): 0.7%; Capacity Utilization: 69.1%
10:30: DOE Crude Oil and Gasoline Inventories
11:00: CMCSA presents at Goldman Sachs Communacopia Conference
12:00: V presents at Barclay’s Financial Services Conference
12:15: MTW presents at JP Morgan Diversified Industries Conference
13:00: NAHB Housing Market Index (September): 19
14:15: COF presents at Barclay’s Financial Services Conference
15:25: LH presents at Bank of America Healthcare Conference
17:00: ORCL earnings call
Post-market EPS: APOG (.24/187.0M); CKR (.21/340.8M); DBRN (.37/400.7M); ORCL (.30/5.2B)

Foreign Market Summary/Key Macro News/Commentary:

The S&P and NASDAQ futures are trading 3 points above fair value at 7:45am ET. Asian markets closed higher excluding Shanghai (Japan up 0.52%, Hong Kong up 2.57%, Australia up 2.42%, Shanghai down 1.34%, South Korea up 2.1%, India up 1.35%). News Corp (NWS.AU) rose on reports it would start charging for access to WSJ stories on mobile devices. Exporters and banks gained in South Korea. Gainers led losers in Taiwan almost 3-to-1. A halt in the yen’s rise vs. the US dollar helped exporters in Japan, but the market turned down late in the day when the incoming financial services minister said he would consider allowing small companies to postpone repaying bank loans for three years. Financials and steelmakers made China miss out on the region’s gains, dropping on overcapacity concerns. European markets are up 1.0% to 1.4% near the highs of the session. Basic materials and financials are leading the rally while healthcare and technology are lagging. SAP is trading down 1.0% in Germany.

Research Calls/Market Moving News:

AAPL (175.16): Cramer says he is raising his price target on Apple (AAPL) to $264 from $200, noting that if FASB rule changes allow the company to recognize revenue from some of its products immediately rather than over a 24-month period (as is now the case), earnings will surge from an estimated $9 a share in 2011 to $12 a share. Cramer says that the potential change, which is now being considered by FASB, is not reflected in consensus estimates. (Note: I am bullish on AAPL shares but am trying to take some off at the 178-179 level. I find it remarkable that Jim Cramer is once again moving stocks - especially large cap stocks - given that he bankrupted tens of thousands of his "viewers" in 2008.)

AAPL (175.16): Apple reiterated overweight at Barclays Capital: The firm says AAPL remains top pick due to its pipeline and the FCF outlook

LH (68.43): Laboratory Corp downgraded to neutral from outperform at Credit Suisse – Bloomberg: Target is $71. Credit Suisse removes LH from the US Focus List.

Warren Buffett sees some stability in housing prices, notably in mid-low price range activity – CNBC: The comment was made in response to a question during an interview

ADBE (35.62): Adobe (ADBE) to acquire Omniture (OMTR) for $21.50/sh in cash, Adobe Systems reports Q3 non-GAAP EPS $0.35 vs. Reuters $0.34, guides Q4 non-GAAP EPS to $0.33-0.39 vs. Reuters $0.39.

ADBE (35.62): Adobe Systems downgraded to hold from buy at Jefferies: The firm cites valuation, embedded CS expectations, and additional potential risk due to the OMTR acquisition. Jefferies says that the deal, while accretive, won't produce much synergy near term

WFC (28.58): Wells Fargo CEO says Fannie Mae (FNM) and Freddie Mac (FRE) should increase the size of the mortgages they buy – FT: The FT cites an interview with Wells Fargo CEO John Stumpf, who says that the government should allow Fannie and Freddie to increase the size of the mortgages that they buy. Stumpf believes that such a move would help reduce interest rates on jumbo mortgages and revive the market for higher-end housing that has been devastated by the credit crunch. Recall that Fannie and Freddie can currently buy or guarantee mortgages worth up to $417,000. The stimulus plan last year allowed the companies to raise their limits to $729,750 in certain high-cost areas until the end of 2009. Any extension of the higher limits will have to be approved Congress. The article goes on to highlight the paralysis in the securitization market, particularly for jumbo mortgages, which according to Bankrate.com are as much as 200 bp over conforming mortgage rates.

WFC (28.58): Wells Fargo says Wachovia deposit retention is better than forecast – Bloomberg: Regarding the Wachovia purchase, WFC says merger costs are lower than predicted. WFC expects non-performing assets to increase from the $18.3B reported in Q2. WFC expects consumer loan losses for the next 12 months. Other comments attributable to the wire, regarding the repayment of TARP and losses from the Wachovia acquisition are similar to those reported in interviews by the WSJ and FT.

C (4.12): More disclosure from management could help Citi shares – WSJ: In a "Heard on the Street" column, the Journal notes that when it comes to shares of Citi, investors may be too focused on how fast the government will sell down its 34% stake in the bank. The paper adds that a bigger question for Citi is whether to pay off the government's $27B of trust-preferred securities, which cost around $2B a year to service. In addition, the article notes that investors should be asking why the bank's management is not highlighting a more positive message: That it does not need to further dilute investors and believes it has the medium-term profitability to pay off the government trust preferreds with capital generated internally. The Journal, which highlights Citi's attractive relative valuation on a TCE per share basis, goes on to note note that management needs to explain more clearly where it expects the bank to generate its profits and focus its resources in the future.

AMZN (83.55): Amazon.com upgraded to buy from neutral at Bank of America Merrill Lynch: Price objective increased to $103 from $95

September 14, 2009: Morning Call

2009-09-14T08:05:00.000-04:00

September 14, 2009: Morning Call

Fair Value: SP500 – 1038.09; NDX: 1684.25; DOW: 9544

Technical Levels:

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

Events:

05:00: Euro-zone Industrial Production (July): -0.4% MoM; -16.9% YoY
12:00: President Obama speech to Wall Street executives about financial regulation
12:30: Fed’s Lacker speaks on financial regulation
12:45: SPWRA presents at Deutsche Bank Technology Conference
13:55: CSIQ presents at Deutsche Bank Technology Conference
15:50: Fed’s Yellen speaks on economic outlook

Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 10 points below fair value and the NASDAQ futures are trading 15 points below fair value at 7:30am ET. Asian markets closed lower except for Shanghai, which rallied 1.2% (Japan down 2.32%, Hong Kong down 1.08%, Australia down 1.4%, South Korea down 1.0%, India down 0.31%). European markets are down 0.73% to 1.2% despite a better than expected Euro-zone Industrial production number (-15.9% YoY vs. –16.7% expected). Energy and mining co’s weaker, mirroring falls in their underlying commodities, with industrial metals under pressure as stockpiles grow, and speculation a possible dispute between the US and China on trade could escalate. Gold has pulled back 8 bucks, falling below 1000 as the dollar rebounds. Classic defensive sectors outperform with media, h/care, telco, food & bev all fairing better.

Research Calls/Market Moving News:

China starts "anti-dumping and anti-subsidy" probe into imports of some US car products and chicken meat – wires: The Ministry of Commerce announced the examination, which appears to be retaliatory against the US's decision to impose a 35% tariff on Chinese-made tires.

FSLR (136.75): Soleil Securities downgrades FSLR to sell from hold: * We are reducing our rating on First Solar from Hold to Sell; price target being reduced from $170 to $96 (17X our 2010 estimate of $5.65 per share - current consensus estimate is $7.40 per share). * We believe the environment in which First Solar massively beats expectations each (and every) quarter has come to an end. 1) Industry capacity is now too large (approaching 20 GW in mid-2010) for government subsidy programs to lead to supply shortages and higher prices; 2) Module pricing is now under intense downward pressure for all producers due to massive industry over-capacity; 3) First Solar has completed its capacity build-out and will no longer be starting up significant amounts of capacity each quarter helping to beat expectations.

S (3.77): Deutsche Telecom considering bid for Sprint Nextel reports the London Telegraph: The paper says the company has called in bankers and could submit a bid for Sprint within the next few weeks. The CEO of DT had promised to fix T-Mobile UK and T-Mobile US, with the deal for T-Mobile UK arranged, he is believed to be focusing on the U.S. unit. A combined company of T-Mobile U.S. and Sprint would challenge AT&T for the second place spot among wireless carriers in the U.S

BIDU (369.95): Baidu 6-month target increased to $455 from $376 at Goldman Sachs: The firm expects coverage ratios can improve and raises estimates. BIDU remains on Goldman's Conviction Buy List.

POT (89.80); MOS (52.26): Citi downgrades MOS, POT: Mosaic (MOS) downgraded to hold from buy. Potash (POT) downgraded to hold from buy Following checks, firm expects fall potash applications to be likely weaker. Citi adds that the Chinese contract delay creates price risk.

Stiglitz Says Bank Problems Bigger Than Pre-Lehman: Joseph Stiglitz, the Nobel Prize-winning economist, said the U.S. has failed to fix the underlying problems of its banking system after the credit crunch and the collapse of Lehman Brothers Holdings Inc. “In the U.S. and many other countries, the too-big-to-fail banks have become even bigger,” Stiglitz said in an interview yesterday in Paris. “The problems are worse than they were in 2007 before the crisis.” Stiglitz’s views echo those of former Federal Reserve Chairman Paul Volcker, who has advised President Barack Obama’s administration to curtail the size of banks, and Bank of Israel Governor Stanley Fischer, who suggested last month that governments may want to discourage financial institutions from growing “excessively.”

YHOO (15.59): Yahoo! sells 57.5M Alibaba (1688.HK) shares for HK$19.80-20.30 ($2.54-2.60) each – Reuters: The wire cites a term sheet

Barron's Cover says the ad market looks to be bottoming but not for traditional media: Advertising dollars are starting to be spent once more but not on traditional media, they are going to cable TV and movie media. Notes the various indications from many of the large advertisers of a change in outlook or spending plans and the improving outlook from several advertising firms. However, things are not yet positive and some observers do not see any meaningful growth in total advertising until 2011. Investors should not confuse good year over year numbers with a strong rebound. In the environment of a shift into alternative forms of advertising, the winners will be companies like CRM, DISCA, CVC, TWX, VIA, DIS and GOOG. The Internet now holds a greater sway over advertising budgets than radio, and is on a path to overtake magazines this year. Highlights the show Mad Men where there was a sponsor for the first show of the new season, free iTunes downloads of the show at a retailer, a website, an iPhone application and a Facebook page. Annual ad revenues for cable should climb 7.1% on average through 2013 according to one analyst. 'Out of home media' (billboards, elevators, media video screens, etc.) could see growth of 4.9% annually while pure Internet could climb 10.6% a year. Broadcast television is expected to fall 2% a year, radio to drop by 3.6% and newspapers to fall 8.9%.

Moving out of business more difficult than US government imagined - NYTIn his speech from Wall Street today, President Obama will argue that government intrusions on business will be temporary, and yet he will finesse an argument that the financial system requires increased government oversight to protect consumers and prevent a repeat of the financial crisis. A senior official says that no government figure has pulled rank on American International Group (AIG) CEO Robert Benmosche, despite his abrasive comments, and the auto task force has not returned, making oversight of General Motors (MTLQQ) and Chrysler next-to-non-existent. But the government's ownership stakes will probably remain for years. Support programs for banks have largely been successfully downsized, but the government is propping up the entire mortgage market, and therefore, housing industry. Nobody knows how the government can step away from its role without upsetting the industry. And in any case, the moral hazard created by the government's having been willing to step in this time will remain for the foreseeable future.

Barron's summary (source: StreetAccount):
· Cover: The ad market looks to be bottoming but not for traditional media.
· Interview: David Rosenberg, chief economist and strategist at Gluskin Sheff & Associates.
· Lead Articles:
o Electric utilities are stable companies with cheap stocks and fat dividends.
o The longest serving member of the FOMC thinks the 'too big to fail' policy must be ended.
o Cablevision (CVC) divestments should unlock value.
o Positive on Nalco Holding (NLC) saying bulls see the stock in the $20s within a year.
o Other Voices argues that the TSA has spent too much money and has not made us safer.
o Editorial says President Obama's speech championed implausible health care reform principles.
· Columns:
o The Trader is negative on Winnebago Industries (WGO).
o Asia Trader is positive on BYD (1211.HK), one of Berkshire Hathaway's investments.
o Euro Trader says Barclays (BARC.LN) still has room to run.
o Current Yield says credit seems available to all except consumers.
o Commodities Corner says the outlook for wheat prices is weak even with a possible drought in Australia.
o The Striking Price notes the ebbing VIX and suggests out of the money calls and protective puts, an upside / downside strategy.
o Preview points to the ING Direct report predicting a bad holiday shopping season.
· Follow Up is cautious on Starbucks (SBUX) and positive on Consol Energy (CNX)
o Up and Down Wall Street questions what lies behind the market's strength.
o Streetwise is negative on Realty Income (O) pointing to speculation that many of its larger tenants have big debt and / or a tough operating environment which could place stress on the dividend.
o D.C. Current says accountants have yet to share in the blame for their part in the financial troubles.
o Economic Beat notes the upbeat tone of the Blue Chip Economic Indicators forecast based on a polling of 50 economists.
o Technology Trader says the new products released last week from Palm (PALM), Apple (AAPL) and Motorola (MOT) were all disappointing in some manner.
o Plugged In says Motorola (MOT) is back on the right track, though far from back.

September 11, 2009: Morning Call

2009-09-11T08:15:00.001-04:00

September 11, 2009: Morning Call

Fair Value: SP500 – 1039.41; NDX: 1685.00; DOW: 9565

Technical Levels:

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

Events:

Pre-market EPS: CPB (.26/1.5B)
05:30: HBC Analyst Meeting
08:30: US Import Price Index (August): 1.0% MoM; -16.0% YoY
08:35: AMGN presents at Thomas Weisel Healthcare Conference
10:00: US Wholesale Inventories (July): -1.0%
10:00: University of Michigan Confidence (Sep): 67.0
14:00: US Budget Statement (August): -152.0B

Foreign Market Summary/Key Macro News/Commentary:

The S&P and NASDAQ futures are flat with fair value at 7:30am ET. Asian markets closed higher excluding Japan (Japan down 0.66%, Hong Kong up 0.44%, Australia up 0.55%, Shanghai up 2.38%, South Korea up 0.48%, India up 0.29%). Shanghai outperformed on in-line Chinese retail sales data (15.4% vs. 15.3% YoY) and better than expected Industrial Production (12.3% vs. 11.8% consensus). New Yuan loans for August also exceeded expectations (410B vs. 320B Yuan). Banks and real estate sectors rallied across the region. Japan lagged on weaker than expected Q2 GDP (0.6% Q/Q vs. 0.9% Q/Q). European markets are trading up 0.60% to 1.2% marking gains in 5 of the last 6 trading sessions. Breadth is positive with 7 issues advancing for every 3 that are declining on FTSE 100.

Research Calls/Market Moving News:

BAC (17.22): Bank of America still in talks on how to compensate government for loss-sharing agreement – Reuters: In a 9-Sep letter to the chairman of the House Committee on Oversight and Government Reform, CEO Ken Lewis says the bank is confident it will resolve the issue. The bank is negotiating how much it needs to pay for an agreement in which the government said it would share losses on $118B of toxic assets.

AAPL (172.56): In interview, China Mobile chairman/CEO Wang Jianzhou says company still in talks to offer iPhone in China - Bloomberg

GS (174.87): Citibank increases their price target to 215 from 175.

AIG (37.85): Wells Fargo downgrades shares to underperform due to reliance on government support. The analyst said the “value of AIG’s businesses is less than its obligations to the government.”

SLB (58.43); SII (27.69): Goldman Sachs upgrades SLB; downgrades SII: Upgrade: Schlumberger (SLB) upgraded to buy from neutral. Downgrade: Smith International (SII) downgraded to neutral from buy

BBY (41.05): Best Buy downgraded to perform from outperform at Oppenheimer: Target increased however to $44 from $42. Firm notes shares are trading near peak valuations and sees little room for additional upside to forecasts in Q3 and Q4.

STLD (17.86): Steel Dynamics raises Q3 EPS guidance: Steel Dynamics now anticipates Q3 EPS $0.20-0.25; higher than the $0.10-0.20 provided on 22-Jul. Reuters consensus is $0.20. STLD says the order book continues to be solid, with bookings through October for flat-rolled products. The company additionally notes that the outlook for the fourth quarter remains uncertain.

WYNN (62.15): Wynn Resorts gets regulatory approval for Hong Kong IPO – WSJ: People familiar with the situation say WYNN can list its Macau casino operations in the city. One source says WYNN will sell a 20% stake in a $1B offering, and part of the proceeds will fund an expansion of Wynn Macau by adding a second casino there. JPMorgan Chase, Morgan Stanley, and UBS are joint bookrunners. A roadshow will begin 21-Sep, and listing is scheduled for 9-Oct.

GRMN (36.06): Garmin upgraded to buy from underperform at Bank of America Merrill Lynch: Price objective increased to $45 from $30.

ERTS (18.05): Electronic Arts downgraded to neutral from buy at Bank of America Merrill Lynch: Price objective cut to $19 from $26.

Home sales being boosted by rush to beat deadline for tax credit – WSJ: First-time home buyers closing deals by 30-Nov are eligible to receive up to $8K. If the deadline is not extended, which seems likely given a perceived need for governmental fiscal restraint, 1-Dec will bring a chance to see how much the housing market has truly recovered, and how much of the recent boom was merely carried out in an attempt by buyers to avail themselves of the credits.

.

September 1, 2009: Morning Call

2009-09-01T08:11:00.001-04:00

September 1, 2009: Morning Call

Fair Value: SP500 – 1019.74; NDX: 1625.17; DOW: 9488.37

Technical Levels:

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

Events:

Pre-market EPS: RAIL (.10/70.1M)
02:00: German Retail Sales (July): 0.7% MoM; -1.2% YoY
03:45: Italian PMI Manufacturing (August): 46.2
03:50: French PMI Manufacturing (August): 50.2
03:55: German Unemployment Change: +30,000; 8.4% Unemployment Rate
03:55: German PMI Manufacturing (August): 49.0
04:00: Euro-zone PMI Manufacturing (August Final): 47.9
05:00: Euro-zone Unemployment Rate (July): 9.5%
10:00: US ISM Manufacturing (August): 50.5; Prices Paid: 58
10:00: US Construction Spending (July): -0.1% MoM
10:00: US Pending Home Sales (July): 1.6%
13:00: F August 2009 Sales and Revenue conf. call
15:30: MTW presents at Morgan Stanley CEO conference
16:30: API Crude Oil and Gasoline Inventories
17:00: ABC Consumer Confidence
21:30: Australia GDP (Q2): 0.6% QoQ; 0.7% YoY
Post-market EPS: ADCT (.14/280.04M); DCI (.30/407.4M); PAY (.18/202M)

Foreign Market Summary/Key Macro News/Commentary:

The S&P and NASDAQ futures are trading 6 points below fair value despite better than consensus Chinese, French, and Euro-zone PMI data. German employment data came in weaker than expected (Job losses of 1000 vs. consensus at +30,000). European markets reversed initial gains and are currently trading near the lows of the session, down between .80% and 1.4%. Markets moved lower following the release of the Euro-zone economic data at 3:55-4am this morning. The S&P futures moved 10 points lower at that time. Financial and commodity leveraged sectors are among the weakest. Healthcare and consumer staples are the strongest. Decliners on the FTSE 100 lead advancers 17-3. Asian markets closed modestly higher (Japan up 0.31%, Hong Kong up 0.75%, Australia up 0.80%, South Korea up 2.1%, Shanghai up 0.41%, India down 0.74%). Technology and mining companies were the biggest gainers following earnings from Hon-Hai Precision beat expectations and China’s manufacturing expanded at the fastest pace in more than a year.

Research Calls/Market Moving News:

BAC (17.59): Bank of America offers to repay part of its TARP bailout – WSJ: People familiar with the matter say the bank would like to repay most or all of the $20B of aid it got around year-end when it was deciding whether or not to go through with its purchase of Merrill Lynch. Repaying the money would mean the bank would no longer be an "exceptional" aid recipient, freeing it from the regulatory and pay-czar scrutiny that accompanies the designation. The bank is also negotiating to pay $300-500M to end a plan that would have had the government share its losses on a $118B pool of BofA and Merrill assets, much of it linked to mortgages.

RIMM (73.06); QCOM (46.42); MOT (7.18); NOK (14.01): Credit Suisse upgrades MOT, RIMM; downgrades NOK, QCOM: Upgrade: Motorola (MOT) upgraded to outperform from neutral; target increased to $9.50 from $7. Research In Motion (RIMM) upgraded to outperform from neutral; target increased to $95 from $76. Downgrade: Qualcomm (QCOM) downgraded to neutral from outperform; target remains $50. Nokia (NOK) downgraded to underperform from outperform; target is €8.50.

AIG (45.33): AIG shares cut to underperform from market perform at Sanford Bernstein. The firm cites valuation for the downgrade and notes that the current price does not reflect the possibility that the common equity is worth zero. Target is 10.

SVA (9.71): SVA is up another 15.5% on continued momentum and news story from South Korea’s Yonhap News agency saying that SVA has signed a deal with South Korea’s Boryung Pharmaceuticals to export 10 million doses of the company’s H1N1 vaccine.

RMBS (19.10): Samsung antitrust trial date has been changed to January 11, 2010 from September 10, 2009 because Samsung’s attorney’s health is in “grave condition.” RMBS shares are trading down 2 points in the pre-market.

Secondary Issuance: IMMU (20 million share shelf), HCN (5 million share secondary). AU (7.8 million share secondary).

EBAY (22.14): EBAY may sell Skype to private investors in a deal that may be announced today. The price talk is 2 billion. EBAY paid 2.6 billion for Skype

PBR (39.64): Petrobras upgraded to outperform from neutral at Credit Suisse:
The firm has raised estimates and their target price to $52 from $38. Lower costs, better results in Gas and Power and higher realization prices for refined products are cited for the upgrade

August 25, 2009: Morning Call

2009-08-25T07:53:00.001-04:00

August 25, 2009: Morning Call

Fair Value: SP500 – 1024.34; NDX: 1634.51; DOW: 9496.84

Technical Levels:

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

Events:

Pre-market EPS: BIG (.30/1.0B; BKC (.33/633.4M); CHS (.10/414.3M); MDT(.78/3.8B); SAFM (1.76/475.6M); SPLS (.16/5.5B)
09:00: S&P/Case Shiller Home Price Index (June): -16.4% YoY
10:00: US Consumer Confidence (August): 48.0
10:00: Richmond Fed Manufacturing Index (August): 14.0
10:00: US House Price Index (June): 0.4%
16:30: API Crude Oil and Gasoline Inventories
Post-market EPS: BCSI (.22/116.3M); DY (.15/273.8M)

Foreign Market Summary/Key Macro News/Commentary:

The S&P and NASDAQ futures are both trading 3 points above fair value at 7:45am ET. The futures are at the highs of the overnight session following news that President Obama will nominate Ben Bernanke for another term as Chairman of the Federal Reserve. Asian markets closed lower (Japan down 0.79%, Hong Kong down 0.49%, Australia down 0.46%, Shanghai down 2.6%, India up 0.38%). Bank stocks underperformed after Chinese Premier Wen said the economy faces “uncertainties.” European markets are down 0.20%, paring losses of nearly 1%. Germany Q2 final GDP (7.1%) y/y vs prelim (7.1%). UK British Bankers Assn reports UK Jul mortgage approvals 38,181 vs 35.564 in Jun and up +76.7% y/y. Q-Cells (QCE.GR) downgraded to neutral at Credit Suisse.

Research Calls/Market Moving News:

WCRX (20.41): WSJ discusses Monday's nearly 30% jump in shares of Warner Chilcott: In a "Heard on the Street" column, the Journal notes that shares of Warner Chilcott rallied nearly 30% on Monday after it announced that it will pay $3.1B for P&G's (PG) prescription-drug division. According to the article, there are a number of positive factors surrounding the deal, particularly Warner's ability to secure full-financing for the deal from a syndicate of banks, a dynamic which represents a significant change from earlier this year when financing conditions were difficult even for drug companies with strong credit ratings. The Journal also highlights how Warner benefits from lower tax rates in Ireland and Puerto Rick, and expects some of the P&G assets to receive the same treatment. The article goes on to point out that Warner has a favorable record when it comes to extending patents on drugs. While not mentioned in the column, StreetAccount notes that the $3.1B price tag also came in at the low end of Bernstein's $3B-$4B valuation range.

WCRX (20.41): Warner Chilcott upgraded to buy from hold at Jefferies: The firm believes the acquisition of P&G Pharma diversifies and strengthens the company's portfolio.

BLK (204.80): Pali Capital downgrades BLK to neutral. “We are downgrading BLK to Neutral from Buy. Since our upgrade on May 22, 2009, BLK is up 44% compared to 15% for the broader market and an average of 31% for the AUM group. We remain bullish on Company prospects but have a hard time generating estimates that can support 15-20% upside from current levels. Our revised 2010 estimate of $9.83 (consensus of $8.84) builds in solid growth for both BLK standalone and BGI. We note our estimates assume average qtrly inflow of $61bn for BGI through 2010 compared to a record actual first half pace of $54 billion in 2009. We assume BGI AUM increases 38% by the end of 2010, compared to a CAGR of 19% from 1995 to 2007. In a nutshell, BGI needs to do materially better than our already constructive outlook and the markets need to remain robust for several qtrs. That risk/reward dynamic warrants a Neutral rating. In accordance with an improvement in markets, we are raising our 2009 and 2010 EPS estimates to $6.56 and $9.83 from $6.53 and $9.10, previously.

AAPL (169.06): Apple mentioned positively at BMO Capital: The firm says demand for the iPhone remains strong following the 3GS launch with the 16GB model selling the best at 60% of mix with 8GB and 32GB at roughly 20% each. BMO believes their gross margin assumption of 34.8% for the Sept. quarter is reasonable if not conservative with upside to the mid 35% level. No change to estimates. Target remains $185.

AAPL (169.06): CEO Steve Jobs focusing on Apple's new tablet device – WSJ: Without giving details on the device or when it might be released, people familiar with the situation say Jobs is intensely scrutinizing the work the company is doing on the tablet, particularly with respect to its advertising and marketing strategy. In an email, Jobs denies what one source says, that employees who had grown used to a degree of freedom while he was on leave have been disturbed by the level of control he is asserting. People close to the company say Jobs remains thin since his liver transplant, but his health has improved significantly.

GS (162.58): Securities regulators examining Goldman Sachs's trading tips – WSJ: People familiar with the matter say examiners at the Financial Regulatory Authority and SEC intend to ask the bank for more information on its weekly trading huddles. Recall the Journal reported yesterday that Goldman uses the huddles to offer choice trading tips to clients it chooses to. The bank has not been accused of violating any securities laws.

GOOG (468.73): Google upgraded to buy from source of funds at ThinkEquity: Target increased to $550 from $400. We downgraded GOOG shares to Source of Funds on February 17, 2009, based on our view that consensus estimates were too high and that low single-digit revenue growth in 2Q and 3Q09 would cause significant multiple contraction. While we believe our fundamental thesis played out as we expected, we clearly got the stock wrong. Given that 2Q is behind us and that we expect an "in-line" 3Q, we upgrade GOOG shares and raise our price target to $550 due to our belief that Google is likely to outperform as the economic cycle turns. KEY POINTS: Several Projected Catalysts Lead To Our Upgrade: There are several reasons for our upgrade today: 1) Our estimates are now meaningfully above the consensus (see Exhibit 1), whereas, in February, they were significantly below the consensus. The Street estimates have come down materially over the past two quarters, and we now expect Google to meet or beat consensus estimates for the next several quarters. 2) We believe Google is the best-positioned company in our universe to outperform when the economy turns. Google has delivered incremental margins higher than 100% for two quarters in a row, but has done so against a decelerating revenue base, which we believe has muted the EPS impact. When revenue re-accelerates, the company's massive incremental margins should drive significant earnings (and FCF) outperformance for a few quarters until Google cranks up its investments to prepare for renewed growth. 3) We believe that there are a number of fundamental catalysts that could contribute to top-line outperformance, including rising revenue per click in the core search business, the launch of DoubleClick AdX 2.0 (which should improve eCPMs across the AFC network), and increasing demand for video advertising opportunities (where YouTube is the leading video destination in the world). 4) The significant foreign exchange headwind should be more muted in 2H09 and potentially benefit Google during 2010.”

GOOG (468.73): WSJ is cautious on Google: In a "Heard on the Street" column, the Journal wonders if Google is the next eBay (EBAY), highlighting some worrisome parallels between Google today and eBay in 2005-06, when the online auction company's growth was stalling. The article notes that like Skype, YouTube may not be able to monetize its high user traffic. In addition, Android's ability to help Google expand in the mobile advertising market remains unproven, while neither Apple (AAPL) nor Research in Motion (RIMM), which dominate the smartphone market, use the operating system. The Journal also notes that while investors are waiting for some of Google's new initiatives to gain traction, growth is slowing in the core paid-search advertising business. The article goes on to point out that the stock is fetching 25x 2009 consensus earnings (including the cost of stock options), despite the fact that Google's medium-term revenue growth is likely to fall toward the 10% level."

STP (14.79): Suntech Power selling solar panels in US for less than cost – NYT: In an interview, CEO Shi Zhengrong says the company is looking to build market share. Any antidumping case seems unlikely to succeed, because it would rely on showing that American companies were losing money as a result. Industry leader First Solar (FSLR) is profitable. The article as a whole looks at how Chinese companies are moving quickly to dominate green energy. Suntech has encouraged its US-based executives to take top positions in industry groups to prevent their acting to stir up opposition to imports. Backed by generous government support, low-interest loans, and substantially cheaper labor than is available in the US, they plan to build factories in the US to avoid the perils protectionist legislation might pose. A Suntech executive says the company will announce its plans to build an American plant in the next month or two.

WSJ warns about Indian banks: A "Heard on the Street" column says Indian banks are big buyers of government debt, which is expanding in quantity at pace. Rising interest rates will mean bond prices decline, and treasury gains made up more than 35% of pretax profits for the quarter ended in June at ICICI Bank (ICICIBC.IN) and others. The higher rates will also threaten loan growth and asset quality as customers may have trouble servicing the debt. In summary, though banks have been outperforming the Indian market recently, the column recommends avoiding the stocks for now.

MA (204.23); V (67.95): Jefferies initiates MA, V: MasterCard (MA) initiated buy with $240 target. Visa (V) initiated buy with $80 target.

Morning Call: August 21, 2009

2009-08-21T08:15:00.003-04:00

August 21, 2009: Morning Call

Fair Value: SP500 – 1006.15; NDX: 1613.99; DOW: 9337.86

Technical Levels:

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

Events:
Pre-market EPS: ANN (.02/472.2M); SJM (.80/1.0B)
10:00: Existing Home Sales (July): 4.98M; 1.8% MoM
10:00: Fed’s Bernanke speaks on Financial Stability and Macroeconomic Policy
12:45: Fed’s Madigan speaks on Fed panel discussion

Foreign Market Summary/Key Macro News/Commentary:

The S&P and NASDAQ futures are trading 5 points above fair value reversing nearly 13 points off the overnight session lows, which occurred overnight due to Asian market weakness. European markets triggered the reversal in the futures following strong French, German, and Euro-zone PMI data. The German service sector came in much better than expected (54.1 vs. 48.6). French and Euro-zone manufacturing also showed modest expansion in August. European markets are up 1.1% to 1.6% near the session highs. Utility, industrial, consumer, and financial stocks are outperforming while Technology and basic material stocks are lagging. Asian markets closed mixed (Japan down 1.4%, Hong Kong down 0.65%, Australia down 1.99%, Shanghai up 1.88%, India up 1.53%). The Chinese market shook off a report that China is moving to tighten bank capital requirements and lending. Shippers were hit by a drop in the Baltic Dry Index. Industrial & Commercial Bank of China (601398.CH) and Shenzhen Bank (000001.CH) rose on results. China Mobile (941.HK) fell on downgrades following disappointing results.

Research Calls/Market Moving News:

FSLR: Jefferies downgrades Solar sector and First Solar on concerns that the downward spiral of pricing in the sector will continue due to a glut of capacity. Expects weaker 2010 estimates and believes that "liberal Chinese lending practices" have encouraged overproduction. The firm downgrades FSLR to hold from buy and cuts the price target to 130 from 200. This call seems very late given that these concerns have been driving the stock lower (from 170) for the last month. I would also note that German solar stocks have ripped higher in Europe (up 3-5%) after German solar companies called for protective tariffs to counter what they say is improper government support for the industry in China. FSLR should bounce today off the 129 pre-market level because most of their revenues come from Germany. But, longer-term, I would note that the momentum continues to be negative given the poor reaction to the news of two huge projects with SCE. It is pretty clear that FSLR holders have shifted their focus away from "revenue growth" and toward module pricing and potential margin erosion. JP Morgan thinks investors have shifted away from the long-term growth potential for FSLR and are "currently focused on the short-term impact the tough financing and oversupplied module market are having on the profitability of the industry. Signs of a stabilizing bottom in the products ASPs are needed to get investors refocused on the revenue and associated earnings growth potential."

AAPL (166.33): Apple estimates increased at Thomas Weisel: Following a meeting with management, the firm is more confident in AAPL's long-term outlook and raise f09 and f10 EPS estimates on higher gross margin assumptions. Above-consensus revenue estimates are unchanged. Thomas Weisel expects an iPhone distribution agreement for China with China Unicom (CHU) in c2H09. The rating remains overweight; target $180.

LVS (13.19): chatter that a Hong Kong IPO may come in late November or December for a minority stake in the Macau operations - LVS expected to target raising 1 to 2 billion dollars.

BRCD (8.05): Brocade reports Q3 EPS $0.12 ex-items vs Reuters $0.11: Company reports revenues of $493.3M vs Reuters $503.3M. Non-GAAP gross margin 58.2% vs. 56.2% seq. and 61.9% y/y; non-GAAP operating amrgin 20.3% vs. 18.8% seq. and 22.6% y/y

China plans to tighten banks' capital requirements – Bloomberg: People familiar with the matter say that 19-Aug, banks received draft rules requiring them to deduct all subordinated and hybrid debt from their supplementary capital. Banks have until 25-Aug to give feedback. Banks may need to restrict lending or sell shares to raise their capital adequacy ratios to the required 12%. The rules also limit a bank's holdings of subordinated or hybrid bonds to 20% of core capital.

Morgan Stanley comments on smartphone survey: Firm's survey indicated that the iPhone and Blackberry were both the top choices in consumers, while Palm's share of the smartphone sales fell.

August 17, 2009: Morning Call

2009-08-17T08:45:00.001-04:00

August 17, 2009: Morning Call

Fair Value: SP500 – 1002.43; NDX: 1610.95; DOW: 9298.71

Technical Levels:

SPX: 875-880, 910, 953, 986 support/1010, 1044 resistance

Events:

Pre-market EPS: CIT (-1.83/412.2M); LOW (.54/14.3B)
08:30: Empire Manufacturing (August): 2.0
09:00: Net-Long Term TIC Flows (June)
09:00: LOW earnings call
13:00: NAHB Housing Market Index (August): 18
18:00: TSL earnings call
Post-market EPS: A (.11/1.0B); TSL (.31/149.4M)

Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 20 points below fair value and the NASDAQ futures are trading almost 30 points below fair value. The financial press is citing the slight miss in Japanese GDP (up 0.9% QoQ vs. up 1.0%) as the primary cause of the weakness. But, the more important catalyst is the big technical break in Shanghai markets, which fell 6.1% overnight on concerns about tighter monetary policy and a bigger than expected drop in foreign direct investment (down 20.3% vs. down 16.8%). Hong Kong fell 3.6% and Japan declined 3.1%. India dropped 4.07%. Banks and basic material stocks fell as much as 8.5% across the region. Weakness in Chinese markets is weighing on commodity prices, which are down about 2.5%-4.0%. European markets are down 2.0% to 2.5% with basic material stocks leading the drop with losses of 4.0% to 5.0%. There is limited corporate news in Europe and the losses are broad-based with every group in the Bloomberg European 500 index currently trading lower. Autos pared declines as Volkswagen (VOW.GR) recovered slightly after releasing Jul vehicle sales. Decliners on the FTSE 100 lead advancers 19-1.

Research Calls/Market Moving News:

FSLR (141.78): Barron's is cautious on the earnings at First Solar, might be from aggressive accounting: The rise in operating income masked the falling cash flow. Receivables grew $166M but revenue only grew $108M and the company lent $25M to a customer outside those receivables. The recent quarter earnings beat estimates because of bookkeeping; the company recognized $84M in revenue as a "result of reclassifying its investment in a project as 'debt' rather than 'equity'." The company gave up the right to convert an investment in a solar farm in Germany into an equity stake. Additionally, the company booked $104M of its purchase of OptiSolar as an asset it will expense only if and when it sells the project even though regulators have required companies to book similar deals as an intangible asset that will be steadily amortized and expensed. FSLR is trading down 6%.

FSLR (141.78): Jefferies comments on Barron's article on First Solar: The firm takes issue with 3 points made in the article. With respect to working capital, Jefferies notes that the company had rising sales and made a change in customer payment terms to bring more in line with industry standards, and says the changes in payment terms have most impact to cash flow at the time they are put in place. In response to Barron's claim about bookkeeping in 2Q08, and the treatment of intangible assets with respect to the Optisolar acquisition, Jefferies believes both were accounted for appropriately. The rating remains buy; target $200.

COF (35.08): Capital One reports Jul managed trust charge-off and delinquency data: All comparisons are month/month: US Card: net principal charge-offs $524.9M vs $527.8M; annualized net charge-off rate 9.83% vs 9.73%. 30 days + delinquencies $3.07B vs $3.09B for a rate of 4.83% vs 4.77%. COF shares are trading down 4.5%.

Oppenheimer downgrades REITs: AVB, BMR, BXP: Biomed Realty Trust (BMR) downgraded to perform from outperform. Boston Properties (BXP) downgraded to perform from outperform. HCP (HCP) downgraded to perform from outperform. AvalonBay (AVB) downgraded to underperform from perform; target is $55. UDR Inc (UDR) downgraded to underperform from perform; target is $10. Washington REIT (WRE) downgraded to underperform from perform; target is $22.

LOW (22.83): Lowe's reports Q2 EPS $0.51, including charge: The figure includes a pre-tax charge of $48M related to a re-evaluation of future store sites. Reuters $0.54. Company reports revenues of $13.84B vs Reuters $14.35B. Guides Q3 EPS to $0.21-$0.25 vs Reuters $0.27. For 2010, expansion in North America will be below previously anticipated levels, and new store openings will likely be in the range of 35 to 45. LOW is trading down 11.5%.

Barron's Technology Trader Fall Preview considers Apple, smartphones and the solar industry: The column considers what may happen during autumn. Apple (AAPL) seems to be clearly up to something and the general consensus is that a tablet computer is coming in early September. In smartphones, there is the coming launch of Motorola's (MOT) new phones based on the Google (GOOG) Android operating system in a bet the company move. Notes some doubts emerging about the success of the Palm Pre (PALM). The Nokia (NOK) deal with Microsoft (MSFT) underscores the weakness of Nokia's smartphone lineup and Research in Motion (RIMM) is probably not worried too much over their position in the enterprise market. Barclays became cautious on the solar industry after poor results from 3 Chinese makers and questions over whether the German subsidy program is sustainable.

Barron's says many retail stocks may correct sharply in coming months: The rally in retail may be sending a false signal about the sector's prospects. Results, particularly for specialty stores and department stores, are likely to disappoint over the next few years, especially as consumer struggle to pay down debt loads. One investor says the consumer is going to be in a secular downturn for years. It has usually been dangerous to bet against the U.S. consumer but much of the recent improvement in earnings came from beating depressed estimates even as revenue fell. A combination of higher taxes, lower wages and high debt levels may keep many consumers home and away from the shops.

CAT (46.00): WSJ is cautious on industrial stocks: A 'Heard on the Street' column says that Caterpillar (CAT) exemplifies the sector perfectly in that the company beat estimates largely due to cost cuts, a lower tax rate, currency gains and accounting gains on shrinking inventory. Revenue fell 41%. Disappearing demand is what investors should be focused on. Morgan Stanley estimates revenue dropped 20% in Q2 industry-wide while order books dropped 30%.

WSJ suggests unloading home improvement stocks: The may be positive news on the housing front this week but there is already a lot of good news priced into the stocks of Lowe's (LOW) and Home Depot (HD), both trading for 18x estimates compared to 15x for the S&P 500. They are vulnerable to any disappointing housing news, something likely given the unemployment situation and continuing foreclosures. There will be better opportunities to buy the names.

August 14, 2009: Morning Call

2009-08-14T08:10:00.003-04:00

August 14, 2009: Morning Call

Fair Value: SP500 – 1010.857; NDX: 1628.05; DOW: 9370.49

Technical Levels:

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

Events:

Pre-market EPS: ANF (-.04/637.9M); JCP (-.08/3.9B)
05:00: Euro-zone CPI (July): -0.6% MoM; -0.6% YoY; Core: 1.3% YoY
08:30: US Consumer Price Index (July): 0.0% MoM; Ex-Food/Energy: 0.2% MoM
08:30: US Consumer Price index (July): -2.1%; Ex-Food/Energy: 1.6% YoY
08:30: ANF earnings call
09:15: US Industrial Production (July): 0.1%; Capacity Utilization: 68.1%
09:30: JCP earnings all
10:00: University of Michigan Confidence (August): 68.5

Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 3 points above fair value and the NASDAQ futures are flat with fair value at 8am ET. Asian markets closed mixed (Japan up 0.75%, Hong Kong up 0.15%, Australia up 0.57%, Shanghai down 2.8%, India down 0.70%, South Korea up 2%). Upbeat comments from Australia’s central bank governor boosted Australia and New Zealand. Technology and bank stocks allowed South Korea to lead the region. Shipping issues gained on a higher Baltic Dry Index. In Japan, insurers fell and real estate firms and trading houses rose but the market reversed early gains when China fell. New Zealand rose as retail sales advanced in Q2 for the first time in two years. European markets are up 0.27% to 0.50% in quiet but whippy trading. Mining shares are amongst the leading gainers while the auto sector was lower led by Volkswagen (VOW.GR) having confirmed reaching of agreement on formation of integrated car group with Porsche (PAH3.GR). Major indices gained around +0.8-1.0% before paring their advance. Advancers on the FTSE 100 lead decliners 3-2.

Research Calls/Market Moving News:

C (4.06): Citi upgraded to buy from underperform at Bank of America Merrill Lynch. C shares are up 3.2%.

BAC (17.00): Bank of America may expand metals and energy team by 25% in next 2-3 years to capitalize on rebound in commodity prices – Bloomberg: The wire cites interviews with the unit's heads. People familiar with the matter say the commodities group currently has 600 people.

Obama administration wants larger banks to pay more for oversight - Washington Post: The latest plan would see banks with more than $10B in assets pay higher fees from its existing regulator and the new consumer protection agency. Smaller banks might pay lower fees. Current rates for banks are determined by whether they are overseen by federal or state officials. Unregulated consumer financial firms, such as mortgage lenders, would have to pay for their oversight for the first time (My take: The Obama administration was expected to take a “carrot and stick” approach with the banking sector. Thus far, it has been almost exclusively carrot, which has been a big surprise particularly to the short-sellers. Clearly, the government has done a brilliant job at orchestrating the current “confidence” trade. But, the greatest longer-term risk for the banking stocks is that the “stick” approach becomes increasingly politically attractive as the mid-term election season begins next year. The fact that regulatory reform has stalled has led many market participants to conclude that the threat of the “stick” approach has diminished and the sector is back to business as usual. Right now, the timing for aggressive reforms is tricky given that the Administration is probably worried about quickly reversing the huge gains in capital markets. Rest assured, the stick will be used at some point and the negative impact on earnings will surprise bank stock bulls.)

WMT (51.88): Wal-Mart making stores around the world more and more local – WSJ: The company has grown to appreciate that what works in Bentonville won't necessarily increase sales in Beijing. The company now uses 60 names besides "Wal-Mart" outside the US. The article focuses on Brazil, where the company is using small discount stores rather than huge boxes resembling its US offerings, and where the company nonetheless remains in third place, behind Carrefour (CA.FP) and Pão de Açúcar Group (CBD). The company is now employing ideas developed in its far-flung countries, like the UK, India, China, and Japan, rather than forcing its American preconceived notions and SKU selections on all global markets.

JWN (29.76): Nordstrom (JWN) reports Q2 EPS $0.48 vs Reuters $0.48, guides f09 EPS to $ 1.50-1.65 vs prior $1.25-1.50 vs Reuters $1.48.

India may trigger INR1.9T ($39B) in stock sales with proposal to limit stakes of controlling shareholders – Bloomberg: The government is considering requiring a 25% minimum public float, which Bloomberg calculates would necessitate equity sales in 560 of Mumbai's 3,335 most-active stocks.

GPS (18.67): Gap upgraded to outperform from neutral at Wedbush Morgan: Checks show strengthening sales at Gap and Old Navy and says shares should show significant appreciation as the company delivers f09 and f10 earnings power above consensus

ETFC (1.40): Citadel Investment Group is cutting its E*TRADE stake reports the WSJ: Citadel has sold 13.9M shares of ETFC and has set up a 10b-5 plan that will allow the sale of up to 120M ETFC shares between 31-Aug and the end of October. One analyst said this announcement clears up any thoughts that Citadel might have wanted to be majority owner of the company.

August 13, 2009: Morning Call

2009-08-13T08:13:00.001-04:00

August 13, 2009: Morning Call

Fair Value: SP500 – 1003.96; NDX: 1618.98; DOW: 9334.10

Technical Levels:

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

Events:
Pre-market EPS: ABV (1.04/2.8B); GIL (.31/339.5M); KSS (.67/3.7B); URBN (.25/457M); WMT (.86/103.1B); WW (.69/390.6M)
08:00: WMT earnings call
08:30: US Import Price Index (July): -0.5% MoM; -19.1% YoY
08:30: US Retail Sales (July): 0.8%; Less Autos: 0.1%
08:30: Initial Jobless Claims: 545,000; Continuing Claims: 6.3 million
08:30: FASB Board Meeting discusses potential expansion of fair value rules to loans
10:00: Business Inventories (June): -0.9%
10:30: EIA Natural Gas Storage Change
13:00: Treasury auctions 15 billion in 30-year bonds
Post-market EPS: A (.11/1.1B); ADSK (.19/413.1M); DV (.51/376.9M); JWN (.43/2.1B);

Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 9 points above fair value and the NASDAQ futures are trading 17 points above fair value at 8am ET. Futures rallied overnight following better than expected GDP news from Germany, France, and the Euro-zone. European markets are up 1.2% to 1.5% with basic resource and financial sectors leading the advance after copper rallied on the LME. Food & beverage space underperforms again, with AB Inbev dropping 3.8% after saying H2 earnings won’t rise at same pace as H1, dragging peer Heineken lower. Nestle drop another 1.5% after y’days disappointing figs. Asian markets closed higher with India leading the region with a gain of 3.3%. India rose when the government promised to cut corporate taxes from 30% to 25% and eliminate a levy on equities trading. Concerns about China’s bank lending tempered optimism in Hong Kong. Fushan International Energy (639.HK) and Hopson Development (754.HK) rose on being included in the MSCI Emerging Markets Index.

Research Calls/Market Moving News:

BAC (15.93): BAC trades 5% higher following reports that Paulson and Company acquired 168 million shares in the second quarter. The shares traded between 6.82 and 14.17 during Q2 so his average price is materially below the current price. Paulson does not need to update his position until 45 days after Q3 given that it represents about 2% of the BAC shares outstanding. He could have easily sold or pared back his stake substantially given the run in the shares. But, perception is reality and right now traders perceive that the “smart money” is long BAC. I am bearish on BAC shares at the 16-17 dollar level. Paulson also disclosed stakes in GS, FITB, and RF.

WMT (50.51): Wal-Mart reports Q2 EPS $0.88 vs Reuters $0.85: Company reports net sales of $100.08B vs Reuters $100.13B. Guides Q3 EPS to $0.78-0.82 vs Reuters $0.80. Guides full year EPS to $3.50-3.60 vs Reuters $3.53, tightened from previous $3.45-3.60. Wal-Mart reports US comps ex-fuel (1.2%) vs StreetAccount consensus +1.0%. Guidance was for flat to +3%. Total net sales for the quarter were down 1.4% and increased 2.7% ex-currency. Gross margin (% of total revenue) reported 25.5% vs SA 24.3%. Inventories ended the quarter at $33.86B compared to $34.39B in Q1 and $34.51B in Q4. Q3 guidance assumes comps flat to +2% at Walmart and flat plus/minus 1% at Sam's.

NTES (46.65): Netease.com reports Q2 EPADS $0.53 vs Reuters $0.45: Company reports revenues of $126.4M vs Reuters $120.4M. Pali Capital is saying that “organic results” missed and that one-time gains led to the bottom line beat. “2Q09 results beat on paper but organic growth is negative in game business – NTES reported 2Q09 revenue of $126.4M, $6M above the Street and our estimate however, the top line beat was driven by the recognition of $12.2M in game revenue from dormant accounts as a result of a change in the user agreement (outstanding points in accounts that are dormant for 540 days or more will be removed after 30 days). It is a one time non-recurring event. Excluding this recognition, game revenue would have been $102.0M, below our $111.0M estimate while total revenue would have been $114.2M, below consensus of $120.3M. The decline was largely due to the weakness in its main game FWWJ, as the ACU number dropped 8% Y/Y and 10% Q/Q from 1.92M in 1Q09 to 1.72M in 2Q09.”

AVB (66.61): AvalonBay (AVB) files to sell up to $400M in common stock through BNY Mellon, BoA Merrill and Deutsche Bank.

LDK (11.21): LDK is trading down 15% following weak Q3 guidance. Think Equity maintains their “source of funds” rating and 8 dollar target. “We believe that LDK's aggressive growth and financing strategy is coming to a critical turning point in its business. If the company can restructure its debt and reduce its near-term cash obligations, we see potential for the company to clean up its balance sheet and gain market share as the low-cost provider of crystalline wafers as a vertically integrated supplier. However, in the meantime, we believe that the company has an uphill climb facing firm polysilicon prices, difficult negotiations on restructuring debt, ongoing price pressure, and significant challenges in ramping its polysilicon manufacturing facility.”

Solar Energy sector downgraded to neutral at Barclays Capital: Investors should wait for better entry points. Sees downside risk from a lack of near term potential catalysts and relatively rich valuation as well as weak seasonality.

JASO (4.47): JA Solar downgraded to equal-weight from overweight at Barclays Capital: Cites concerns that limit upside to the name even though the $4 book value provides potential downside support.

Follow up on Cramer and the iPhone

2009-08-12T15:42:00.002-04:00

This appears to be the source of Cramer's rumor that 5 million iPhones have been pre-ordered by CHU. Again, color me skeptical. But, here is the link:

http://idannyb.wordpress.com/2009/08/12/rumor-apples-1-4-billion-iphone-pre-sale-to-china-unicom/

CNBC's Chief Mascot on Apple's China deal

2009-08-12T14:53:00.006-04:00

Jim Cramer just reported a "rumor" during his idiotic "Stop Trading" segment that CHU (China Unicom) has ordered 5 million iPhone units. I have been a long-time bull on Apple shares and follow the story closely. Color me skeptical on Cramer's rumor given that an Apple/China Unicom deal has not even been finalized. CHU has supposedly committed to selling 1 million iPhones per year as part of the rumored contract negotiations. Why would they pre-order 5 million units before they even close the deal with Apple? I think it's possible that Apple could sell 5 million units in China in the first year given the strength of the Apple brand in China. But, I think Cramer literally made this rumor up and would chalk it up to him being totally reckless. The Beijing Business Today newspaper quoted Apple CFO Tim Cook last week as saying he expected a deal to be finalized by the end of this autumn. Not surprisingly, Cramer's make believe rumor has moved AAPL shares 1.50 higher to 166.50 from 165 in the last 15 minutes. Efficient markets!

August 12, 2009: Morning Call

2009-08-12T08:22:00.001-04:00

August 12, 2009: Morning Call

Fair Value: SP500 – 992.47; NDX: 1594.01; DOW: 9214.10

Technical Levels:

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

Events:

Pre-market EPS: ESLT (1.07/740.0M); JASO (-.06/77.7M); SLE (.24/3.2B)
05:00: Euro-zone Industrial Production (June): 0.3% MoM; (actual: weaker –0.60%)
05:30: BOE releases Quarterly Inflation Report
07:00: Bloomberg Global Confidence (August)
07:00: MBA Mortgage Applications
08:30: US Trade Balance (June): -28.5B
10:30: DOE Crude Oil and Gasoline Inventories
12:00: CSCO presents at Canaccord Adams Growth Conference
13:00: Treasury auctions 23 billion in 10-year notes
14:00: Monthly Budget Statement (July): -129.5 billion
14:15: FOMC Rate Decision: 0.25%
14:00: TOL Q3 Guidance Update
14:30: KLAC presents at Canaccord Adams Growth Conference
15:30: MSFT presents at Canaccord Adams Growth Conference
21:00: NTES earnings call
Post-market EPS: AAP (.83/1.3B); HRS (.82/1.2B); LDK (-.91/236.)M); SINA (.33/88.2M); NTES (.49/120.4)

Foreign Market Summary/Key Macro News/Commentary:

The S&P and NASDAQ futures are trading 2 points above fair value and the NASDAQ futures are trading 7 points above fair value at 8:15am ET. The S&P futures hit an overnight low of 986 due to weakness in Asia and early in the European session. European markets are currently up 0.25% to 0.50% after opening down close to 1.0%. Euro-zone markets moved higher at 5:30am after the BOE inflation report said, “inflation is more likely to be below target in the media term than above.” Breadth is mixed with advancing issues only modestly ahead of declining issues. Asian markets closed lower with financial and resource sectors leading the decline (Japan down 1.4%, Hong Kong down 3.03%, Australia up 0.26%, Shanghai down 4.4%, South Korea down 1.2%, India down 0.36%). Shanghai was particularly weak with 17 issues declining for every advancing issue. Shanghai has pulled back 10.7% from the August 4 closing highs. Bloomberg is reporting that the Chinese commerce minister said overnight “that efforts to boost domestic demand can’t completely offset an export slump.” Chinese officials seem to be continuing a policy of “talking down” the market rather than officially tightening monetary policy.

Research Calls/Market Moving News:

AMAT (13.22): Applied Materials (AMAT) reports Q3 EPS ($0.02) ex-items vs Reuters ($0.08), reports Q3 new orders $1.07B vs StreetAccount consensus $862M, guides revenue to be up 10-20% q/q, implies a range of $1.24-1.36B vs Reuters $1.07B, guides EPS breakeven to $0.04 vs Reuters ($0.04).

TOL (20.48): Toll Brothers reports preliminary Q3 revenues of ~$461.3M vs. Reuters consensus $367.2M: First Call is $377.1M. Other Q3 metrics: backlog $930.7M and 1,626 units vs. $944.3M and 1,581 at end of Q2 and (37%) in units and (47%) in dollars y/y. net signed contracts $447.7M, 837 units, vs. $298.3M, 582 units seq., and +3% in units and (5%) in dollars y/y. gross signed contracts 915 totaling $502.6M vs. 743 totaling $418.5M seq. and (9%) and (15%), respectively y/y. cancellation rate 8.5%, 78 cancellations, vs. 21.7%, 161, seq. and 19.4% and 195 y/y; the 3Q09 cancellation rate was the lowest since f2Q06.

GS (159.22): Goldman Sachs maintained buy at UBS following meetings with CEO and CFO: Target is $180. Firm notes that management remains committed to Goldman's overall business model, but growing asset management is a priority given its stability. The company continues to have wide bid-ask spreads on liquid products and its market share gains have not slipped. In the near-term, UBS thinks the bias for consensus is to the upside and book growth should be strong. Firm adds that it does not expect a repeat of Q2's stellar results.

GRMN (32.45): Garmin added to Conviction Sell List at Goldman Sachs: The firm is concerned about 4Q09 and 2010 estimates. The target is $23.

Electricity prices fall sharply as demand drops reports the WSJ: A report due Friday is expected to show electricity demand down 4.4% in the first half which helped lead to a 40% drop in spot market prices. This is on top of a 2.7% drop in energy use in 2008 compared to 2007. Electricity demand has dropped in absolute terms in only 5 years since 1950. Wholesale prices have dropped significantly in many regions. Many consumers pay rates based on long term contracts but the lower prices will filter down over. Some utilities are reporting double digit drops in industrial usage. On top of the drop in demand, the fall in natural gas prices is another large contributing factor to the drop in electricity prices.

MSFT (23.13); NOK (13.08): NOK and MSFT to hold a conference call at 11am to discuss a partnership that will bring MSFT’s mobile office to NOK handsets.

SPWRA (30.11): SunPower downgraded to underperform from neutral at Bank of America Merrill Lynch: Price objective is reduced to $26 from $33.

Obama administration sends proposal to Congress for derivatives regulation reports the WSJ: The proposal from the Obama administration, which does not differ much from the plan outline by Treasury Secretary Geithner in May, would force many products onto regulated exchanges. There is an exemption that eases margin requirements for some hedging transactions in what the WSJ describes as a concession to small market players. The essential aim is to increase transparency with much of the power given to the SEC and CFTC but granting banking regulators the authority to oversee banks that deal in derivatives.

White House considering allowing consumers to use cash for clunkers vouchers - WSJ: The Journal reports that the Obama administration is reviewing a congressional request to allow consumers to use cash for clunkers vouchers toward future vehicle purchases. According to the article, vouchers would help address concerns surrounding the dwindling supply of many popular replacement vehicles.

August 11, 2009: Morning Call

2009-08-11T08:13:00.003-04:00

August 11, 2009: Morning Call

Fair Value: SP500 – 1004.91; NDX: 1609.71; DOW: 9305.88

Technical Levels:

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

Events:

Pre-market EPS: FOSL (.20/321.8M); M (.15/5.2B)
08:00: T presents at Oppenheimer Communications/Tech Conference
08:30: US Productivity (Q2): 5.5%; Unit Labor Costs: -2.5%
10:00: MDR earnings call
10:30: MSFT presents at Pacific Crest Technology Conference
10:30: MSFT presents at Oppenheimer Communications/Tech Conference
10:30: M earnings call
13:00: QCOM presents at Pacific Crest Technology Conference
13:10: CSCO presents at Oppenheimer Communications/Tech Conference
16:30: API Crude Oil and Gasoline Inventories
18:00: FIRE presents at Pacific Crest Technology Conference

Foreign Market Summary/Key Macro News/Commentary:

The S&P and NASDAQ futures are flat with fair value at 8am ET. The S&P futures have pulled back 7 points off the overnight highs following a modest downside reversal in European markets. European markets failed to hold onto gains of 0.50% to 1.0% and are currently trading down 0.10% to 0.50%. Cyclical related sectors (Banks, Basic Material, Energy, Industrials) are leading the decline in Europe. Asian markets closed higher despite some weaker data out of China; markets in Asia appears to take solace in the fact that July loan growth in China declined “on its own” and may not require government tightening (Japan up 0.58%, Hong Kong up 0.69%, Australia up 0.65%, Shanghai up 0.33%, India up 0.43%)

Research Calls/Market Moving News:

Chinese Economic Data: China July new loans CNY355.9B vs survey CNY500B, June CNY1.530T – Bloomberg. Chinese Industrial Production was weaker than expected (10.8% vs. 11.5%). Retail Sales came in slightly better at 15.2% vs. 15.0% YoY. Fixed Urban Investment was weaker at 32.9% vs. 34% YoY. Chinese Exports fell 23% YoY, in-line with expectations.

HGSI (14.87): Human Genome target raised to $30 at Leerink Swann : Leerink Swann raises their HGSI tgt to $30 from $16 saying their statistical power analysis confirms an ~85% likelihood of success for BLISS-76 data in November. They considered the major factors which could influence p-value via effect size and variability in the context of past results for Benlysta in BLISS-52 and Phase II. The firm says an 8% response rate delta between Benlysta and placebo on the primary endpoint would be statistically significant in BLISS-76 if the same standard deviation as seen in BLISS-52 occurs. Furthermore, a 9% delta would be sufficient at all standard deviations analyzed. Recall that Phase III (10mg/kg), Phase III (1mg/kg), and Phase II showed deltas of 14%, 8%, and 17%, respectively. At the lowest standard deviation analyzed, even a 6% delta in response rates would achieve a p=0.042.

BAC (16.68): Judge rejects Bank of America-SEC settlement – FT: Judge Jed Rakoff says the $33M settlement is too small if Bank of America's conduct was actually the way it was being described. Rakoff orders the parties to submit detailed statements about the case by 24-Aug and encourages the SEC to identify who was responsible for misleading shareholders.

TARP oversight panel says smaller banks may need $12-14B in additional capital to deal with troubled loans still on their books - Bloomberg:
In its monthly report, the Congressional Oversight Panel says the US's biggest banks appear ready to handle more loan losses, but banks with $600M-1B in assets will need to raise significantly more capital.

FLR (57.49): Fluor reports Q2 EPS $0.93 vs Reuters $0.91: Company reports revenues of $5.29B vs Reuters $5.80B. New project awards for Q2 were $6.8B, compared with $6.4B in new awards a year ago. Current quarter awards included a large mining project and a $1.3B oil sands project. Consolidated backlog rose to $30.9B, up from $29.1B last quarter, but down 6% from a year ago primarily due to cancellations and scope reductions of Oil & Gas projects during Q1. Reaffirms full year EPS guidance of $3.80-4.10 vs Reuters $3.82.

MDR (21.32): McDermott reports Q2 EPS $0.40 vs Reuters $0.37:
Company reports revenues of $1.56B vs Reuters $1.59B. At June 30, 2009, McDermott’s consolidated backlog was $9.5B, compared to $9.8B and $10.0B at June 30, 2008 and March 31, 2009, respectively.

MBI (6.17): MBIA downgraded to underweight from neutral at JPMorgan: The firm believes CDO, RMBS, and CMBS related losses would eventually overwhelm capital. JPMorgan says recent accounting to record a $1.1B recovery from a law suit that is uncertain, as well as the impact of FAS 157 has skewed GAAP earnings and book value to represent a company that appears to be stabilizing.

BPI (19.34): Bridgepoint Education reports Q2 non-GAAP EPS $0.34 vs Reuters $0.23 Company reports revenues of $110.9M vs Reuters $99.2M. Total student enrollment increased 101.3% y/y to 45,504 at the end of the quarter. Combined new student enrollments for Q2 at both of Bridgepoint Education's academic institutions were approximately 14,600, an increase of 80.2%, vs approximately 8,100 y/y. Guides f09 EPS to $1.00-1.02ex-items vs Reuters $0.88; guides GAAP revenues to $425-430M vs Reuters $406.5M. Total student enrollment is expected to be between 48,000 and 49,000 at December 31, 2009.

BTU (35.21); MEE (28.19): Massey Energy (MEE) removed from, Peabody Coal (BTU) added to Conviction Buy List at Goldman Sachs: Massey Energy remains buy rated; the target is increased to $33 from $30. BTU target is increased to $46 from $43. The firm also raises targets on: Alpha Natural (ANR) to $43 from $38. CONSOL Energy (CNX) to $42 from $40. Patriot Coal (PCX) to $9 from $8.

OPEC sees 2010 demand for OPEC crude (480K) bpd y/y vs prior forecast of (380K) bpd: The group estimates non-OPEC supplies increasing 430K bpd vs prior guidance of +330K bpd. Further, the body sees 2009 global oil demand (1.65M) bpd y/y, in line with prior guidance, and 2010 demand also in line at +500K bpd. Finally, OPEC member states met 68% of supply reductions in July vs 70% compliance in June.

CNS (19.30): REIT investment management company Cohen & Steers (CNS) files 22 million share shelf. The company says selling shareholders may offer up to 12 million shares of common stock. Watch what management does (selling stock), not what they say (that the REIT business has bottomed).

FT discusses concerns surrounding potential Lloyds' potential £15B capital raise: Recall that there have been recent reports that Lloyds would look to raise as much as £15B in new capital in an effort to strengthen its balance sheet and reduce its exposure to the government's asset protection scheme (APS), where it originally agreed to place £260B of troubled loans. According to the FT, Lloyds faces a difficult task in convincing Alistair Darling, the chancellor, to revisit the basic terms of the scheme following months of complex negotiations. The paper adds that even if the government did decide to amend the terms of the bank's participation in the APS, it would either have to participate in the rights issue at a cost of up to £9B, or see its 43% stake diluted.

August 10, 2009: Morning Call

2009-08-10T08:08:00.000-04:00

August 10, 2009: Morning Call

Fair Value: SP500 – 1008.01; NDX: 1618.75; DOW: 9335.01

Technical Levels:

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

Events:

Pre-market EPS: ALD (.13/87.3M); DISH (.67/2.9B); HOC (.27/1.0B); SYY (.49/9.1B); PCLN (1.75/575.4M)
04:30: Euro-zone Sentix Investor Confidence (August): -25.8 (actual: -17.0)
08:30: PCLN earnings call
10:15: JNPR presents at Pacific Crest Technology Conference
11:00: INTC presents at Pacific Crest Technology Conference
12:30: CTSH presents at Pacific Crest Technology Conference
13:00: YHOO presents at Pacific Crest Technology Conference
13:30: BRCM presents at Pacific Crest Technology Conference
17:30: FLR earnings call
22:00: Chinese Fixed Urban Investment (July): 34.0%
22:00: Chinese Producer Price Index (July): -8.3% YoY
22:00: Chinese Consumer Price Index (July): -1.6% YoY
22:00: Chinese Retail Sales (July): +15.0% YoY
22:00: Chinese Industrial Production (July): 11.5% YoY; 7.7% YTD
Post-market EPS: FLR (.91/5.8B); MDR (.37/1.5B); SF (.46/224.8M)

Foreign Market Summary/Key Macro News/Commentary:

The S&P and NASDAQ futures are both 5 points below fair value in a quiet news morning. Asian markets closed higher (Japan up 1.08%, Hong Kong up 2.72%, Australia up 0.11%, Shanghai down 0.30%, India down 0.99%). Aluminum Corp (2600.HK) and China Mobile (941.HK) rose when China said it would maintain policies aimed at encouraging domestic spending and China Shenhua Energy (1088.HK) rose on better-than-expected preliminary results. Exporters were lifted by a weaker yen in Japan, which enjoyed a broad-based rally. Rio Tinto (RIO.AU) fell in Australia on accusations published over the weekend that it illegally used information about China’s steel sector for six years. European markets are down 0.50% to 0.75% with basic material, financial, and healthcare stocks leading the decline. Lloyds Banking Group (LLOY.LN) fell on talk it may seek to raise up to £15B through a share sale. WirtschaftsWoche reported that SAP (SAP.GR) considering bidding for TIBCO Software (TIBX).

Research Calls/Market Moving News:

RIMM (77.09): Research In Motion downgraded to neutral from buy at UBS: Target reduced to $88 from $90. Shares downgraded on valuation with the firm also noting the potential for a new data centric AAPL device at VZ.

PCLN (131.32): priceline.com reports Q2 pro forma EPS $2.02 vs Reuters $1.79: Company reports revenues of $603.7M vs Reuters $573.5M. Guides Q3 pro forma EPS to $2.70-2.85 vs Reuters $2.57.

AAPL (165.51): Apple added to short term buy list at UBS: Target raised to $170 from $160.

BBY (39.75): Best Buy downgraded to neutral from buy at Goldman Sachs .

AAPL (165.51): NY Times says it is far from clear how much revenue there will be from Apple iPhone apps: Media brands are jumping onto the iPhone but the firms acknowledge they are all trying to figure out the revenue side of the equation as they go. Some executives say they are more concerned with exposure through the iPhone than with revenue while others say they do not believe in running mobile applications as a loss leader.

China July car sales +64% y/y to 1.09M vehicles – WSJ: The semiofficial China Association of Automobile Manufacturers reports: passenger vehicle sales +71% to 832,600. Commercial vehicle sales +44% to 253,000.

Barron's says timberland may be one of the world's most overvalued asset classes: Noting the rise in value of timberland since the mid-1990's and only a 0.5% decline in the first half of 2009, Barron's notes that timber prices could be vulnerable to a 50% drop in the next few years. Such a drop would hurt timber REITs like Plum Creek Timber (PCL) and Potlatch (PCH) as well as Weyerhaeuser (WY) with its 2M acres of forest. Dividends at PCL and PCH are not generated from operations and thus could be vulnerable. Rayonier (RYN) could be better due to its more diversified business.

TIBX (8.47): TIBX shares are up 10% on rumors that SAP may buy the company.

August 7, 2009: Morning Call

2009-08-07T08:11:00.001-04:00

August 7, 2009: Morning Call

Fair Value: SP500 – 994.59; NDX: 1599.57; DOW: 9221.29

Technical Levels:

SPX: 832, 875-880, 910, 953 support/ 1002, 1044 resistance

Events:

Pre-market EPS: EIX (.52/3.1B); MGA (-1.00/4.1B)
08:30: US Change in Nonfarm Payrolls (July): -325,000 (whisper: -200,000-250,000)
08:30: US Unemployment Rate (July): 9.6%
08:30: Change in Manufacturing Payrolls (July): -100,000
08:30: Average Hourly Earnings (July): 0.1% MoM; 2.5% YoY
08:30: Average Weekly Hours: 33.0
15:00: Consumer Credit (June): -3.7 billion

Foreign Market Summary/Key Macro News/Commentary:

The S&P and NASDAQ futures are trading flat with fair value at 8am ET, ahead of the July payroll data. The July whisper number has improved with chatter going around that the economy may have lost between 200,000-250,000 jobs. Rumors have also been circulating that there could be a major benchmark revision to prior months, which would add substantial job losses since January. Asian markets closed lower excluding Japan (Japan up 0.25%, Hong Kong down 2.5%, Australia down 0.62%, Shanghai down 3.0%, India down 2.2%). Konica Minolta Holdings (4902.JP) and Kubota (6326.JP) fell on results. Elpida Memory (6665.JP) rose on a report it will get ¥ 30B in public funds. Australia fell on profit taking when the Reserve Bank of Australia warned interest rates would rise if the economic recovery lasts. Banks led Hong Kong down. European markets are down 0.50% to 1.0% following weak earnings from RBS (down 15%). Financial, mining and energy stocks are the weakest. The Russian Central Bank cut its benchmark interest rate by 25 bps to 10.75%. Decliners on the FTSE 100 lead advancers 3-1. NY University professor Nouriel Roubini says the rally in global markets will hit a snag in the next 2 months, according to the Australian Financial Review, which cited comments made at a Chartered Financial Analyst Forum in Sydney on Thursday. Roubini said the pullback would not take equities back down to the lows reached in March.

Research Calls/Market Moving News:

AAPL (163.91): Piper Jaffray’s Gene Munster expects Apple to launch a tablet in CY 2010. • We continue to expect Apple to release a tablet in early CY10. • We expect Apple to target the netbook market and focus on portability with web and media features (plus apps) at prices lower than the MacBook. • We believe the tablet would leverage the App Store platform, running current iPhone apps and a new category of larger apps simultaneously. • Assuming Apple sells about 2m tablets at a $600 ASP in CY10, it would add about $1.2b or ~3% to revenue in CY10. Continue To Expect Apple Tablet In Early CY10. As talk over a new tablet device from Apple grow, we are reiterating our thesis that in early CY10 Apple will introduce a touch-screen device similar to an iPod touch but larger. Last week we spoke with an Asian component supplier that has received orders from Apple for a touch-screen device to be fulfilled by late CY09. This data point underscores our thesis that a tablet will likely launch in early CY10. What Will Apple's Tablet Device Be Like? We expect the tablet hardware to be similar to an iPod touch but larger; we expect the key differentiator of the device to be its software. While there are several options ranging from a touch screen Mac OS X to an iPhone-like OS, we expect the tablet to be driven by a new version of Apple's iPhone OS that runs a new category of larger apps alongside all the current apps from the App Store. See pg. 2 for details and an image. Will Consumers Buy It? Without getting caught up in the buzz surrounding the device, we want to step back and analyze the addressable market for a tablet device priced between the iPod touch and the MacBook (likely about $500-$700). In most respects, we believe Apple will target the netbook market with its new device. In our estimate most netbook buyers are drawn to the portability for prices lower than a full laptop, and use netbooks primarily the web surfing, email, and media. We believe an Apple tablet would be priced 30%-50% below the $999 MacBook, and would offer best in class web, email, and media software. In other words, we believe Apple's tablet would compete well in the netbook category even though it would not be a netbook. Tablet Could Add ~3% To CY10 Revenue. The impact of a tablet device launching in early CY10 is not yet baked into street models. While at first glance this may appear to address a niche market, we believe the addressable market is larger than that of the Apple TV, of which Apple sold about 1.2m in its first year. We estimate that Apple could sell about 2m tablets at a $600 ASP in CY10, which would add about $1.2b or ~3% to revenue in CY10.”

AAPL (163.91): Apple (AAPL) to offer iPhone in China this fall through China Unicom, says Beijing Business Today – Bloomberg: Apple COO Tim Cook tells the paper the companies will reach a distribution agreement by the end of the summer.

CROX (4.27): Crocs upgraded to overweight from neutral at Piper Jaffray: The firm notes Q2 results outpaced estimates and share price appreciation should accompany consistent fundamental improvement and profitability potential in the next 12 months. Target is raised to $7.50 from $3.

FNM (.79): Fannie Mae reports Q1 EPS ($2.67) vs year-ago ($2.54): As a result of its $14.8B net loss for the quarter ended June 30, 2009, FNM had a net worth deficit of $10.6B as of that date. The Director of FHFA submitted a request on August 6 for $10.7B from Treasury. Company reports revenues of $5.60B vs year-ago $4.00B. FNM recorded a net loss of $14.8B and a diluted loss per share of $2.67 for Q2 of 2009. The net loss was driven by significant credit-related expenses, which totaled $18.8B in Q2, and more than offset net revenues of $5.6B generated from net interest income and guaranty fee income, and $823M in fair value gains.

AIG (22.35): American International Group reports Q2 diluted EPS $2.30: On an adjusted basis, excluding net realized losses and FAS 133 gains, AIG reports adjusted Q2 EPS $2.57. It is unclear if either figure is comparable to Reuters $1.31. Net premiums written $7.92B vs. $9.81B y/y; net premiums earned $8.02B vs. $9.67B. AIG says certain businesses stabilized and that it continues to engage in productive discussions with potential buyers for a number of its other businesses.

RIG (77.11): Transocean downgraded to outperform from buy at Calyon Securities

F (8.07): Ford and others considering production increases in response to cash for clunkers program reports the WSJ: Ford, General Motors and Chrysler are considering whether to increase production though are cautious because of the fact that big sales promotions are usually followed by a slump in sales. One source said Chrysler has increased its production estimate for October to 80K vehicles from 60K. Ford is considering increasing production of cars selling well under the clunkers program and is talking to suppliers to see what level production could be boosted too.

MOS (54.39): Soleil is positive on Mosaic after an upbeat management meeting: The firm believes the chances of a special dividend within 6-9 months or in H2 of 2010 are improving because of the $1.3B in net cash and the estimated $1B in free cash flow for F2010. The $1.3B in net cash implies a special dividend of up to $3 per share. Target increased to $65 from $60.

August 6, 2009: Morning Call

2009-08-06T07:51:00.001-04:00

August 6, 2009: Morning Call

Fair Value: SP500 – 1000.24; NDX: 1613.75; DOW: 9246.17

Technical Levels:

SPX: 832, 875-880, 910, 953 support/ 1002, 1044 resistance

Events:

Pre-market EPS: ATK (1.95/1.1B); BCE (.59/4.3B); BX (.09/341.9M); CNQ (1.09/1.7B); CMCSA (.26/8.8B); DTV (.43/5.1B); EP (.21/1.1B); HUN (-.13/1.9B); NDAQ (.47/368.5M)
07:00: US Retailers release July Same Store Sales
07:00: BOE Announces Interest Rate Decision: 0.50%
07:45: ECB Announces Interest Rate Decision: 1.0%
08:30: Initial Jobless Claims (August 1): 580,000; Continuing Claims: 6.25 million
08:30: CMCSA earnings call
10:30: EIA Natural Gas Storage Change
11:00: ICSC Chain Store Sales
11:00: BX earnings call
11:00: ATW earnings call
17:00: BZH earnings call
Post-market EPS: ACS (.97/1.6B); ASEI (.92/65.7M); BZH (-1.53/225.6M); CBS (.08/3.0B); EOG (.42/998.5M); PSA (1.21/395.4M)

Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 3 points above fair value and the NASDAQ futures are trading flat with fair value at 7:30am ET. Monthly retail sales and Initial Jobless Claims will likely set the tone in today’s session. Asian markets closed mixed (Japan up 1.3%, Hong Kong up 1.9%, Australia up 1.4%, Shanghai down 2.0%, India down 2.4%). Australia rallied after the unemployment rate was better than expected at 5.8% vs. expectations of 6%. China Mobile (941.HK) led Hong Kong reverse as people speculated a listing in Shanghai is forthcoming. Shanghai dropped led by Citic Securities (600030.CH), on concern the central bank may rein in lending. Commodity producers fell on lower metals and energy prices. European markets are up 1.0% to 1.2% as high levels of liquidity continue to fuel gains in risk assets. Gains are broad-based led by financial and consumer related sectors.

Research Calls/Market Moving News:

CSCO (22.17): Cisco Systems guides Q1 (Jul) revenue to be down 15-17% - conf. call: Note that Q4 revenue was down 17.6% versus guidance for a decline of 17-20%; recall guidance Q3 revenue was down 16.6% versus guidance for a decline of 15-20%. Most analysts on the street are modeled for Q1 revenues within the range of Cisco’s guidance.

PCLN (132.42): Piper Jaffray reiterates overweight rating and raises the price target to 150 ahead of the company’s earnings report on Monday. “We expect proforma EPS of $1.90 vs. the street's $1.75 and the company's $1.65-$1.75 guidance. • Competitor OTA results suggest Street bookings ests are overly conservative. • Over the last 8 quarters, Priceline has beaten the midpoint of its PF EPS guidance by 23% on average (see table on pg 2 for details). • Raising PT to $150 from $123, now based on 19x 2010E PF EPS of $7.75. We believe 19x PF EPS vs. 17x previously is justified given accelerating growth. Confident In Q2 Ests Based On OTA Competitor Results; Raising Q2 PF EPS To $1.90. Priceline is scheduled to report Q2 results on Monday (8/10), before market open; based on competitor OTA results, we expect material upside to Street consensus. Additionally, we believe Street estimates for the remainder of CY09 and CY10 are conservative and are raising our estimates above consensus.” Note: This research note hit First Call yesterday at 2:19pm and triggered a 3 point rally into the close. I point it out because the short-interest interest ratio in PCLN shares remains very high. As of July 15, 2009, short interest is 9.3 million shares compared to 10.6 million on June 30. PCLN float is 39 million shares.

COST (49.06): Costco reports Jul comps (7.0%) vs.First Call (7.0%): The company reports July revenues (5.1%) to $5.41B. US comps were (8%); international comps (5%). US comps (excluding the impact from gasoline deflation) were (2%); international (excluding the effects of foreign exchange) +6%; total comps (excluding aforementioned effects) (1%).

FCX (64.46): Freeport-McMoRan upgraded to buy from underperform at Bank of America Merrill Lynch: Price objective increased to $87 from $49.

MBI (5.53): MBIA reports Q2 diluted EPS $4.30 vs year-ago $7.14: Company reports revenues of $992.1M vs year-ago $3.35B. Total premiums earned $177.9M vs. $406.6M y/y. Book value/share $13.30 as of 30-Jun vs. $4.78 at 31-Dec. Shares are up 16%.

CSIQ (16.12): Shares are up 12% after in the pre-market after reporting EPS of 49 cents versus an expected loss of 9 cents. Revenues were 114.2 million vs. street at 95.3 million. The company boosts year view for shipments.

STEC (33.59): STEC increases the size of the secondary offering. According to Bloomberg, the company priced an additional 9 million shares at 31. Shares are trading down 3%.

JPM (41.78): JPMorgan Chase initiated buy at Deutsche Bank

GRMN (33.66): Garmin downgraded to underweight from neutral at JPMorgan
Downgraded based on price.

ENER (14.34): Energy Conversion downgraded to underweight from neutral at Piper Jaffray: Target reduced to $9 from $21. Weak commercial end markets and SIT acquisition risk are cited

Blow-of Top in the Banks??

2009-08-05T13:09:00.003-04:00

This move in the banks certainly feels like a blow-off top. The price action suggests flat out panic buying in JPM, BAC, and WFC. BAC (16.50) is up 32%, JPM (41.80)is up 11% and WFC (27.30)is up 17% since July 24. JPM is about 25% away from making a new all-time high, which is absurd given the long-term headwinds and structural issues related to the consumer de-leveraging that is still very much underway. Although it is too dangerous to be aggressively short these stocks, I would definitely look to purchase out of the money puts on JPM, WFC, and BAC. Volatility has come down to reasonable levels given the long-term headwinds the sector is still facing. The risk/reward no longer favors the bank bulls.

August 4, 2009: Morning Call

2009-08-04T08:07:00.001-04:00

August 4, 2009: Morning Call

Fair Value: SP500 – 999.71; NDX: 1627.19; DOW: 9242.49

Technical Levels:

SPX: 832, 875-880, 910, 953 support/ 1002, 1044 resistance

Events:

Pre-market EPS: AYE (.43/867.0M); ADM (.44/15.2B); CAM (.47/1.2B); EMR (.57/5.3B); HCP (.51/249.2M); HNT (.52/3.9B); HSIC (.76/1.6B); ICE (1.13/242.9M); MLM (.77/471.0M); PTRY (.45/1.6B); SPG (1.37/878.5M); VNO (1.09/608.8M);DHI (-.23/774.5M): UBS(na/na)
03:00: UBS earnings call
05:00: Euro-zone PPI (June): -6.6% YoY; 0.2% MoM
08:30: Personal Income (June): -1.0%; Personal Spending: 0.2%
08:30: PCE Core (June): 0.2% MoM; 1.7% YoY
08:30: ICE earnings call
08:30: CAT analyst meeting
08:30: PHM earnings call
09:30: Fed’s Tarullo testifies on bank regulation
10:00: Pending Home Sales (June): 0.6%
11:00: DHI earnings call
11:00: SPG earnings call
16:30: API Crude Oil and Gasoline Inventories
17:00: CEPH earnings call
17:00: ABC Consumer Confidence
Post-market EPS: CEPH (1.30/540.2M); DVA (.95/1.4B); ERTS (-.14/727M); KFT (.54/10.3B); NWS (.18/7.6B); ONXX (.14/57.4M); BID (.28/153.2M); WFMI (.19/1.8B); AUY (.09/299.0M)

Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 7 points below fair value and the NASDAQ futures are trading 13 points below fair value at 7:30am ET. Asian markets closed mixed (Japan up 0.22%; Hong Kong down 0.05%, Australia up 1.08%, Shanghai down 0.01%, India down 0.59%). European markets are down 0.75% to 1.1% near the lows of the session. Basic material, financial, and energy stocks are leading the decline with losses of 1.5% to 3%. The dollar is modestly higher and commodity prices are down 1% across the board. Jun Personal Income and Spending will be reported at 8:30 ET. Jun Pending Home Sales at 10:00 ET. Fed Reserve Gov Tarullo testifies at Senate panel at 09:30 ET.

Research Calls/Market Moving News:

HGSI (14.25): Think Equity upgrades the shares to buy and raises the price target to 26 a share (price target is the highest among Wall Street analysts). “We spent the past few days evaluating our model for Benlysta and conclude that our estimates are just too conservative. We believe BLISS-76 will, more likely than not, confirm the results seen in BLISS-52. Based on a revised model, we raise our price target to $26 per share, which justifies a raise of our rating to Buy. The result of these changes triangulating an EPS, sum-of-the-parts, and FCFF model points to $26 per share. At first blush, we are surprised by the numbers, but what we must recognize is that Lupus is an unmet medical need and Benlysta is essentially a benign drug that has shown itself to be active, and therefore helps patients. Given the marketing power of Glaxo, we believe that patient awareness will grow rapidly and that physicians will prescribe it. Primary research conducted by the company points to a medical community that is very aware of and willing to use Benlysta. These assumptions point to Benlysta's potential to be a $2.7 billion dollar drug and may eventually prove to be conservative, in our view. We also factor into our model that Human Genome Sciences has raised $357 million with a stock offering, issuing approximately 26M shares at $14 per share. We believe this offering is prudent, and that it strengthens the company's balance sheet, where convertible debt has been an overhang. We have revised our model to reflect the higher share count.”

UBS (15.46): UBS reports Q2 EPS (CHF 0.39) vs Bloomberg (CHF 0.22) and previous quarter (CHF 0.57): Results include an own credit charge of CHF 1.21B, restructuring charges of CHF 582M and a goodwill impairment charge of CHF 492M related to the announced sale of UBS Pactual. Excluding the own credit, goodwill impairment and restructuring charges, operational profit before tax would have been CHF 971M. Company reports revenues CHF 5.77B vs Bloomberg CHF 6.47B and previous quarter CHF 4.97B. UBS shares are trading down 8%.

EMR (36.42): Emerson (EMR) reports Q3 EPS $0.56 vs Bloomberg $0.57, guides FY EPS to $2.20-2.30 vs prior $2.40-2.60 and Reuters $2.30. Q3 revenues were also light at 5.1 billion vs. street at 5.3 billion.

STEC (35.50): Company reports solid earnings and guides Q3 above consensus. But, insiders have filed to sell 7.5 million shares of stock via a secondary.

CAT (45.12): Bank of America raises their price target to 52 from 45.

ADM (30.39): Archer-Daniels reports Q4 EPS $0.10 vs Reuters $0.44: Company reports revenues of $16.53B vs Reuters $15.24B. ADM notes that it see signs of improving demand in the various food, feed and fuel markets its serves.

CVS (34.00): CVS Caremark reports Q2 EPS $0.65 ex-items vs Reuters $0.64: Company reports revenues of $24.87B vs Reuters $24.44B. Guides full year EPS to $2.59-2.64 vs prior $2.55-2.63 and vs Reuters $2.52.

Fed to strengthen examinations of banks' lending practices, financial health with teams of experts – Bloomberg: In testimony prepared for a Senate Banking Committee hearing tomorrow, Fed Governor Daniel Tarullo outlines the step, which builds on the stress tests carried out earlier this year. The teams will assess operations, risks, and risk-management activities; the experts will come from different disciplines. Tarullo says the Fed will soon release guidance on compensation practices that it approves of, and that General Electric (GE) and companies that already own finance arms or industrial-loan businesses should be able to keep them without the Fed's overseeing their non-bank operations. A person familiar with the matter says that on 31-Jul, Treasury Secretary Timothy Geithner used strong language to tell regulators including FDIC chairman Sheila Bair to stop campaigning against the administration's revamping rules for the industry.

July 31, 2009: Morning Call

2009-07-31T07:51:00.000-04:00

July 31, 2009: Morning Call

Fair Value: SP500 – 983.83; NDX: 1608.81; DOW: 9110.66

Technical Levels:

SPX: 832, 875-880, 910, 953 support/ 980, 1002, 1044 resistance

Events:

Pre-market EPS: AN (.24/2.8B); CVX (.95/32.4B); PEG (.62/3.4B); TOT (1.00/72.0B)
05:00: Euro-zone CPI (July): -0.4% YoY (actual: -0.6%)
05:00: Euro-zone Unemployment Rate (June): 9.7% (actual: 9.4%)
08:30: US GDP (Q2): -1.5%; Personal Consumption (Q2): -0.5%
08:30: GDP Price Index (Q2): 1.0%; Core PCE (Q2): 2.3%
08:30: Employment Cost Index (Q2): 0.3%
09:45: Chicago Purchasing Manager (July): 43.0
21:00: Chinese PMI Manufacturing (July)
22:30: Chinese CLSA PMI Manufacturing

Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 2 points above fair value and the NASDAQ futures are trading 4 points above fair value at 7:30am ET. Asian markets closed higher (Japan up 1.89%, Hong Kong up 1.68%, Australia up 1.28%, Shanghai up 2.75%, South Korea up 1.6%, India up 1.8%). Technology stocks outperformed. European markets are unchanged ahead of the US GDP report at 8:30am ET. Consumer product stocks were amongst the leading gainers led by L'Oreal (OR.FP) with computer service shares showing strong gains for a second day following broker upgrades for Logica (LOG.LN) and Cap Gemini (CAP.FP). Energy shares were the weakest group led by Eni (ENI.IM) dividend cut and Total (FP.FP) results.

Research Calls/Market Moving News:

FSLR (173.55): First Solar reports Q2 EPS $2.11 vs Reuters $1.67: Company reports revenues of $525.9M vs Reuters $459.5M. First Solar maintains 2009 revenue guidance of $1.9-2.0B vs Reuters $1.94B - earnings presentation. The conference call went very poorly. The company effectively acknowledged significant pricing pressure by announcing a price rebate program based on silicon module benchmark prices. The company also announced that its receivables in Q2 increased 166 million.

FSLR (173.55): First Solar downgraded to neutral from outperform at Credit Suisse: Target cut to $135 from $200. Firm says the company's earnings momentum may be peaking, though the firm notes that the company has a capable management team and compelling technology.

LVS (11.15): Las Vegas Sands reports Q2 EPS adjusted $0.01 vs Reuters ($0.01): Company reports revenues of $1.06B vs Reuters $1.09B. Las Vegas: Net revenue $291.0M vs StreetAccount consensus $310M. Adjusted property EBITDAR $78.1M vs SA $90M. LVS was light; Sands Macao was in-line; Venetian Macao better: Net revenue $443.2M vs SA $477M. Adjusted property EBITDAR $110.0M vs SA $122M. During the conference call, Sheldon Adelson repeatedly put his foot in his mouth by being arrogant and idiotic. The transcript is a must read.

SYNA (35.85): Synaptics reports Q4 EPS $0.47 vs Reuters $0.44: Company reports revenues of $115.3M vs Reuters $112.1M, and a backlog of $62.8M. Guides Q1 revenues to $113-$119 vs Reuters $127.4M. Guides f10 revenues to $495-$525M vs Reuters $522.5M. Synaptics guides Q1 non-GAAP EPS to $0.37-0.43 vs Reuters consensus of $0.55. Calyon and Jefferies downgrade the shares.

DIS (26.22): Walt Disney reports Q3 EPS $0.52 ex-items vs Reuters $0.51: Company reports revenues of $8.60B vs Reuters $8.86B. Media Networks: Revenue $3.96B vs SA $4.03B. Operating income $1.32B vs SA $1.37B. Parks and Resorts: Revenue $2.75B vs SA $2.72B. Operating income $521M vs SA $469M. Studio: Revenue $1.26B vs SA $1.32B. Operating income ($12M) vs SA $42M. Consumer: Revenue $510M vs SA $547M. Operating income $96M vs SA $103M. Interactive: Revenue $113M vs SA $152M. Operating income ($75M) vs SA ($82M).

X (38.61): U.S. Steel mentioned positively at Morgan Stanley: The firm believes the market is discounting extended weakness in the company's tubular business, underestimating recovery potential and its effect on flat rolled profits. Improving data points on rig counts, OCTG pricing, inventories, and imports could all serve as catalysts in the 2H. Shares remain overweight rated with upside to the firm's $45 target.

Federal regulators getting tougher with banks, putting more on probation - WSJ: The Fed, the FDIC, and the Office of the Comptroller of the Currency are on pace to issue almost 600 secret memorandums of understanding this year, vs 399 last year. The article discloses that Fidelity Southern Corp (LION), Berkshire Bancorp (BERK), and Mercantile Bancorp (MBR) have received them. Recall that the WSJ reported 16-Jul that Bank of America (BAC) and Citi (C) had gotten them, and that Colonial BancGroup (CNB) and Riverview Bancorp (RVSB) had disclosed they were operating under memorandums of understanding. The sanctions are typically not made public to avoid alarming depositors and investors.

Trading Higher: EGLE +2.2% (charters for four vessels). On earnings: NVTL +19.1%, ABAX +11%, GXDX +9.4%, SGY +8.7%, RST +5.6%, VSEA +3.9%, CPHD +3.7%, DRYS +2.2%, AMCC +2.2%, MET +2%. Trading Lower: VPHM -5.1% (FDA Letter). On earnings: SYNA -18.9%, LVS -10.7%, ESLR -9.6%, MPWR -9.6%, GPRO -8.9%, GERN -5.5%, VPRT -5%, ADPT -4.8%, GNW -4.2%, EXEL -3.8%, VLCM -3.8%, FSLR –6.4%, DIS -3.5%, ARRS -2.7%, TSYS -2.2%. Solar stocks lower (ESLR and FSLR earnings): SPWRA -3.2%, SOLF -3.2%, CSIQ -2.9%, ENER -2.1%, YGE -1.9%.

July 29, 2009: Morning Call

2009-07-29T08:38:00.002-04:00

July 29, 2009: Morning Call

Fair Value: SP500 – 976.61; NDX: 1604.35; DOW: 9065.68

Technical Levels:

SPX: 832, 875-880, 910, 953 support/ 980, 1002, 1044 resistance

Events:

Pre-market EPS: AET (.78/8.6B); MT (-.21/15.2B); BWA (.07/970.4M); COP(.85/39.0B); HES (.03/7.4B); JNY (.07/776.8M); NYB (.25/230.0M); SAP(.51/3.6B); SEE (.34/1.0B); S (-.02/8.1B); TDW (1.80/334.0M); WLP (1.42/15.4B)
08:30: Durable Goods Orders (June): -0.6%; Ex-Trans: 0.0%
08:30: Fed’s Dudley speaks on the economy
08:30: AMT earnings call
09:30: MT earnings call
10:30: DOE Crude Oil and Gasoline Inventories: 1.5 million crude draw.
11:00: COP earnings call
13:00: Treasury auctions 39B in 5-year notes
14:00: Fed’s Beige Book
17:00: V earnings call
18:00: Bernanke Town Hall Meeting Part 3 on PBS
Post-market EPS: AFL (1.14/4.6B); AKAM (.41/211.0M); AVB (.59/216.3M); CBG(.04/952.6M); ESRX (.86/5.44B); EQR (.21/501.0M); FLS (1.79/1.1B); HIG (1.16/5.9B); LNC (.83/2.5B); ORLY (.55/1.2B); SYMC (.35/1.48B); TSO (-.24/4.6B); V(.64/1.6B)

Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 6 points below fair value and the NASDAQ futures are trading 8 below fair value. Weakness in Chinese markets led Asia lower and pressured the S&P futures in the overnight session (At 2:30am ET, the futures were 12 below fair value at 964). Shanghai declined 5% and Hong Kong fell 2.4% on concerns that the government will tighten monetary policy in order to curb speculation; markets in Shanghai and Hong Kong were also short-term overbought heading into the session so some of the selling pressure was related to technical factors. Japan bucked the trend lower with a gain of 0.26% after Canon reported slightly higher full-year guidance. European markets are up 0.75% to 1.1% reversing most of the decline during Tuesday’s session. Better than expected earnings from the likes of Akzo Nobel (AKZO.NA) and Bayer (BAY.GR) outweighed disappointing results from ArcelorMittal (MT.NA).

Research Calls/Market Moving News:

HGSI (14.53): HGSI priced 23,215,000 million shares at 14 instead of the initial indication of 18 million shares. The underwriters (Citibank and Goldman) have an option to purchase 3.48 million additional shares. So, the increased size of the offering raises the dilution to 20% (if the underwriter's option is exercised) from the prior estimate of 15%. Shrewd move by the company to increase their common equity capital to a level that more than covers the convertible bonds that are due to be rolled in 2011 and 2012. I would be surprised if the 14 level broke in the near-term given the increased demand at that level. At the same time, the stock will encounter more solid resistance at the long-term relative highs of 15 to 16 (dating back to 2003) given the dilution. Additional data on Benlysta is due in November. I doubt the stock could break above 16 absent a takeover offering or additional positive clinical data on their pipeline of drugs prior to November.

AAPL (160.00): China Unicom Hong Kong unlikely to share phone-service revenues in iPhone deal - South China Morning Post: Sources say the company's guarantee it will sell at least 1M units in the first year has rendered Apple (AAPL) likely to give up its revenue-sharing model. Ironically, the revenue-sharing model was why Apple was unable to come to a deal with China Mobile (941.HK). An analyst says the idea that phone bills will increase after users buy an iPhone may not hold in China.

MT (36.58): ArcelorMittal reports Q2 EPS ($0.57) vs Reuters ($0.12): Company reports revenues of $15.17B vs Reuters $16.30B. Company reports EBITDA of $1.22B vs Reuters $1.34B. Company reports total steel shipments of 17.0M tonnes vs Q1 16.0M tonnes and year-ago 29.8M tonnes. Company guides Q3 EBITDA to exceed $8.5B. Company guides Q3 EBITDA to $1.4-1.8B, with slightly higher shipments than in Q2, at a stable or slightly lower selling price. MT shares are trading down 6.2%

ISRG (223.62): 3 insiders sell stock on Monday, according to SEC filings released last night. The CFO sells 3500 shares. The Chairman/CEO sells 15,000 shares and a director sells 3500 shares.

WLP (54.38): WLP shares are trading down 3% after the company lowered full year guidance below street consensus. WLP sees 2009 EPS of 5.60 to 5.66. Street consensus is at 5.74.

FTI (41.58): FMC Technologies (FTI) reports Q2 EPS $0.84 vs Reuters $0.62, guides FY EPS to $2.55-2.65 vs prior $2.40-2.50 and Reuters $2.38.

MCK (46.83): McKesson (MCK) reports Q1 EPS $1.06 vs Reuters $0.85, guides FY EPS to $4.15-$4.30 vs prior $3.90-$4.05 vs Reuters $4.00;

YHOO (17.22); MSFT (23.47): Yahoo and Microsoft finally announce a search deal after 2 years of speculation. Under the 10-year agreement, Microsoft will acquire an exclusive 10 year license to Yahoo's core search technologies. Microsoft’s Bing will be the exclusive algorithmic search and paid search platform for Yahoo sites, while Yahoo will continue to use its technology and data in other areas of its business such as enhancing display advertising technology. YHOO shares are trading down 7.5%. MSFT is up 0.70%, and GOOG is down 0.85%.

BHP (61.630: BHP Billiton provides update on iron ore price negotiations: BHP Billiton has settled 23% of total iron ore volumes at an agreed annual contract price. The price for iron ore fines will be approximately 33% lower than the contract prices agreed in the 2008 contract year. The price for iron ore lump will be approximately 44% lower than the contract prices agreed in the 2008 contract year. A further 30% of BHP Billiton's total iron ore volumes will be sold on a mix of quarterly negotiated pricing, market clearing price (spot market) and index-based pricing. Negotiations for the remaining 47% of iron ore volumes are ongoing.

BHP (61.63): Barron’s Weekday Trader is cautious on BHP Billiton: Barron's argues that investors' expectations seem to have got ahead of the stock, which is now trading at 24x 2009 and 2010 EPS estimates of $2.59 and $2.54, respectively. The article also points out that management is much more cautious, noting earlier this year that weakness, uncertainty and volatility in the outlook are issues not just for the short-term, but also for the medium-term

MS (27.43): Morgan Stanley downgraded to neutral from buy at Goldman Sachs: Target cut to $32 from $34.

KKR plans IPO for Dollar General – WSJ: People familiar with the matter say the firm is in advanced preparations for the IPO, on which KKR will also be one of the lead underwriters, along with Goldman Sachs, Citi, and others. For the quarter ended 1-May, the chain posted a profit of $83M vs year-ago $5.9M, and gross margin was 30.8% vs year-ago 28.8%. Dollar General plans to add 450 doors this year from 8,362 at the end of 2008.

MGM (7.48): MGM Mirage downgraded to neutral from buy at Bank of America Merrill Lynch: Price objective cut to $8 from $11.

COH (28.05): Coach upgraded to overweight from neutral at Piper Jaffray: Target price, $32.

Larry Kudlow predicts S&P will rise another 20% by year-end!

2009-07-23T11:15:00.005-04:00

After predicting the market will ramp another 20%, Larry Kudlow just said, "I could be wrong and I have been wrong before." Without question, this is one of the greatest understatements of all time. Larry Kudlow has been consistently wrong about the financial markets, politics, and the economy for at least 10 years running.

July 22, 2009: Morning Call

2009-07-22T08:16:00.001-04:00

July 22, 2009: Morning Call

Fair Value: SP500 – 951.53; NDX: 1552.02; DOW: 8873.61

Technical Levels:

SPX: 765, 788, 832, 875-880, 910 support/ 956, 1002 resistance

Events:

Pre-market EPS: APD (.98/2.1B); ATI (.06/818.5M); MO (.47/5.3B); BK (.43/3.2B); BA (1.20/17.1B); DAL (-.27/6.9B); NITE (.39/253.7M); MS (-.49/5.3B); NTRS (.72/983.0M); PEP (1.00/10.9B); PFE (.47/11.2B); SU (.29/3.7B); STI (-.54/2.1B); USB (.10/4.0B); WFC(.34/20.4B); WHR (.42/4.1B); LLY (1.02/5.2B)
04:30: Bank of England Releases Minutes from Interest Rate Decision
05:00: Euro-zone New Orders (May): 1.9% MoM; -28.0% YoY
07:00: MBA Mortgage Applications
08:00: WFC earnings call
08:00: BK earnings call
09:00: USB earnings call
10:00: House Price Index (May): -0.2%
10:00: Bernanke testifies on monetary policy for Senate Banking Committee
11:00: MS earnings call
10:30: DOE Crude Oil and Gasoline Inventories
16:45: QCOM earnings call
Post-market EPS: ACL (1.70/1.6B); BIDU (1.43/157.5M); CMG (.87/390.4M); EBAY (.36/1.98B); MOS (.11/1.5B); QCOM (.52/2.7B); TEX (-.28/1.5B)

Foreign Market Summary/Key Macro News/Commentary:

The S&P futures moved 6 points below fair value after MS and WFC released earnings at 8am. The futures had been flat with fair value prior to the EPS. NASDAQ futures are trading flat with fair value due to strong earnings from AAPL. Although WFC EPS beat and revenues were in-line, the 700 million-reserve build looks light. MS reports a loss of 1.37 vs. street consensus of a loss of 0.47 cents. Revenues were light, particularly in fixed income sales and trading. European markets moved lower (down 0.25% to 0.50%) following the release of MS and WFC earnings. Asian markets closed mixed (Japan up 0.75%, Hong Kong down 1.3%, Australia up 0.44%, India down 1.46%). Solar energy stocks led China higher after Beijing announced subsidies for projects. Sinopec (600028.CH) rose on a broker estimate its H1 net may more than triple. Consumer finance firms were hit by profit-taking in Japan, exporters suffered from both profit-takers and a slightly stronger yen. Hon Hai Precision Industry (2317.TT) gained on Apple's (AAPL) better-than-expected results. Gains in mining shares outweighted declines in bank share in Australia.

Research Calls/Market Moving News:

AAPL (151.51): Apple upgraded to buy from hold at Canaccord Adams: Target increased to $200 from $150. Firm notes Q3 results and the company's entry into the low-end camcorder market. Estimates are raised.

AAPL (151.51): Apple reports Q3 EPS $1.35 vs Reuters $1.17: Company reports revenues of $8.34B vs Reuters $8.21B. Product shipments: Macs 2.6M vs StreetAccount consensus 2.36M, iPods 10.2M vs SA 10.70M and iPhones 5.2M vs SA 4.86M. Gross margin was 36.3% vs SA 34.4%. Guides Q4 EPS to $1.18-1.23 vs Reuters $1.30; guides revenues to $8.7-8.9B vs Reuters $9.07B. Apple guides Q4 (Sep) gross margin to be approximately 34% - conf. call: Management says that margins will be pressured sequentially by a full quarter of back-to-school promotions and new Macbook availability, as well as rising component prices. In response to analyst question on longer term margins, management declines to weigh in on the previously discussed 30% target but repeats their pledge to offer products at "ever increasing value".

Morgan Stanley equity strategist recommends that market participants “sell into” global stock rally- Bloomberg. Morgan Stanley also says sentiment behind rally may be transitory and that risks have not disappeared. Overall, the firm has a cautious stance on equities.

HGSI (13.84): Human Genome announces new order for raxibacumab (ABthrax) from US government: The US government exercises its option to purchase an additional 45,000 doses of raxibacumab for the Strategic National Stockpile. HGSI expects approximately $151M in revenue from delivery of 45,000 doses to U.S. Strategic National Stockpile over three-year period beginning in late 2009. In July 2009, the FDA notified HGS that the BLA for raxibacumab has been filed and will receive priority review. HGS will receive $10M from the U.S. Government upon FDA licensure of raxibacumab. The BLA was filed with the FDA in May

LLY (34.45): Eli Lilly reports Q2 EPS $1.12, ex-items, vs Reuters $1.02: Company reports revenues of $5.29B vs Reuters $5.29B. Guides full year EPS to $4.20-$4.30, ex-items, vs Reuters $4.23. Eli Lilly reports Q2 results: Drug sales: Zyprexa $1.20B vs StreetAccount consensus $1.19B. Gemzar $353.2M vs SA $380M. Cymbalta $744.4M vs SA $753M. Strattera $142.8M vs SA $140M. Forteo $203.3M vs SA $202M. Evista $251.3M vs SA $265M. Alimta $385.3M vs SA $345M. Humulin $248.1M vs SA $256M. Humalog $477.5M vs SA $462M. Cialis $363.6M vs SA $383M.

FCX (58.17): Freeport-McMoRan downgraded to hold from buy at Citi: Valuation cited. Though downgraded, the target is increased to $61 from $58.

BK (29.11): Bank of New York Mellon reports Q2 EPS $0.51 ex-items vs. Reuters $0.53: Company reports revenues of $2.96B vs Reuters $3.30B. Provision for loan loss was $61M. Assets under mgmt reported $926M with net asset outflows of $19B. Assets under custody reported $20.7T. Tier 1 capital ratio reported 12.5%.

CAT (39.46): Caterpillar maintained sell at UBS: Target is raised to $33 from $30. Firm raises '09 EPS to reflect the better than expected Q2 results, but lowers estimates for 2H'09 given further expected underproduction of demand. 2010 estimates are unchanged. UBS notes further potential demand deterioration and potential pricing headwinds.

WHR (56.34): Whirlpool reports Q2 EPS $1.04, including items: The figure includes an energy credit. Reuters is $0.67. Company reports revenues of $4.17B vs Reuters $4.20B. US industry unit shipments of major appliances (T7) (14%) Guides full year EPS to $3.50-$4.00, compared to prior $3.00-$4.00. Reuters is $3.52.

DDR (4.54): Developers Diversified Realty Corp. working on two CMBS deals that will be eligible for TALF: The Journal reports that Developers Diversified Realty Corp. is working on raising $600M through two deals (company hopes to close them this fall) that will be the first major offerings of CMBS to take advantage of the TALF. Recall that the Fed extended the TALF to include newly issued CMBS in June, but there have not been any deals thus far. According to the article, Developers Diversified is focused on two pools of assets, valued at $800M each, and consisting of roughly 60 shopping centers across the country. The properties feature stable cash flows given that they are occupied by discount retailers. By borrowing $600M against these pools, the loan-to-value ratio would be around 40%, down from the 70% that some borrowers were able to secure before the credit crisis destroyed the liquidity in the CMBS market. Sources tell the paper there are a couple of other CMBS deals also in the TALF pipeline.

CSCO (21.59): Cisco Systems upgraded to outperform from neutral at RW Baird: Target increased to $26 from $20. The firm cites preliminary results from a resellers survey noting an improvement in sentiment and recovery.

CSCO (21.59): Cisco Systems reiterated outperform at Oppenheimer after channel checks: Target is $25. Firm says July-quarter channel checks suggest that CSCO sales are tracking in line to slightly ahead of expectations as enterprise spending constraints ease, pipeline improves, and CSCO pushes for a strong finish to its fiscal year. Oppenheimer says ~2/3 of their interview respondents indicated CSCO's sales could grow sequentially next quarter.

NBR (17.16): Nabors Industries reports Q2 EPS $0.32 ex-items vs Reuters $0.28: Company reports revenues of $878.0M vs Reuters $945.3M. Company expects Q3 results to be flat, with a modest recovery beginning in Q4.

Jesup & Lamont downgrades HP, NBR, PTEN, others: Helmerich & Payne (HP) downgraded to sell from hold. Nabors Industries (NBR) downgraded to sell from hold .Patterson-UTI (PTEN) downgraded to sell from hold. Unit Corp (UNT) downgraded to sell from hold. Firm cites NBR's Q2 report as catalyst for the downgrades.

BTU (33.02): Peabody Energy downgraded to hold from buy at Citi: Target cut to $34 from $40. The firm cites valuation.

PFE (15.70): Pfizer reports Q2 EPS $0.48 vs Reuters $0.47: Company reports revenues of $10.98B vs Reuters $11.26B. Guides full year EPS to $1.90-$2.00 vs Reuters $1.94 and prior $1.85-$1.95; guides revenues to $45B-$46B vs Reuters $46.91B and prior $44B-$46B.

Credit-card disputes lose an option for resolution – WSJ: Two large arbitration firms have said they will stop resolving disputes between customers and their credit-card and cellphone companies until new guidelines are set out. Credit-card and cellphone companies prefer arbitration, saying it is less expensive and time-consuming than going to court to resolve disputes over whether or not customers owe them money. The new guidelines have been deemed necessary because a lawsuit last week revealed that one of the arbitrators has financial ties to the debt-collection industry, raising questions about whether it was violating consumer-protection laws.

July 17, 2009: Morning Call

2009-07-17T07:46:00.001-04:00

July 17, 2009: Morning Call

Fair Value: SP500 – 937.56; NDX: 1517.96; DOW: 8666.63

Technical Levels:

SPX: 765, 788, 832, 875-880 support/ 935-943 resistance

Events:

Pre-market EPS: BBT (.22/2.01B); C (-.34/20.7B); GE (.24/42.05B); MAT (.01/965.4M); BAC (.18/34.0B)
05:00: Euro-zone Trade Balance (May):
05:00: Euro-zone Construction Output
08:00: C earnings call
08:30: US Housing Starts (June): 530,000; Building Permits: 520,000
09:30: BAC earnings call

Foreign Market Summary/Key Macro News/Commentary:

The S&P and NASDAQ futures are both trading 5 points below fair value at 7:30am ET. GE, IBM, BAC, and GOOG all reported revenues that were slightly below either consensus estimates or the whisper number. Asian markets closed higher (Japan 0.55%, Hong Kong up 2.42%, Australia up 0.13%, Shanghai up 0.53%, India up 3.47). Technology stocks received mixed messages from IBM (IBM) and Google (GOOG)’s post-close performances. Shippers followed the Baltic Dry Index up once again. Indonesia was the only market in the region not to join in the rise, as terrorism concerns resurfaced when bombs went off in Jakarta. Brokerage upgrades on Chinese shares fueled Hong Kong's rise. European markets are up 0.50% to 1% but are pulling back off the highs of the session following the release of GE and BAC earnings.

Research Calls/Market Moving News:

BAC (13.17): Bank of America reports Q2 EPS $0.33: The figure excludes the deduction of $805M in preferred dividends. Reuters is $0.29; First Call $0.28. Note the disparity in the consensus estimate seems to be related to the number of one-time items. Company reports revenues of $32.77B vs Reuters $33.26B. BAC says the figure compares to $0.72 y/y. NPA’s rose to 30.9B vs. 25.6B in the prior quarter, a pretty sharp sequential increase in non-performing assets. The provision for credit losses came in at 13.4B, flat with the first quarter. The company increased the allowance for loan losses by 4.7 billion to 33.7 billion from 29.0 billion.

GE (12.40): General Electric reports Q2 EPS $0.26: The figure includes $0.02 in gains, $0.03 in charges and $0.04 in marks and impairments. Reuters is $0.24. Company reports revenues of $39.08B vs Reuters $42.09B. Revenue and profits by segment: Technology Infrastructure: Revenue (11%) to $10.56B and profit (11%) to $1.83B. Energy Infrastructure: Revenue (1%) to $9.58B and profit 13% to $1.79B. Capital Finance: Revenue (29%) to $12.80B and profit (80%) to $590M. NBC Universal: Revenue (8%) to $3.57B and profit (41%) to $539M. Consumer & Industrial: Revenue (20%) to $2.51B and profit (20%) to $111M.

GOOG (442.60): Google reports Q2 EPS $5.36 vs Reuters $5.08: First Call is $5.09. Company reports revenues of $5.52B, including TAC, vs Reuters $5.49B, which includes TAC. Excluding TAC, GOOG reports revenues of $4.07B vs. First Call $4.06B. Segment revenues (gross): Google Sites $3.65B vs SA $3.71B. Networks $1.68B vs SA $1.60B. Licensing/other $186.8M vs SA $196M. Google says business appeared to stabilized during the quarter - conf. call: In response to analyst question on the stabilization, Schmidt says that they had no idea where the bottom was a quarter ago. However since that time, most of the preferred metrics have stabilized or slowly begun to improve. RPMs have not fully recovered, but most other metrics have begun to come back. Providing some color on ad trends, he says that large advertisers have been coming back to the table and are becoming a little more aggressive with their purchases. Nearly all verticals outside of financials are said to have begun to look better versus last quarter. Taking all of these things, Schmidt says they are comfortable using the term "stabilized" but would not want to go beyond that. He says they are no longer looking at a downward spiral as they were six months ago.

IBM (110.64): IBM reports Q2 EPS $2.32 vs Reuters $2.01: Company reports revenues of $23.25B vs Reuters $23.48B. Guides full year EPS to at least $9.70, up from at least $9.20 vs Reuters $9.12

CIT (.41): CIT Group, clients move rapidly to secure their futures – WSJ: People familiar with the matter say CIT executives are working on lining up $2-3B in private-sector financing. One says bondholders are discussing a $5B debt-for-equity swap, which would be dependent on regulators' approving the company to transfer some assets to its banking unit. Clients, worried CIT's payments to them could be frozen by a bankruptcy court, are taking varying steps to protect themselves. Sources say some vendors are asking large retailers to pay them directly rather than via CIT.

NOK (13.46): Nokia downgraded to neutral from buy at UBS – Bloomberg. Natixis also downgraded the shares in Europe.

GS (156.84); JPM (36.13): NYT deems Goldman Sachs (GS), JPMorgan Chase (JPM) "giants" coming from Wall Street ruins: The article does not actually cover any new ground. It notes that the banks have done very well, while Citi (C) and Bank of America (BAC) are struggling, and even the giants stand to be losers if the economy does not recover. One banking executive says that all banks benefited from government aid, even if JPM, GS, and Morgan Stanley (MS) were anxious to pay TARP funds back as soon as possible.

Miners, countries in tug-of-war over plans – WSJ: The economic downturn has set miners, who no longer feel pressed to come up with resources to feed to China, against resource-rich countries, who want production to be maintained to generate revenues. Rio Tinto (RIO.LN) faces troubles in Guinea as well as its diplomatic battle in China. Russia threatened to revoke Arcelor Mittal (MT.NA)'s coal licenses. Zimbabwe, South Africa, and Zambia are talking about renegotiating agreements to claim greater ownership of mining ventures. In a vicious circle, doing so makes miners less likely to want to invest in countries they see as risky, which makes the countries want greater ownership, and so on, and so on.

July 14, 2009: Morning Call

2009-07-14T07:46:00.001-04:00

July 14, 2009: Morning Call

Fair Value: SP500 – 897.85; NDX: 1446.86; DOW: 8283.71

Technical Levels:

SPX: 765, 788, 832, 875-880 support/ 935-943 resistance

Events:

Pre-market EPS: GS (3.47/11.16B); JNJ (1.11/14.9B)
05:00: Euro-zone ZEW Economic Sentiment Survey (July): 44 (actual: 39.5)
05:00: Euro-zone Industrial Production (May): 1.5% MoM; (actual: 0.5%)
05:00: Euro-zone Industrial Production (May): -17.5% YoY (actual: -17.0%)
08:30: US Producer Price Index (June): 0.9% MoM; Ex-Food/Energy: 0.1% MoM
08:30: US Producer Price Index (June): -5.2% YoY; Ex-Food/Energy: 2.9% YoY
08:30: US Retail Sales (June): 0.5%; Less Autos: 0.5%
08:30: CSX earnings call
09:00: DELL analyst meeting
10:00: Business Inventories (May): -1.0%
11:00: GS earnings call
16:30: API Crude Oil and Gasoline Inventories
17:00: ABC Consumer Confidence
17:30: INTC earnings call
18:30: RIMM Annual Meeting
Post-market EPS: ALTR (.16/277.5M); YUM (.43/2.5B); INTC (.07/7.24B)

Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 2 points above fair value and the NASDAQ futures are trading flat with fair value ahead of Goldman’s earnings this morning. Asian markets closed sharply higher following the strong Monday session on Wall Street (Japan up 2.34%, Hong Kong up 3.66%, Australia up 3.47%, India up 3.38%). Mining, industrial, and financial stocks outperformed. Automakers rallied in Japan on a report they were raising capacity in China. Brokerages rose and Komatsu (6301.JP) rallied on a report it probably posted an operating profit in the Apr-Jun quarter. China rose across the board, with gainers leading losers in Shanghai, 745-65. Singapore benefited when the government issued an advance reading on Q2 GDP 20.4% q/q vs cons 13.4%, and raised its forecast for the year. Former Morgan Stanley strategist Barton Biggs also said that Asian economies were emerging from the financial crisis faster than any other regions. European markets are up 0.50% to 0.75% led by mining and bank stocks. Advancers on the FTSE 100 lead decliners 7-3. Q-Cells (QCE.GR) fell after says Q2 results fall short of expectations and withdraws FY guidance.

Research Calls/Market Moving News:

GOOG (424.30): Bernstein previews the quarter for Google, sees consensus as low: The firm sees net revenue of $4.22B vs. consensus $4.05B. EPS for the quarter is seen $5.22 vs. Reuters consensus $5.08. Bernstein sees GOOG as well positioned to benefit from a recovery. Shares remain outperform rated with a $600 target.

GOOG (424.30): Oppenheimer expects Google to report lackluster results: Shares are maintained outperform and the target is increased to $490 from $440 on a higher market multiple. Firm expects GOOG to report lackluster 2Q results Thursday after the close, in-line with recently reduced expectations. Oppenheimer is lowering their revenue, EBITDA and EPS estimates by 2%, 1% and 2%, respectively.

Potash price war looming - Globe and Mail: The article relies largely on analysts and does not cite any inside sources, but says the months of cooperation among producers to cut production rather than lower prices appears to be set to end. The development comes thanks to Silvinit (SILV.RU)'s 10-Jul $460/tonne deal with India on the heels of Canpotex's $700/tonne deals announced 9-Jul. The Silvinit deal means other large companies are likely to be less willing to sign longer-term contracts.

Credit-default swaps probed by Justice Department, says Markit Group – Bloomberg: A spokeswoman declines to comment on the nature of the investigation the data provider has been informed of. People familiar with the matter say the antitrust division sent civil investigative notices this month to banks that own Markit to determine if they have unfair access to price information.

RTP (128.80): China expands steel-industry corruption investigation beyond Rio Tinto (RIO.LN) – NYT: Chinese media reported last night (13-Jul in China) that authorities have detained or questioned at least seven industry executives. An analyst says the industry is shocked and fearful of what may come next. There are reports of widespread bribery; one industry official points out that his or her company entertains officials all the time, and it is unclear if that will be considered bribery.

DELL (13.02): Dell expects "slight sequential revenue growth", "modest margin pressure" in Q2 (Jul): Company notes that y/y demand for its IT products appears to have stabilized and as a result expects to report a slight sequential revenue increase in Q2. However, gross margin is anticipated to be down modestly, with the company citing higher component costs, a competitive pricing environment, and an unfavorable mix of product and business-segment demand for the decline. Providing some color on the revenue stabilization, management says that the results "vary significantly" by customer segment and geography. Management continues to believe that customers are deferring IT purchases and expects demand to return to more typical levels "at some point.” Dell’s analyst meeting is today at 9am ET.

CIT (1.35): US officials in advanced talks to aid CIT Group -- WSJ, citing sources: Citing sources familiar with the matter, the Journal reports that government officials are in advanced talks about providing support for CIT Group. According to the article, the discussions are fluid and it remains unclear if a deal can be secured. While support on Capital Hill appears to be fairly tepid, the Journal does point out that government officials are worried about unforeseen consequences that a collapse of the commercial lender could trigger. CIT shares are trading up 22%.

CAT (31.80): Caterpillar EPS reduced at Credit Suisse: The firm says sentiment across the US remains bearish with continued deterioration in conditions overseas. Excess inventories are noted to remain an issue globally. EPS estimates for 2009 and 2010 are reduced to $0.25 and $1.00 vs. Reuters $1.13 and $1.59 respectively. Target for the shares remains $34. CAT is neutral rated.

MLM (77.10): Martin Marietta Materials (MLM) guides full year EPS to $2.70-$3.30 (incl effect of stimulus plan) vs Reuters $3.57.

July 13, 2009: Morning Call

2009-07-13T08:09:00.000-04:00

July 13, 2009: Morning Call

Fair Value: SP500 – 875.91; NDX: 1418.98; DOW: 8098.42

Technical Levels:

SPX: 765, 788, 832, 875-880 support/ 935-943 resistance

Events:

Pre-market EPS: FAST (.33/485.7M)
*Treasury Secretary Geithner travels to UK, France, Saudi Arabia this week
08:00: Meredith Whitney interviewed on CNBC
14:00: US Monthly Budget Statement (June): -70B
14:30: White House Council of Economic Advisors releases labor market report
18:30: NVLS earnings call
Post-market EPS: NVLS (-.38/117.2M); CSX (.62/2.22B)

Foreign Market Summary/Key Macro News/Commentary:

The S&P and NASDAQ futures are both trading flat with fair value at 8am, rallying 10 points off the overnight session lows on light volume. Asian markets closed sharply lower on political concerns in Japan, growing doubts about the pace of the recovery, and concerns about relative valuations in emerging markets (Japan down 2.5%, Hong Kong down 2.56%, Australia down 1.49%, Shanghai down 1.1%, Taiwan down 3.5%, South Korea down 3.4%, India down 0.77%). Stocks in Japan fell for a 9th straight session after Prime Minister Aso’s plan to dissolve parliament sparked concern that political turmoil will hurt the economy. Fears about the fallout from a potential failure at CIT also weighed on sentiment. China Eastern Airlines (600115.CH) and Shanghai Airlines (600591.CH) both rallied as they resumed trading after announcing terms of their proposed merger. Fortescue Metals (FMG.AU) gained when it reported higher Q4 production, but Rio Tinto (RIO.AU) fell on lower metals prices. European markets have reversed opening declines of 1.0% and are currently trading up between 0.25%-0.50%. Mining and banking stocks are leading the gains. Philips Electronics (PHIA.NA) gained on Q2 net €44M topping estimates. Getinge (GETIB.SS) also traded higher after reports Q2. Friends Provident (FP.LN) traded higher after Resolution (RSL.LN) confirmed its made an initial offer for the company.

Research Calls/Market Moving News:

Goldman Sachs upgraded to buy from neutral at Meredith Whitney Advisory Group LLC: The price target is $186. Whitney will be appearing on CNBC at 8am ET.

Bank of America trying to avoid paying government billions for guarantees against losses at Merrill Lynch – Bloomberg: People familiar with the matter say regulators want BAC to pay at least part of a $4B fee it agreed to in January, because the company subsequently enjoyed implied US backing of $118B of Merrill assets. But the bank argues that since the rescue agreement was never signed and the funding never used, it shouldn't have to pay. One source says the government is probably asking for less than the $4B in the unsigned agreement. Another source says an update may be provided with Q2 results.

GS (141.87): Front-page NYT story profiles Goldman Sachs’s “Swift Return to Lofty Profits.” “Up and down Wall Street, analysts and traders are buzzing that Goldman, which only recently paid back its government bailout money, will report blowout profits from trading on Tuesday. Analysts predict the bank earned a profit of more than $2 billion in the March-June period, because of its trading prowess across world markets. If they are right, the bank’s rivals will once again be left to wonder exactly how Goldman, long the envy of Wall Street, could have rebounded so drastically only months after the nation’s financial industry was shaken to its foundations. The obsessive speculation has already begun, along with banter about how Goldman’s rapid return to minting money will be perceived by lawmakers and taxpayers who aided Goldman with a multibillion-dollar cushion last fall. “They exist, and others don’t, and taxpayers made it possible,” said one industry consultant, who, like many people interviewed for this article, declined to be named for fear of jeopardizing business relationships. Startling, too, is how much of its revenue Goldman is expected to share with its employees. Analysts estimate that the bank will set aside enough money to pay a total of $18 billion in compensation and benefits this year to its 28,000 employees, or more than $600,000 an employee. Top producers stand to earn millions.”

POT (85.07): Potash downgraded to neutral from buy at Sterne, Agee

GE (10.78): General Electric may have upside to Q2 EPS, says Goldman Sachs: The firm believes that GE may post upside Q2 EPS to First Call consensus of $0.23 (Reuters is $0.24) based on results from Industrial and GE Capital. Goldman Sachs maintains its neutral rating, noting that a potential for short covering around earnings is offset by the potential uncertainty regarding US financial regulatory reform. The target remains $16.

AAPL (138.52): Apple to release netbook in October, says Commercial Times – Bloomberg: Without citing sources, the paper says Wintek (2384.TT) will supply the touch panel and Hon Hai Precision (2317.TT) will assemble it.

GOOG (414.40): Think Equity previews GOOG’s Q2 earnings: “We expect GOOG to report an in-line Q2—revenue trends during the quarter were mixed, according to our SEM checks (April-May showed signs of improvement, but June slowed), but we believe GOOG could continue to produce upside to EPS/FCF forecasts, given cost controls and moderate CapEx. While we are expecting a better-than-L-shaped recovery, June jobs data suggested the path out of the recession could be bumpy. Considering MSFT is putting forward more competition in search and projected next-leg growth opportunities, such as display and mobile, still on the horizon, we remain cautious and reiterate our SoF (source of funds) rating and $325 price target. Consensus Revenue Expectations Have Declined But Still Too High, In Our View: As we noted above, we are expecting a better-than-L-shaped macroeconomic recovery, but questions remain as to the timing of the recovery and the ultimate strength of the recovery. Given disappointing June jobs data and our checks with large paid search buyers, which suggested potential consumer weakness in June, the path ahead could be a bumpy one. Consensus estimates for FY09 and FY10 have steadily decreased over the past several quarters, but we believe that they may still be too aggressive. For FY09, the consensus implies 6.3% net revenue growth (versus our estimate of 4.1%); for FY10, the consensus implies 14.4% net revenue growth (versus our estimate of 13.3%). While we find the consensus estimates to be more reasonable than in the recent past, we still believe downward estimate revisions are likely, and we expect those revisions to weigh on GOOG shares.”

INTC (16.04): Needham previews Intel’s Q2 earnings report. “We reiterate our Buy ahead of INTC's 2Q09 earnings on July 14. We expect 2Q09 results to beat consensus based on a strong Nehalem ramp and positive notebook orders at key ODMs. While the shares appear to already discount strong results and higher guidance, we believe upside to margins could still surprise the Street. Despite macro concerns, we believe improved visibility supports seasonal growth in 2H09. Looking into 2010, we believe Windows 7 will drive the much-needed corporate refresh, leading to further revenue growth and the return of normalized earnings. Upside to consensus revenue estimate largely expected; Intel may report a GAAP loss on EU fine. Most Asian OEM/ODMs reported MoM growth in June, suggesting the start of the typical seasonal build. We expect Intel's 1Q09 results to reflect strong order rates for server and mobile products. Intel may report a GAAP loss if it records the $1.45B EU antitrust fine, which is not factored in the Street's (or ours) estimates. 3Q09 revenue guidance should show seasonal growth. We expect guidance to reflect seasonal growth for 3Q09, or roughly inline with 15-yr average of 8.7% Q/Q. We believe the impact of component shortages in PC supply chain could be the biggest risks for 3Q09. The stock could rally on stronger margin guidance. We believe consensus underestimate margin leverage in Intel's model. The Street is modeling 3Q09 margin of 49.6% vs. our 51.8%. While the Bears are worried about mix shifting towards low-end netbooks, we believe Intel continues to limit price cuts to protect its margins. We believe margin outlook could beat expectation. Windows 7 to drive corporate refresh in 2010. As our IT Hardware Analyst, Rich Kugele, wrote on his July 7 piece, we believe Windows 7 will drive a corporate refresh cycle in 2010. The combination of a compelling OS offering, the aging corporate PCs, and weak IT spending this year, we believe there is pent-up demand for corporate PCs that could drive growth in 2010. Since corporate PCs typically use higher-end MPUs, we believe Intel will see further margin expansion.

GOOG (414.40): Barron's Technology Trader is skeptical of Google's plans to develop Chrome OS: While making many of the same observations made by others over the past week, Barron's says Google misunderstands the nature of netbooks in that people do use them to connect to the Web, but they use them for other things, including running standard software. Barron's also notes the overlapping markets for Chrome OS and Android.

BBY (32.77): Best Buy upgraded to outperform from perform at Oppenheimer: Target is increased to $42 from $40. Firm says recent concerns for the shares are largely overblown and the market has been too quick to dismiss the potential benefits for BBY from Circuit City's demise.

WSJ notes companies that may face problems if antitrust scrutiny increases
A "Heard on the Street" column surmises that industries that have not been looked at could be subject to scrutiny if exclusive agreements turn out to be the trigger for Justice Department concern. Best Buy (BBY) and Wal-Mart (WMT) sell a lot of things no one else does, and DirectTV (DTV) has exclusive rights to broadcast every Sunday NFL game. The behavior of companies that offer credit cards and are planning to raise fees before the new rate-limiting law comes into effect may be considered collusive. While not every antitrust case is lost by the company it is filed against, the column suggests avoiding any large targets the Justic Department may choose to make a statement.

AIG - Short-term trading opportunity.

2009-07-10T08:48:00.004-04:00

AIG is down 72% since the 1 for 20 reverse split. It is apparent that short sellers have used the reverse split as a catalyst to aggressively attack the shares. AIG's long-term fundamentals are terrible and there is the real likelihood that the common equity is worth zero once the liquidation of the assets is completed (probably years out) and the government is paid back the loans. That said, mechanical and technical factors are favoring a substantial bounce back above the 10 dollar level. The stock is extremely oversold in the short-term (Stochastics/MACD) and the negative rebate rate on short sales is btwn 50-60% annually depending on the prime broker you call (getting too expensive to hold shorts). I bought a small block of stock representing just 4% of the equity in my trading account because a larger position would be somewhat reckless given the concerns I have about the fundamentals of the company. I caught a nice bounce off the pre-market sell-off on Monday and moved to the sidelines. But, the move to 8.75 appears overdone. Long for a move to above 10.

July 8, 2009: Morning Call

2009-07-08T08:26:00.003-04:00

July 8, 2009: Morning Call

Fair Value: SP500 – 877.79; NDX: 1403.89; DOW: 8116.12

Technical Levels:

SPX: 765, 788, 832, 875-880 support/ 935-943 resistance

Events:

G-8 Meeting Starts today
Pre-market EPS: FDO (.59/1.8B)
05:00: Euro-zone GDP (Q1): -2.5% QoQ; -4.9% YoY
05:00: Euro-zone Household Consumption (Q1): -0.5%
07:00: MBA Mortgage Applications
09:00: NYX presents at Virtual Investor Forum
10:00: FMC presents at Morgan Stanley Energy Conference
10:00: FDO earnings call
10:30: DOE Crude Oil and Gasoline Inventories: -2.8m Crude draw; +900k Gas Build
12:55: Fed’s Evans speaks on a subject TBA
13:00: Treasury auctions 19 billion in 10 year notes
13:00: APC presents at Morgan Stanley Energy Conference
15:00: Consumer Credit (May): -7.8B
17:00: AA earnings call
17:00: Select US Retailers release June Same-Store Sales
Post-market EPS: AA (-.34/3.9B); RT (.19/303.9M)

Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 3 points above fair value and the NASDAQ futures are trading 7 points above fair value at 8am ET. The MSCI World index fell for a fifth straight day, commodities are down 1%, the USD is modestly higher against the Euro, and Treasury bonds are up a few ticks ahead of the 10-year note auction. Asian markets closed lower (Japan down 2.3%, Hong Kong down 0.79%, Taiwan down 0.70%, Shanghai up 0.35%, India down 2.3%). Financials dropped as the cost of protecting regional corporate and sovereign bonds from default jumped. Australia reversed declines as miners jumped on a report China agreed to a 33% iron-ore price cut. Doubts about the pace of economic recovery sent Hong Kong and Indian markets lower. European markets are flat to down 0.50% in a listless trading session. The final revision to Euro-zone Q1 GDP was in-line with expectations (-4.9% YoY vs. –4.8% consensus).

In the May 20th morning call, I noted that the S&P 500 would settle into a trading range between 875-950 for the next few months and that opportunistic traders should trade around these broad market levels. On June 23rd, the S&P had the first real test of the bottom end of the range and I noted that, “opportunistic traders should buy the bottom end of the range.” I am no longer advocating this "trade the range" strategy because the underlying bid is appreciably weaker than I expected. On balance, economic data has been disappointing over the last few weeks and market participants are clearly beginning to question the long-term sustainability of any economic recovery. Thus far, the massive monetary and fiscal of stimulus (and trillions in additional financial backstops/guarantees) have only appeared to trigger a modest improvement in the data. As TCW’s Jeffrey Gundlach noted in a letter to investors on June 15: “Well, given the government’s massive intervention in our economy, a few blips in the econ stats would be the least we should expect! If we’re to indulge in horticultural metaphors, I suspect these green shoots owe more to Miracle-Gro than properly fertilized soil and the natural change in the seasons. Like perennials overdosed with Miracle-Gro, the economy may manage a year or two of real growth under the goad of Treasury-issued debt and Fed-engineered inflation—before burning out.” In terms of strategy, traders should be focused on short-term trading strategies rather than aggressively buying the bottom end of this range (875-880). I would look to buy more aggressively on a technical break below the trading range – say around 855-860.

Research Calls/Market Moving News:

GOOG (396.63): Google introduces Google Chrome operating system on website: The open-source OS will initially be targeted at netbooks; the company will open-source the code later this year. Google is working with multiple OEMs to make netbooks running Google Chrome OS available for purchase in H2/10. While there are areas where Google Chrome OS and Android overlap, the projects are different.

AAPL (135.40): Apple disclosures about Steve Jobs's health remain under SEC scrutiny – Bloomberg: A person familiar with the matter says investigators want to make sure investors weren't misled by January statements that moved Jobs's condition from "relatively simple" to "more complex" in nine days. The source says the review does not mean Jobs or Apple will be accused of wrongdoing. Regulators are particularly interested in exactly what the company's board knew when it made the 5-Jan and 14-Jan statements. Another source says Apple's lead directors were being briefed by Jobs's doctors about his condition at the time.

FSLR (144.70): First Solar upgraded to buy from accumulate at ThinkEquity (144.70): “Conclusion: Given the recent sell-off of solar stocks and FSLR's 29% move lower from its May high, we believe investors can begin to get constructive on the stock in anticipation that the company meets 2Q09 estimates, reiterates 2009 guidance, and the potential for consensus 2010 estimates to increase on higher systems sales. We believe FSLR has the only unquestionably sustainable business model in the solar industry and is actively taking market share despite the weak business environment. We believe shares are oversold at current levels and are upgrading the stock to Buy (from Accumulate) based on valuation and raising our price target, which offers 24% upside from current prices. Additional Key Points Include: • We expect FSLR to meet consensus estimates and reiterate guidance based on our most recent round of channel checks. • We believe that the 2Q09 sell-through is still a concern and modest inventory build is a possibility, but we have not found significant volumes of inventory in the channel. • Euro-denominated pricing appears to be moving lower, but USD/Euro exchange rate is offsetting declines, in our view. We expect module ASPs at approximately $1.97/W for the quarter. 2Q09 sell-through is a concern, but we have not found significant volumes of inventory in the channel. While reports of large volumes of FSLR modules have been widely disseminated for the past two quarters, we have not found
confirmation of those volumes. However, our checks indicate that inventory of FSLR modules has increased modestly at the installer level and that the secondary market for FSLR product has seen some volume that has taken several weeks to clear. While we view slower moving inventory as a concern and would not be surprised to see a small inventory build at the OEM level, we believe the company is focusing on removing barriers to sell-through and will likely not see a large inventory build anywhere in the channel despite increasing production volume. We also believe the company is using its North American systems business, which we believe has a much larger backlog than the company has indicated, as a safety valve for volumes allocated to Europe, which the company is not able to sell. Given our channel checks and management's history of guiding very conservatively, we believe FSLR is likely to at least meet consensus estimates of $460M in revenue and $1.61 in EPS and has a significant chance to meet our expectation of $484M in revenue and $1.69 in EPS.”

RIMM (66.46): Piper Jaffray is cautious on RIMM citing increased smartphone competition and “slightly weaker” June sales: “Slightly Weak June Sales: Our checks indicated BlackBerry sales declined in June at AT&T and Sprint due to increasing smartphone competition, as BlackBerry sales appeared to lose share to the Palm Pre at Sprint and the new 3GS iPhone and older $99 iPhone at AT&T. BlackBerry sales at T-Mobile remained solid, but Verizon sales were slightly weaker following the termination of the BOGO promotion. Maintain Neutral: Due to our longer term concern of increasing smartphone competition and RIM's increasing mix of sales to consumers combined with RIM's ongoing investments to grow its global brand and market share, we anticipate declining margin trends. As such, we maintain our Neutral rating. • Pre Launch Impacts Blackberry Sales At Sprint: Our checks indicated Curve sales slightly declined in June at Sprint due to solid sales of the Palm Pre. Despite initial stock-out issues of the Pre, our June checks indicate adequate Pre stock at most Sprint channels, and we anticipate solid sell-through of the Pre over the next several months could potentially lead to softer Curve sales. • iPhone Launch Impacts Blackberry Sales At AT&T: Our checks indicated the new 3GS iPhone and older 3G iPhone's new $99 price impacted BlackBerry and other competitor sales. At AT&T, our checks indicate the Bold remains the top selling BlackBerry device with the 8900 a distant second and limited sales for the older Curve and Pearl products. Overall, our checks indicated the new iPhone impacted BlackBerry sales, as June sales appeared lower than May levels.”

FCX (45.00): Citibank upgrades FCX to buy from hold. Price target is 58 a share.

FDO (27.75): Family Dollar reports Q3 EPS $0.62 vs guidance $0.54-0.58 and Reuters $0.59: Company previously reported revenues of $1.84B. Guides Q4 EPS to $0.39-0.43 vs Reuters $0.39. Guides full year EPS to $2.03-2.07 vs Reuters $2.00. FDO noted the quarter is off to a good start, with sales in comparable stores increasing an estimated 2% in June. For Q4, the company expects that net sales will increase between 4%-6% and expects comparable store sales will increase 2%-4%.

Federal regulators consider restrictions on speculative traders in oil, natural gas, and other energy products – NYT: The Commodity Futures Trading Commission says it will consider using its existing powers to impose volume limits on such trading by purely financial investors. Trading by businesses such as airlines or oil companies would not be restricted. The CTFC also intends to reveal more about exactly who the traders are. The article notes the ideas, borne of recent chaotic movements in the price of oil, could be fiercely opposed by big banks, which are large traders in commodities. The government already limits speculative trading in agricultural commodities. Bloomberg had a high profile article on this topic yesterday and concerns about the trading limits caused sharp sell-offs in CME and ICE shares.

AMGN (52.23): Amgen's Denosumab demonstrates superiority over Zometa in head-to-head phase 3 trial – shares are trading up 7 in the pre-market: AMGN announced that a pivotal, Phase 3, head-to-head trial evaluating denosumab versus NVS's Zometa (zoledronic acid) in the treatment of bone metastases in 2,049 patients with advanced breast cancer met its primary and secondary endpoints and demonstrated superior efficacy compared to Zometa.

AMGN (52.23): Amgen target raised to $60 from $54 at Deutsche Bank following Denosumab data: The firm sees the results as the best possible scenario for AMGN after the company announced Dmab showed superiority vs. Zometa in breast cancer with both primary and secondary endpoints being met. Superiority in breast cancer is seen increasingly the likelihood of superiority in other indications.

FDIC chief Sheila Bair not anxious to have private-equity firms buy banks - NY Post: A participant in a five-hour 6-Jul meeting between Bair, banking figures, and private-equity figures provides the assessment of her attitude. The source, which says the meeting was friendly, suggests Bair may feel there are too many banks, making consolidation preferable to new ownership. Wilbur Ross says, "I left the meeting feeling the FDIC was nervous about private equity, but not that they did not want to work with us."

July 7, 2009: Morning Call

2009-07-07T08:21:00.001-04:00

July 7, 2009: Morning Call

Fair Value: SP500 – 895.02; NDX: 1440.22; DOW: 8271.58

Technical Levels:

SPX: 765, 788, 832, 875-880 support/ 935-943 resistance

Events:

13:00: Treasury auctions 35 billion in 3-year notes
16:30: API Crude Oil and Gasoline Inventories
17:00: ABC Consumer Confidence (July 5): -50

Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 2 points above fair value and the NASDAQ futures are trading 4 points above fair value at 7:45am ET. Asian markets closed mixed (Japan down 0.34%, Hong Kong down 0.65%, Shanghai down 1.1%, Taiwan up 0.98%, South Korea up 0.27%, India up 0.90%). Construction stocks rose in Taiwan after Ting Shin International Group bought a 20% stake in Taipei 101 from China Development (2883.TT), which jumped 6%. Tech stocks in South Korea continued to be supported by Samsung Electronics (005930.KS)’s guidance yesterday. Samsung itself benefited from a broker upgrade and added another 3%. LG Electronics (066570.KS) jumped 5% after announcing it would reorganize its manufacturing plants and expand its investments in Mexico. Japan extended its losing streak on persistent concerns over the likely strength of any economic recovery, while exporters were dragged lower by worries over a strengthening yen. European markets have reversed modest losses on the open and are currently trading up 0.50% to 1.0%. British industrial production and manufacturing production numbers came in weaker than expected while German factory orders came in better than consensus. Basic material, financial, and industrial sectors are outperforming while the health care and telecom sectors are lagging.

Research Calls/Market Moving News:

AAPL (138.61): Piper Jaffray’s Gene Munster reiterates a buy rating and 180 price target and is “increasingly confident in June Mac and iPhone estimates.” “We are increasingly confident in our 2.2m Mac and 5m iPhone unit estimates for the June quarter given the following data points: • New lower-priced 13" MacBook Pros have a 7-10 day lead-time at Apple's online store (we have not seen similar delays on 13" models in over 2 years at 5-7 days). • 7 of 10 Apple retail stores we called are in short supply of 13" MacBook Pros. • NPD (April & May) tracking down 3%, vs. our model of down 10% for the June quarter. We expect NPD for the June quarter to be tracking up 1% once the month of June data is factored in. • Media sources are reporting that AT&T had its best retail sales day ever at the launch of the iPhone 3GS (i.e. an improvement from the iPhone 3G). Shortages Indicate Strong Mac Sales In June Quarter. Apple's online store is currently showing a 7-10 day delay in shipments of some models of the 13" MacBook Pro. Recall that Apple re-branded the popular 13" aluminum MacBook as the MacBook Pro and lowered the price on 6/8. We track product lead-times and our records show that Apple has never had a 7-10 day delay on its most popular 13" model, with the most recent significant delay being 5-7 days over 2 years ago in 9/08. We see this as a sign that demand is outpacing the company's build expectations, and it may take several weeks to reach a supply demand equilibrium. delays at its online store, Apple retail stores are experiencing shortages in some 13" MacBook Pro models. Of the 10 Apple stores we contacted, 7 are short of at least one 13" MacBook Pro model. Again, we see this as a sign of strong demand for Apple's most popular computer, which gives us increasing confidence in our 2.2m Mac unit estimate for the June quarter. AT&T Indicates Recent iPhone 3GS Launch Better Than Previous Launches. Several media sources are reporting that AT&T had its best retail sales day ever at the launch of the iPhone 3GS. While Apple has indicated the 3GS launch was as good as the 3G launch a year earlier (both reached 1m units), AT&T has indicated that the Jun-09 launch was its best-ever retail sales day and the largest order day in att.com history and (i.e. an improvement from the iPhone 3G). We are modeling for 5m iPhones in the Jun-09 quarter, a reduction from the 6.9m units the company sold in the launch quarter of the iPhone 3G. However, these datapoints suggest domestic sales of the new 3GS are tracking ahead of Apple's internal expectations. That said, the 3GS was launched in just 8 countries this year (vs. the 3G in 21 countries last year), so the international units will likely be weaker. The Bottom Line On Our iPhone Estimates. While we could be raising our June quarter unit numbers from 5m, we are maintaining estimates given a successful 3GS launch was built into our numbers and we remain significantly above the Street for June quarter iPhone unit estimates."

AAPL (138.61): BMO Capital reiterates their overweight rating and raises the price target to 152 from 150. “In this note, we take a look at Apple’s guidance for the September quarter, focusing on the introduction of the new iPhone and MacBook models with lower price points, and the impact to Apple’s gross margin. At the product level, we believe gross margins for both iPhones and MacBooks in the September quarter will decline owing to higher cost of goods sold (COGS) and lower pricing. However, factoring in mix, we believe overall gross margins should remain at healthy levels of 34%-35%, owing largely to increasing iPhone contribution. Further, we believe that Apple has been aggressive about reducing supply costs, to help offset the cost of
richer configurations and lower consumer ASPs. We offer a few main points:
1. iPhone impact, like for like. Given the $100 price cut and higher COGS, we believe gross margins for the new 16GB iPhone 3G S is currently around 53% versus 63% for the
previous 16GB 3G during the March quarter, or approximately a 940 bp decline.
2. iPhone, net of mix. We estimate total iPhone gross margins decline to 52% in the
September quarter from 59% in March, or approximately a 690 bp decline. We believe that mix within the iPhone family will help offset the like-for-like pricing pressure. Moreover, we note that profit margins on the 32GB iPhone are greater than the 16GB iPhone, given that the increase in price is greater than the increased cost of flash.
3. MacBook impact. For MacBooks, we assume a $50 price cut in ASPs lowers gross
margins to 25% in the September quarter from 30% in March, or approximately a 510 bp
decline.
4. Despite the price cuts, we believe Apple’s overall gross margins in the September quarter should be in the 34%-35% range, helped by higher mix of iPhones. Given Apple’s conservative guidance posturing, we would not be surprised if Apple provided gross margin guidance in the 32% range.
5. Estimate changes – higher. We are modestly raising our CPU and iPhone unit estimates as well as raising our gross margin assumption. We are raising our June CPU forecast to 2.4 million units from 2.2 million, and raising our iPhone forecast to 4.5 million units from 4.2 million. Net, we are raising our EPS estimate to $1.17 from $1.04, which compares with the Street $1.15. For FY2010, we are raising our GAAP EPS estimate to $6.10 from $6.00, and our non-GAAP EPS estimate to $7.00 from $6.75.
6. Raising target. Given our estimate changes, we are raising our target price to $152 from $150, based on 20x-22x our GAAP EPS plus cash, or 20x-22x our non-GAAP estimate. We note that June quarter results will be impacted by the release of iPhone OS 3.0, in which Apple did not recognize new iPhone sales until June 17, or only two weeks of revenue recognition. We believe the iPhone accounting treatment will impact June quarter revenues by approximately $200 million and EPS by $0.05. Still, we believe Apple will be able to at least meet Street estimates of $1.15. If Apple were to report June quarter EPS of $1.20-$1.30, we believe Apple will guide September quarter EPS in the range of $1.05- $1.15, or a 10%-15% q/q decline."

Information Technology Spending to Drop 6 Percent, Gartner says- Bloomberg: “Spending on information technology will drop 6 percent to $3.15 trillion this year, more than previously forecast, as the economic crisis forces companies and consumers to cut back, researcher Gartner Inc. said. “While the global economic downturn shows signs of easing, this year IT budgets are still being cut and consumers will need a lot more persuading before they can feel confident enough to loosen their purse strings,” Gartner said in an e-mailed statement. In March, the Stamford, Connecticut-based researcher had predicted a 3.8 percent decline for 2009. The drop is worse than the slowdown after the Internet bubble burst in 2001, when technology spending fell 2.1 percent. The “full impact of the global recession on the IT services and telecommunications sectors is still emerging, and forecast growth in these areas has been further reduced significantly,” Gartner said today. The researcher also changed its forecast because the U.S. dollar rose against most currencies in recent months. Computer-hardware sales will fall the most, with spending on equipment declining 16 percent, Gartner said. That compares with a 2.5 percent gain in 2008. Spending on services, software and telecommunications gear will also drop. For 2010, Gartner predicts spending on information technology products and services will increase by 2.3 percent."

INTC (16.54): Bank of America Merrill Lynch upgrades INTC and other semiconductor stocks: Intel (INTC) upgraded to buy from neutral; target is $19. LSI Corp (LSI) upgraded to buy from underperform; target is $7. Marvell (MRVL) upgraded to buy from neutral; target is $17. Maxim Integrated (MXIM) upgraded to neutral from underperform; target is $15. National Semiconductor (NSM) upgraded to neutral from underperform; target is $13.

Goldman Sachs upgrades DKS, JNY, KSS; downgrades BJ: Dick's Sporting Goods (DKS) upgraded to buy from neutral, tp $20. Jones Apparel (JNY) upgraded to buy from neutral, $12. Kohl's (KSS) upgraded to buy from neutral, tp $50. Downgrade: BJ's Wholesale (BJ) downgraded to sell from neutral.

APC (41.79): Anadarko Petroleum upgraded to buy from neutral at Bank of America Merrill Lynch

HES (48.62): Hess Corporation upgraded to overweight from equal-weight at Barclays Capital: Valuation cited. Target is $75.

July 1, 2009: Morning Call

2009-07-01T08:32:00.005-04:00

July 1, 2009: Morning Call

Fair Value: SP500 – 915.74; NDX: 1476.62; DOW: 8395.15

Technical Levels:

SPX: 765, 788, 832, 875-880 support/ 935-943 resistance

Events:
Pre-market EPS: GIS (.80/3.7B); STZ (.32/777.2M)
04:00: Euro-zone PMI Manufacturing (June): 42.4 (actual: 42.6)
07:00: MBA Mortgage Applications
08:15: ADP Employment Change (June): -395,000 (actual: -473,000)
10:00: ISM Manufacturing (June): 44.9 ; Prices Paid: 47.0
10:00: Construction Spending (May): -0.6% MoM
10:00: Pending Home Sales (May): 0.0% MoM
10:00: GIS earnings call
10:30: DOE Crude Oil and Gasoline Inventories: -2m Crude draw; +2m Gas Build
11:15: Fed’s Evans speaks on credit crunch, policy actions
14:00: GM June 2009 Sales and Revenue Call

Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 6 points above fair value while the NASDAQ futures are trading 10 points above fair value at 8am ET. Chinese manufacturing expanded for the fourth straight month (PMI 53.2 vs. prior 53.1; CLSA PMI 51.8 vs. prior 51.2). Euro-zone manufacturing was in-line with expectations. Asian markets closed mostly higher with markets in Shanghai outperforming, closing above 3000 for the first time in 12 months (Shanghai up 2.26%, Taiwan 2.2%, Hong Kong closed, Japan down 0.19%, Australia down 2.05%, India up 1.0%, South Korea up 1.8%). Construction and property shares advanced in Taiwan after the government lifted a ban on Chinese investment yesterday. Telecoms climbed after the Korea Communications Commission asked the country’s wireless carriers to refrain from overheating marketing competition. A weaker-than-expected tankan had minimal impact on Japan. Chalco (601600.CH), All Nippon Airways (9202.JP) and Orix (8591.JP) fell on reports the companies plan to offer new shares. All sectors in Australia fell in the first day of trading in the new FY. Hong Kong was closed for SAR Day. European markets are up 1.3% and have been trading in a tight trading range all morning. Mining shares were amongst the leading groups and retailers are strong following positive comments by UK retailer Marks and Spencer (MKS LN). Advancers on the FTSE 100 lead decliners 4-1.

Research Calls/Market Moving News:

BAC (13.20): Bids for Bank of America's Columbia Management Advisors LLC coming below expectations – FT: The FT cites people close to the matter who say that bids for the asset management business have come in at about $2B, below the $3B that BofA had targeted. The article notes that BofA may separate Columbia's money market assets to make the business more attractive, though the move may prove unnecessary if the pricing gap narrows. People close to the situation say that BlackRock (BLK) will not be buying the business, and that buyout firms remain interested in First Republic, BofA's private bank and mortgage lender, for perhaps $600-800M.

AIG (23.20): AIG is trading down 25% following the execution of a 1 for 20 stock split. There is no clear news to account for the decline. I would note that NITE securities is the number 1 broker based on advertised volume in the pre-market. Although AIG equity is likely worth zero over the long-term, I am not seeing any new fundamental news to account for the sell-off this morning. AIG shares fell 13% yesterday on concerns about European CDS exposure. Either the shares are continuing to fall on that story or retail investors are selling the shares in a very sloppy fashion (as I said, NITE is the largest advertised broker and they typically see a big chunk of discount/online broker's order flow). Hard to believe but AIG could be worth a fade (buy) here at the 17.50 level for a quick trade.

FDIC expected to propose tough new guidelines for private-equity firms looking to invest in failed banks – WSJ: The Journal cites people familiar with the matter, though it also points out that the proposal is not final and could still change before it is issued for public comment. According to the article, the proposal is expected to focus on deterring private-equity firms from flipping failed banks and may include a mandatory investment period. The proposal is also likely to impose higher capital reserves on private-equity firms than traditional banks, and may even require firms that own several banks to offer some form of cross-guarantee.

GIS (56.02): General Mills (GIS) reports Q4 EPS $0.86 ex-items vs Reuters $0.80, guides f10 EPS to $4.20-4.25 vs Reuters $4.17; FC $4.18.

June 30, 2009: Morning Call

2009-06-30T07:53:00.001-04:00

June 30, 2009: Morning Call

Fair Value: SP500 – 923.59; NDX: 1483.26; DOW: 8477.54

Technical Levels:

SPX: 765, 788, 832, 875-880 support/ 935-943 resistance

Events:
Last Trading Day in Q2
Pre-market EPS: SCHN (.11/382.6M)
09:00: S&P/Case Shiller Home Price Index (April): -18.75% YoY
09:00: BBBY Annual Meeting
09:45: Chicago Purchasing Manager (June): 38.5
10:00: US Consumer Confidence (June): 55.1
10:00: AIG Annual Meeting
12:00: Fed’s Bullard speaks on exit strategies
16:10: Fed’s Hoenig speaks on a topic to be determined.
16:30: API Crude Oil and Gasoline Inventories
17:00: ABC Consumer Confidence
21:00: Chinese Manufacturing PMI (June): 53.1
22:30: Chinese CLSA Manufacturing PMI (June): 51.2

Foreign Market Summary/Key Macro News/Commentary:

The S&P and NASDAQ futures are both trading flat with fair value at 7:30am ET. Asian markets closed mixed (Japan up 1.79%, Hong Kong down 0.81%, Australia up 1.75%, Shanghai down 0.42%, India down 1.97%). The WSJ reported that Shinsei Bank (8303.JP) and Aozora Bank (8304.JP) are expected to announce on Wed their plan to merge. In China, Hebei Iron and Steel head says hoping to win more than 33% price cut in iron ore talks. Australian retailer David Jones (DJS.AU) jumped after upgrading its profit guidance for the FY after it experienced improved trading conditions in May and June. European markets are flat to down 0.25% in a range-bound session. European markets weakened following the release of a weaker final revision to Q1 UK GDP (-2.4% vs. –2.1% consensus). Decliners on the FTSE 100 lead advancers 3-2. BG Group (BG.LN) announced it'll acquire a 50% interest in 120k net acres and related and complementary gas-gathering and transportation assets from EXCO Resources (XCO) for a total approx $1.3B.

Research Calls/Market Moving News:

FCX (50.33): Freeport-McMoRan upgraded to buy from hold at Canaccord Adams: Target increased to $61 from $40.75. Firm notes an increase in copper price forecasts for '09/'10/'11.

AMZN (83.03): Amazon.com upgraded to outperform from neutral at Cowen & Co.

UBS Equity Strategy increases allocation in Financials to a modest overweight from neutral.

GS (149.36); JPM (34.60); MS (29.10); STT (48.50): UBS resumes coverage of financials GS, JPM, MS, C, and STT: Goldman Sachs (GS) resumed buy; target is $175. Citigroup (C) resumed neutral, firm says shares are a short term buy; target is $3.25. JPMorgan Chase (JPM) resumed neutral; target is $37. State Street (STT) resumed neutral; target is $49.

FDX (55.63): FedEx upgraded to overweight from equal-weight at Barclays Capital:
Target remains $71. The stock is the firm's top pick within the transportation sector.

GERN (6.69): GE Healthcare and Geron reach an agreement to share intellectual property rights for embryonic stem cell products. GERN shares are up almost 30% on the news.

APOL (65.99): Apollo Group reports Q3 EPS $1.26 vs Reuters $1.12: Company reports revenues of $1.05B vs Reuters $1.04B. Apollo Group mentioned positively at RBC: The firm believes the quarterly results will lead to upward earnings revisions and perhaps upgrades of the shares based on expectations for increased future profitability. RBC says comments during the company conf. call have positive implications for the rest of the sector from both a financial and regulatory standpoint. Shares of APOL remain sector perform rated. APOL shares are trading up 5% in pre-market trading.

Securities firms on the verge of closing most profitable quarter since the credit crisis began – WSJ: The Journal highlights some of the favorable developments, noting that according to Dealogic, the debt market saw $1.5T of global issuance in Q2 (just slightly below the level seen in Q1), while equity offerings reached nearly $26B, four times the amount recorded in Q1 and the highest since Q2 of 2008. The article also notes that spreads between bid and offer prices on fixed-income assets remained wide through much of Q2, a dynamic that helped to boost trading revenues.

FT discusses stalemate in iron ore talks: The FT reports that amid a stalemate in tense talks with Chinese steelmakers over a new iron ore supply deal, Rio Tinto has threatened to sell its iron ore into the spot markets if the parties are unable to reach an agreement on Tuesday. The paper notes that negotiations have been complicated by the fact that iron prices have jumped to their highest levels in four months, above the annual benchmark level at which the world's biggest miners struck deals with steelmakers elsewhere in Asia. Recall that the three mining companies - Rio Tinto, Vale and BHP Billiton - agreed to cut annual benchmark iron ore prices by 28%-33% for deliveries to steelmakers in Japan, South Korea, Taiwan and Europe. However, the China Iron and Steel Association (Cisa), Beijing’s negotiator, has rejected those cuts and is looking for 40-45% reduction in prices.

F (5.78): Ford guides Q3 production to 485K vehicles vs previous 460K –wires: Headlines crossed just before the close. Represents a 16% y/y increase compared to previous guidance for +10%

NCI Journal article questions cancer drugs' cost -- WSJ : The authors of the article published in the National Cancer Institute found that use of Erbitux, which costs $80K for an 18-week regiment, only prolongs survival by 1.2 months. Using that estimate and extrapolating those costs to extending the lives of 500K Americans who die of cancer annually by one year could cost $440B. The article also questions the cost of Avastin (ROG.VX, PDLI) and Nexavar (BAY.GR, ONXX) and is seeks changes in the testing and practice of medicine. The pharmaceutical companies says the article exaggerates the overall costs of the treatments as few patients are on them for extended periods.

2009-06-29T08:16:00.001-04:00

June 29, 2009: Morning Call

Fair Value: SP500 – 915.24; NDX: 1479.73; DOW: 8385.67

Technical Levels:

SPX: 765, 788, 832, 875-880 support/ 935-943 resistance

Events:

04:00: Euro-zone Consumer Confidence (June): -30; Economic Conf: 71.0
04:00: Euro-zone Industrial Confidence (June): -32
08:30: Chicago Fed. National Activity Index (May): 33.10
17:00: APOL earnings call
Post-market EPS: APOL (1.12/1.04B); HRB (2.05/2.5B)

Foreign Market Summary/Key Macro News/Commentary:

The S&P and NASDAQ futures are both trading 2 points above fair value at 7:30am ET. The futures are trading 10 points above the overnight session low (907.40) in very light volume. Asian markets closed lower (Japan down 0.95%, Hong Kong down 0.39%, Australia down 0.43%, Shanghai up 1.65%, Taiwan down 1.1%, India up 0.14%). Japanese Industrial production came in weaker than expected (5.9% vs. consensus 7.0%). Daiwa Securities (8601.JP) fell after announcing a $2.5B share sale and Mizuho Financials (8411.JP) also traded lower on talk of share sale. European markets quickly reversed small opening declines and are currently trading up between 0.50% and 1.2%. Euro-zone confidence numbers came in stronger than expected. Deutsche Telecom is up 2.5% on chatter that VOD is considering a bid for DT’s UK wireless division. ELN traded up as much as 8% before pulling back on chatter that NVS is in talks to buy part of the Elan. Reports are saying that an agreement is “some way off.”

Research Calls/Market Moving News:

AAPL (142.44): Collins Stewart says iPhone shipments are well ahead of consensus, according to their channel checks. “ Final June Production Well Above Our Prior Estimate Our AAPL supply chain checks indicate that total iPhone production (3G/GS) for the June quarter will come in close to 7 million or well above our earlier near consensus expectations of 4.6 million. The late ramp was attributed to production bottlenecks. Legacy 3G iPhone shipments would have increased over 15% sequentially to 4.4 million and the residual 2.4 million representing 3GS shipments. Overall shipments are almost 2x the levels in the June quarter. Conservative Production Forecast: AAPL current iPhone production forecast for the September quarter calls for total unit shipments to modestly exceed 6 million units. This would be a high single digit decline both sequentially and year-on-year. If these production levels hold, it would represent modest sequential increase for the 3GS phones and a 15% decline for the 3G platform. It appears that AAPL will sunset the legacy platform by year end. n Model iPhone contributes to about a fifth of top-line revenues. An incremental 2+ million iPhone shipments translates to an additional $150 million based on subscription accounting, or a 2% upside, to our revenue estimate of $8.1billion.

WSJ says PPIP has lost momentum and shows the difficulty of getting the bad debt off the banks' balance sheets: Cites the well known causes: "Big banks worried about having to sell at fire-sale prices while small banks feared they would be shut out. Potential buyers balked at the risk of doing business with the government, concerned that politicians might demonize them for making big profits." Some officials say the banking environment has improved and there is not as much of a need for the program, as demonstrated by the recent capital raisings. The FDIC effectively ended the prong that would buy bad bank loans earlier this month while investors are reluctant to participate in the effort to buy troubled securities. Some claim that the announcement of the program generated the confidence to allow the bank to raise private capital.

AAPL (142.44): Barron's Follow Up is still positive on Apple: The shares are trading for 25x forward earnings compared to a 5 year average of 30x. Bernstein Research's Toni Sacconaghi has a target of $155 and believes the near term performance will be good enough to merit a higher stock price. COO Cook has performed ably while CEO Jobs was absent for medical reasons.

AAPL (142.44): NY Times notes the popularity of gaming on the Apple iPhone: Games are the largest section of the App Store and the largest number of downloads. The gaming industry is starting to pay attention to the casual gamers who use the iPhone to play, about 79% of iPhone users have downloaded games vs 31% for smartphone users in general. Electronic Arts is now bringing titles to the iPhone, including some of the bigger franchises. Some developers say the sophisticated level of play possible is starting to cut into the market of devices like the PSP and DS.

GOOG (425.32): Google argues size shouldn't matter because it is a click away from obsolescence reports the NY Times: Google is waging a public relations campaign to convince regulators and lawmakers that despite its size, Google is still vulnerable to competition and industry disruptive technologies. Google has not been accused of anticompetitive practices but is involved in three separate governmental investigations and some analysts say government opposition is the biggest threat to the company's continued success.

DELL (13.68): Bernstein comments on Dell, acquisition strategy: The firm believes DELL is focused on acquiring small to medium sized enterprise related companies with strong margin profiles and higher levels of recurring revenues and says a PC or consumer/handset related acquisition appears unlikely. Bernstein does believe DELL should consider a deal to acquire another PC company with Acer mentioned as a possibility. A large acquisition in the services area such as CSC or ACN is seen as highly unlikely though Perot (PER) could make sense. With regard to the storage area, Compellent (CML) and CommVault (CVLT) are both seen as appropriate targets.

STT (48.33): State Street receives Wells notice from SEC: On 25-Jun, the staff of the SEC provided State Street Bank and Trust Company, State Street's principal subsidiary, with a “Wells” notice. The notice relates to an ongoing SEC investigation into disclosures and management by State Street Global Advisors of certain active fixed-income strategies during 2007 and prior periods. The Wells notice informs State Street that the SEC staff intends to ask the SEC Commissioners for permission to bring a civil enforcement action for possible violations of the securities laws.

Barron's summaryCover: Examination of the asset allocation of the large university endowments. Interview: Joe Dear, chief investment officer of Calpers, is counting on a 7.75% rate of return long term. Lead Articles: Wendy’s/Arby’s Group (WEN) looks worth buying after a recent selloff; Henry Schein (HSIC) and Patterson (PDCO) look overextended; cautious near term on Asia; Other Voices is a contribution from Joe Queenan; Editorial questions the wisdom of the proposals for increased regulating of the financial markets. Columns: The Trader is cautious on the markets and dollar, looks at potential commodity M&A and is positive on Accenture (ACN); Commodities Corner says corn bulls may suffer if not as much farmland is left fallow as originally planned and the shift away from corn does not materialize; Current Yield notes the backing away from risk lately and the risk to the larger market if California starts paying obligations with IOUs on 1-July; Asia Trader notes the strength of the Indonesian market; Euro Trader is positive on Allianz (AZ) and AXA Group (AXA); The Striking Price notes the time it takes for a calming of volatility to be priced into longer term options and that some traders are seeking to profit from that; Follow Up is still positive on Apple (AAPL) and packaging stocks; Up and Down Wall Street considers the latest economic and political news; Streetwise notes that if the credit markets are correct, then conditions should remain supportive of stocks generally; D.C. Current notes the secretiveness surrounding the Obama administration's auto task force; Technology Trader criticizes Apple (AAPL) and Palm (PALM) for their lack of candor, Apple about CEO Jobs' health and Palm about sales of the Pre; Plugged In notes the attack of NetSuite (N) against SAP (SAP) on SAP's home territory with the coming release of NetSuite's applications for German companies and others doing business in that country.

June 26, 2009: Morning Call

2009-06-26T07:56:00.001-04:00

June 26, 2009: Morning Call

Fair Value: SP500 – 916.59; NDX: 1475.37; DOW: 8419.88

Technical Levels:

SPX: 765, 788, 832, 875-880 support/ 935-943 resistance

Events:

Pre-market EPS: KBH (-.72/337.6M)
08:30: Personal Income (May): 0.3%; Personal Spending: 0.3%
08:30: PCE Core MoM: 0.1%; PCE Core YoY: 1.8%
10:00: University of Michigan Confidence (June): 69.0
13:00: Fed’s Fisher speaks on the economy
13:00: Baker Hughes US Rig Count
11:30: KBH earnings call
14:00: Fed’s Bernanke gives brief remarks at BLS 125th Anniversary Celebration

Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 2 points below fair value while the NASDAQ futures are trading 5 points below fair value at 7:30am ET. Asian markets closed higher following Wall Street’s sharp gains in Thursday’s session (Japan up 0.83%, Hong Kong up 1.78%, Australia up 1.24%, Shanghai up 0.34%, India up 2.92%). Qantas (QAN.AU) cancelled an order for 15 Boeing (BA) B787's and delayed delivery of a further 15 B787's for four years. Suzuki Motor (7269.JP) rose after the Manager Magazin reported yesterday Volkswagen (VOW.GR) was considering taking a stake of around 10%. Bridgestone (5108.JP), the world’s largest tiremaker, rallied 8.5% in Japan after it said it expected to break even on a net basis this year. European markets are flat to up 0.50% after opening up as much as 1.0% to 1.4%. Technology and consumer stocks are outperforming while healthcare and utilities are underperforming. SNY is down 8% in Paris on concerns that its Lantus diabetes drug has health risks; Lantus is Sanofi’s third biggest-selling drug.

Research Calls/Market Moving News:

POT (93.52): Potash guides Q2 EPS to ~$0.70 vs. prior $1.10-$1.50 and Reuters $0.97: Company says the change reflects substantially lower than forecasted potash sales volumes due to deferral of purchases by customers around the world and lower realized prices for phosphate fertilizers. Adds that any necessary revisions to annual guidance will be addressed in its Q2 release.

Dollar Falls on China Call for World Currency – Bloomberg: “The dollar weakened and stocks pared their advance after China’s central bank reiterated a call for a “super sovereign currency” and said the country’s financial institutions face a tougher environment this year. The Dollar Index that measures the currency’s performance against six trading partners fell as much as 0.7 percent at 11:25 a.m. in London after China’s central bank also said the International Monetary Fund should manage part of members’ foreign reserves. The Dow Jones Stoxx 600 Index of European shares added 0.2 percent, trimming an advance of as much as 1.3 percent. Russia’s Micex Index gained 2 percent. China, the biggest foreign owner of U.S. Treasuries, reduced its holdings of government notes and bonds by $4.4 billion to $763.5 billion in April, according to data released on June 15 in Washington. People’s Bank of China Governor Zhou Xiaochuan in March urged the IMF to expand the functions of its unit of account and move toward a “super- sovereign reserve currency.” “To prevent the deficiencies in the main reserve currency, there’s a need to create a new currency that’s delinked from the economies of the issuers,” the People’s Bank of China said in a review of the economy in 2008 released today.

UBS (12.97): UBS expects to incur net loss in Q2 and confirms Sfr3.8B equity placement: UBS provides the following update on its current trading performance: Based upon preliminary results for April and May and estimated results for June, UBS expects to incur a net loss for Q2. The majority of the expected loss is attributable to own credit and the restructuring charges that have already been announced. The operating result for the quarter is expected to represent an improvement compared with Q1, largely attributable to better market conditions affecting the Investment Bank and a reduction in losses and write downs on legacy risk positions. UBS also confirmed the FT report that it is offering 293,258,050 newly issued shares from authorized capital to a small number of institutional investors at a price of CHF 13.00 per share.

POT (93.52); MOS (43.79); AGU (41.39): Canaccord Adams lowers estimates on fertilizer producers following lowered guidance from Potash (POT): Potash (POT) estimates for Q2'09, FY'09, and FY'10 are lowered. Target is lowered to $135 from $150. Rating is buy. Mosaic (MOS) estimates FYQ4'09 and FY'10 are lowered. Target is lowered to $62 from $65. Rating is buy. Agrium (AGU) estimates for Q2'09, FY'09, and FY'10 are lowered. Target is lowered to $50 from $52. Rating is hold.

A.CN (31.64): Accenture (ACN) reports Q3 EPS $0.68 vs Reuters $0.65, guides full year EPS $2.67-$2.70 vs prior $2.60-$2.67 and Reuters $2.65.

FSLR (159.48): Morgan Stanley comments on First Solar, says Phoenix Solar announcement raises near term risk: The firm says yesterday's announcement by FSLR customer Phoenix Solar that it will not meet 2009 EPS guidance along with lack of near term catalysts, raises the risk that FSLR trades off in the coming weeks. Morgan Stanley sees roughly 10% downside from current levels though they remain overweight on the shares.

PALM (14.02): Palm says no details on Pre shipments in May quarter - conf. Call: While noting that the 351K in shipments during the quarter was aided by initial shipments of the Pre, as well as higher than expected Treo Pro sales, management declines to provide any specifics regarding the contribution from Pre. Sticking with new CEO Rubinstein's roots (formerly at Apple), a similar no comment was provided in response to a question on Pre gross margins. However, they did comment that consolidated adjusted gross margins over time are expected to return to levels above 30%. Opex is anticipated to increase from Q4 levels as they more aggressively market Pre going forward. Regarding cash use, management expects cash use to continue through at least the 1H of fiscal 2010 and believe there is potential for cash flow to be positive in the 2H. They do believe that existing cash is sufficient to carry out their launch plans and continue investing in the business. In response to analyst question on exclusivity agreement with Sprint (S), management says they "couldn't be happier" with their launch partner but they are not going to discuss any details on how long the exclusivity lasts. Stock continues to strengthen during the call and was last quoted +13.7% at $15.94 on 7.71M shares.

BHP (55.84): BHP Billiton (BLT.LN) downgraded to equal-weight at Barclays Capital.

JPMorgan upgrades Industrials and Materials sectors to overweight from neutral

MON (75.66): Monsanto maintained buy, target lowered to $95 from $115 at UBS: Firm lowers estimates following the company's lowered long-term gross profit target for Roundup. UBS continues to expect the Seed & Genomics business to grow 22+% per year through 2015.

FFIV (34.15): F5 Networks target raised to $38 from $32 at Oppenheimer: Firm's channel checks suggest the company's Jun-quarter sales are tracking in line with a slight upward bias. Oppenheimer thinks the company could surprise on guidance. FY'10 estimates are increased. Rating is outperform.

June 24, 2009: Morning Call

2009-06-24T08:14:00.001-04:00

June 24, 2009: Morning Call

Fair Value: SP500 – 891.24; NDX: 1423.99; DOW: 8268.40

Technical Levels:

SPX: 765, 788, 832, 875-880 support/ 935-943 resistance

Events:

Pre-market EPS: MON (1.17/3.46B); PTR (na/45.08B); RAD (-.12/6.53B)
04:00: ECB Euro-zone Current Account (April)
07:00: MBA Mortgage Applications
08:30: Durable Goods Orders (May): -0.8%; Ex-Transportation: -0.5%
09:30: Bank of England’s King, Bean, Fisher, Sentence, Barker testify to Parliaments Treasury Committee
09:30: MON earnings call
10:00: US New Home Sales (May): 360,000; 2.3% MoM
10:15: FDX presents at Wachovia Conference
10:30: DOE Crude Oil and Gasoline Inventories
13:30: FSLR Analyst/Investor meeting
14:15: FOMC Rate Decision: 0.25%
17:00: NKE earnings call
Post-market EPS: BBBY (.24/1.68B); CKR (.25/449.2M); NKE (.94/4.71B); PAYX(.33/507.1M)

Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 3 points above fair value while the NASDAQ futures are trading 5 points above fair value at 8am ET. The Federal Reserve will announce their decision on interest rates at 2:15pm. The OECD modestly increased its economic forecast this morning. OECD expects the global economy to contract 4.1% this year and grow 0.7% in 2010. The March forecast estimated a contraction of 4.3% in 2009 and growth of 0.1% in 2010. Asian markets closed higher with energy and basic material sectors snapping back from the recent selling pressure (Japan up 0.43%, Hong Kong up 2.02%, Australia up 0.27%, Shanghai up 1.19%, Taiwan up 2.95%, India up 0.69%). Construction and property shares helped Taiwan rally on a report that various geographies would be upgraded into municipalities, potentially boosting their land values. Steelmakers rose in China and Hong Kong on a report that Asia’s largest iron-ore deposit had been discovered in the country. BHP Billiton (BHP.AU) slipped in Australia on the aforementioned report of a huge iron-ore discovery in China. European markets are up 0.25% to 1% after opening modestly lower. Technology related shares got a lift from Oracles results and mining shares bounced from the recent selling pressure.

Research Calls/Market Moving News:

ORCL (19.87): Oracle reports Q4 EPS $0.46 ex-items vs Reuters $0.44: Company reports revenues of $6.88B vs Reuters $6.48B. Oracle reports Q4 new licenses $2.744B vs. consensus $2.45B. Represents a 13% y/y decline versus guidance for down 17-27%. Non-GAAP operating margin reported 51.1% vs. 49.5%. Oracle guides Q1 (Aug) non-GAAP EPS $0.29-0.31 vs Reuters $0.30 - conf. Call: Currency neutral EPS targeted at $0.31-0.33. Guides non-GAAP revenue to decline 3-5% y/y on a reported basis, implying a range of $5.15-5.26B vs Reuters $5.15B. Oracle says customer "panic" has abated - conf. Call. Management highlights that its pipeline has been growing significantly and indicates that close rates were better than expected during the fourth quarter. They also went on to note that the Q1 outlook assumes "unusually conservative" close rates

FCX (47.18): FBR upgrades FCX to outperform. Target is 58. “The shares of Freeport-McMoRan Copper & Gold, Inc. continue to exhibit strong correlation with the underlying price of copper, which has corrected recently on (1) declining arbitrage between LME and SHME, (2) declining canceled warrants and (3) the speculation that China may have sold some copper recently. While we are cognizant about the near-term weakness, we continue to believe that copper and its largest consumer China do have long-term structural supply issues. In fact, according to the China Non-Ferrous Metal Association, at the current demand level, China might exhaust its copper reserves in 16 years. As such, we believe that China will continue to absorb worldwide supply surplus as strategic reserves. We further maintain our 2010 copper price forecast of $2.40/lb and believe that copper should be priced on cost plus return on a capital basis rather than the simple marginal cash cost. Given the recent pullback in equities, we are upgrading FCX to Outperform from Market Perform. We maintain our price target of $58/share based on 5.5x 2010E EV/EBITDA and we recommend investors take advantage of the market volatility to accumulate FCX shares. Currently, FCX trades at 4.6x our 2010E EV/EBITDA

GOOG (405.68): Piper Jaffray is positive on GOOG following their quarterly eCommerce survey. “We conducted our quarterly eCommerce survey of 315 online shoppers and the results suggest search is well positioned for a consumer increase in eCommerce activity. Since Google is the leader in search, and we do not believe this is likely to change long term, we believe Google is best positioned to benefit from these improving consumer trends. Our survey results suggest that 17% of consumers prefer search as their primary online shopping method, up from 8% in September 2008 and 14% in March 2009. Search is now the most preferred method to shop online for more consumers than online auction (eBay) or comparison shopping. We believe this is a result of search engines, and specifically Google, improving their shopping engines and offering better experiences than many other online offerings.

Iron ore deposit discovery reported in China - China News Agency:
The China News Agency said that a 3B MT iron ore deposit was discovered in the Chinese province of Liaoning, and could start production as early as next year. The report comes as Chinese steel makers are in iron ore price negotiations with producers, and shipping rates recently have been highly leveraged to such shipments, with elevated demand from China cited as a primary driver.

AXP (23.39): American Express looks overpriced – WSJ: A "Heard on the Street" column says AmEx's P-E ratio of 16.9 far exceeds JPMorgan Chase (JPM)'s 11.9. It's close to Visa (V)'s 18.6, but Visa does not have credit risk, and AmEx is dealing with new bank regulations. At 12.9 times earnings, MasterCard (MA) represents much cheaper exposure to payments than AmEx does.

AMT (29.83): American Tower upgraded to overweight from neutral at JPMorgan:
Target is $36

FSYS (20.82): Fuel Systems Solutions upgraded to buy from neutral at Janney Montgomery Scott: Target is $31

Oppenheimer downgrades refiners: Frontier Oil (FTO) downgraded to perform from outperform .Sunoco (SUN) downgraded to perform from outperform. Tesoro (TSO) downgraded to perform from outperform. Valero Energy (VLO) downgraded to perform from outperform. Firm cites a deteriorating industry outlook of low margins caused by high oil prices and weak demand. Oppenheimer believe sUS gasoline consumption may have peaked, while diesel demand will continue to reflect economic activity.

RIMM (69.60): China Telecom (CHA) is in talks with Research In Motion to offer BlackBerry in China -- Dow Jones, citing Caijing Magazine: The report, citing an unnamed China Telecom executive says the two companies are currently testing the devices and a launch schedule has not yet been determined. RIMM says it doesn't comment on market rumors, while a CHA spokesman couldn't be reached for comment. RIMM currently offers the BlackBerry in China through China Mobile (CHL).

AAPL (134.01): Tennessee hospital confirms reports that Apple's Steve Jobs underwent liver transplant: The Methodist University Hospital Transplant Institute confirmed, with the patient's permission, that Steve Jobs received a liver transplant. The hospital said that Jobs "received a liver transplant because he was the patient with the highest MELD score (Model for End-Stage Liver Disease) of his blood type and, therefore, the sickest patient on the waiting list at the time a donor organ became available. Mr. Jobs is now recovering well and has an excellent prognosis.

June 23, 2009: Morning Call

2009-06-23T08:25:00.001-04:00

June 23, 2009: Morning Call

Fair Value: SP500 – 889.20; NDX: 1426.18; DOW: 8285.01

Technical Levels:

SPX: 765, 788, 832, 875-880 support/ 935-943 resistance

Events:

Pre-market EPS: KR (.60/23.35B)
04:00: Euro-zone PMI Manufacturing (June): 42.1 (actual: 42.4)
04:00: Euro-zone PMI Services (June): 45.6 (actual: 44.5)
05:00: OECD May Economic Outlook
08:00: PHM presents at Wachovia Conference
09:15: GOOG presents at Euromoney Renewable Energy Finance Forum
10:00: Richmond Fed Manufacturing Index
10:00: Existing Home Sales (May): 4.82 million; Home Price Index: -0.4% MoM
10:00: Existing Home Sales (May): 3.0% MoM
10:45: DHI presents at Wachovia Conference
11:00: BAC, MS, UBS present at Euromoney Renewable Energy Finance Forum
11:45: MET presents at Wachovia Conference
13:00: TOL presents at Wachovia Conference
13:00: Treasury auctions 40 billion of 2 year notes.
15:10: Treasury officials discuss TARP at NYSSA Conference
15:15: GS and JPM present at Euromoney Renewable Energy Finance Forum
17:00: ORCL earnings call
Post-market EPS: DRI (.86/1.98B); ORCL (.44/6.48B); SONC (.20/179.4M)

Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 3 points above fair value while the NASDAQ futures are trading 6 points above fair value at 7:45 am ET. Asian markets closed sharply lower led by energy and commodity sectors. Emerging markets (EEM) have lost 10% from the recent peak. Shippers lost ground on a dip in the Baltic Dry Index. China pared declines on speculation the central bank will reduce the amount lenders have to hold in reserve. China Minsheng Banking Corp (600016.CH) rose on reports it will raise CNY20B through an IPO in Hong Kong. South Korea fell as decliners outnumbered advancers almost 7-to-1 though some LCD issues managed to buck the trend and eke out gains. European markets are flat to modestly higher (up 0.30%); markets in Russia are down 1.0% after dropping almost 8% in Monday’s session. Advancers on the FTSE 100 lead declines 13-7. Anglo American (AAL.LN) trades lower after rejects combination with Xstrata (XTA.LN). The shares pared declines on rumors that Chinalco (ACH) may step in with a bid. Anglo American upgraded to buy at BoA Merrill. BHP Billiton (BLT.LN) upgraded to buy at Citi. Credit Suisse downgrades Gazprom (GAZP.RU). Swiss Life (SLHN.VX) downgraded to sell at UBS.

In my May 20 morning call, I noted that the “S&P would likely settle into a trading range between 875-950 for the next few months or until incoming information alters the consensus view of a modest recovery in the 2H09 and 2010.” I continue to believe that the range will hold and opportunistic traders should buy the bottom of the range near the 875-880-area and short the top end of the end range near 940-950. Downside risks have increased, though, because the focus has shifted from modest second half growth toward the outlook for sustainable global growth in 2010. The incessant (and ridiculous) talk of “green shoots” appears to have justifiably subsided because the economy should recover given the massive fiscal and monetary intervention by the US Government and Federal Reserve. The key question is sustainability? What will happen in 2010 when the US government and the Federal Reserve will need to begin scaling back the massive monetary and fiscal stimulus? What will happen if there is no political will to withdraw the fiscal and monetary stimulus?

Research Calls/Market Moving News:

GS (137.01): FBR raises their price target on GS and reiterates their outperform rating: “We are raising our EPS estimates and price target (to $160 from $140) while reiterating Outperform on Goldman Sachs (GS) shares, given what has been a better-than-expected market share pickup from disruptions at competitors. With the better-than-expected share gains, we believe Goldman Sachs is likely to return toward a more normalized +15% ROE sooner than we had originally anticipated, resulting in our improved 2010 outlook. We note that our 2010 estimate still implies a sub-15% ROE, and we believe the potential remains for upside surprises to our numbers should the overall economy show some signs of growth. Our revised price target implies a 12.2x EPS multiple on our new 2010 EPS estimate, which increased from $11.30 to $13.10. On top of our longer-term expectations, we expect the second-quarter's results to benefit from a favorable trading and capital market environment in the second quarter, although perhaps not to the degree implied by consensus estimates, given the expenses associated with TARP repayment, further commercial real estate write-downs, and credit valuation adjustments.”

US airline passenger revenue fell 26% y/y in May – WSJ: The paper cites data from the ATA. The May figure marked the seventh consecutive monthly decline. The number of passengers fell 9.5%, while the average price fell 17.6%. Cargo traffic fell for a ninth straight month, down 22% y/y. The ATA noted that the H1N1 influenza outbreak exacerbated an already weak demand environment (I would note that the rail, air, and freight data has not been good of late. Certainly, not supportive of the green shoot con job).

AAPL (137.37): WSJ notes COO Tim Cook's value to Apple has never been higher: People familiar with the situation say Motorola (MOT) and Dell (DELL) have both tried to hire Cook within the past two years. To build a bigger moat around him, a person familiar with Apple's thinking says the company's board may invite Cook to join.

AAPL (137.37): Apple employees confirm to CNBC that Monday was Steve Jobs's first day back at work: There were rumors around earlier that Jobs had been back at work today, following the reports over the weekend that he had received a liver transplant a couple of months ago.

FDX (50.05): FedEx upgraded to overweight from neutral at JPMorgan: Target increased to $66 from $60. The firm believes the bad news is priced into the valuation and also notes the company's operating leverage

COP (40.43): ConocoPhillips upgraded to outperform from market perform at Bernstein: Target is $54.

UBS reduces estimates for the US Airline group: The firm has reduced estimates for the group given continued weakness in demand and higher fuel prices. UBS believes comps will remain tough into Q4 and says revenue in June, July, and August remained about as weak as May.

June 18, 2009: Morning Call

2009-06-18T08:12:00.000-04:00

June 18, 2009: Morning Call

Fair Value: SP500 – 906.79; NDX: 1455.58; DOW: 8444.01

Technical Levels:

SPX: 765, 788, 832, 875-880 support/ 935-943 resistance

Events:

Pre-market EPS: CCL (.30/3.00B); SJM (.63/991.5M)
08:00: GENZ presents at Jefferies Healthcare Conference
08:30: JCP Business Update Call
08:30: Initial Jobless Claims: 604,000 ; Continuing Claims: 6.8 million
09:30: Treasury Secretary Geithner testifies to senate on financial regulation
10:00: Philly Fed (June): -18
10:30: EIA Natural Gas Storage Chance
12:30: CELG presents at Jefferies Healthcare Conference
17:00: RIMM earnings call
Post-market EPS: RIMM (.92/3.4B); SWHC (.09/90.8M)

Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 3 points below fair value while the NASDAQ futures are trading 8 points below fair value at 8:00am ET. The S&P futures are 6 points off the overnight high (912) because European markets reversed initial opening gains. European markets are down 0.25% to 0.70% after opening 0.25% to 0.50% higher. Weaker than expected UK retail sales is pressuring consumer, industrial, basic material, and financial sectors. Asian markets declined in quiet trading with the MSCI Asia Pacific index moving to a three-week low (Japan down 1.4%, Hong Kong down 1.7%, Australia down 0.31%, Shanghai up 1.56%, India down 1.7%, South Korea down 1.2%). The World Bank boosted their growth forecast for China to 7.2%. Although the news has not garnered much attention in the financial press, SocGen analyst Albert Edwards issued a strategy report yesterday afternoon predicting a significant drop in Chinese equities before the end of the year. This could have played a role in the weakness overnight as Edwards is known for calling for a major reversal in Asian markets in 1997.

Research Calls/Market Moving News:

IBM (107.00): IBM initiated outperform at Cowen & Co.

AAPL (135.58): Apple mentioned positively at RBC Capital: The firm sees healthy iPhone uptake and estimates AAPL ships 500K-700K iPhone 3GS units in the 1st week and 1.5M in Q1. RBC continues to see pent up demand for iPhone with AAPL handset share reaching 2.4% in C10. Shares are reiterated outperform. Target is $165.

SocGen analyst Albert Edwards comments on China: “Most areas in the markets have now discounted a V-shaped recovery. Any doubt will trigger a rapid reversal in prices. I continue to be extremely skeptical and see recent events as part of a 1930s-like, long march to revulsion. Talking about long marches, nowhere in the world fills me with more skepticism than the Chinese economic recovery. The continued enthusiasm for all things China reminds me so much of the way investors were almost totally blind to the fact the US growth miracle was built on sand. China could be the biggest disappointment yet. 􀁑 Whether you look at surging commodity prices or the near 60% ytd run-up in the Metals & Mining sector, one thing is clear; the markets believe wholeheartedly in the Chinese economic recovery. We have a long history of sticking our necks way out against the consensus. In 2001 we repeatedly wrote that the US growth miracle would be seen in retrospect as a sick joke, as it was based on Kilimanjaro-like mountains of debt. It has taken a while, but now most concur with that ‘extreme’ view. In a few years time, I believe we will look back on the Chinese economic miracle as the sickest joke yet played on investors.”

RTP (170.45); BHP (55.26): Chinese official talks up possibility of using country's anti-monopoly laws to thwart iron ore jv between Rio Tinto (RTP) and BHP Billiton (BHP) – FT: Chinese opposition to the recently announced iron ore joint venture between Rio and BHP has been widely reported but RTP and BHP shares continue to get pounded. The FT now cites comments from Chen Yanhai, head of the raw material department of China’s ministry of industry and information technology, who told state media that the proposed joint venture “has an obvious color of monopoly” and should be subject to the country’s antitrust laws.

UBS comments on global fertilizer pricing: Firm notes that timing of yesterday's announcement by K+S AG (SDF.GR) to cut its current spot potash price is surprising give the is so close to Indian/Chinese potash negotiations. UBS comments that the risk posed by the cut is that it prompts others to undercut. Firm believes however that the markets can stabilize near current levels and continues to expect China and India to sign '09 contracts in the range of $500-525 FOB Vancouver. UBS lowers its medium term potash price to $600/t from $700/t FOB Vancouver, but leaves long term forecast of $700/t unchanged.

NYT looks at proposed Consumer Financial Protection Agency: A banking industry figure says current regulators have all the authority they need; the industry claims it will lose billions of dollars if the agency comes into existence. The article describes the CFPA as a sort of FDA for financial products, having the right to set out standards before banks could offer some options, and requiring warnings on others. Visible problems include exactly how the agency will be financed, since a conflict of interest would result from bank fees' being used, and the division between state and federal powers.

GE (12.25): Regulatory overhaul likely to present problems for GE Capital – WSJ: In a "Heard on the Street" column, the Journal reports that the Obama administration's proposed regulatory overhaul of the financial industry may be particularly painful for GE Capital. The article notes that while GE Capital has $613B in assets and provides significant amounts of credit to consumers and corporations, the bulk of its operations are not subject to the oversight of a banking regulator. However, if Congress passes the administration's proposals, GE Capital would likely be deemed a systemically important firm, meaning that it would face much more stringent regulation. According to the paper, the bigger problem is that such supervision would also extend to the firm's parent company and other subsidiaries, a dynamic that could make it necessary for GE Capital to be spun off. The article goes on to note that such a move could be problematic for parent GE, given that it would have to ensure that GE Capital had sufficient capital and stable funding.

June 16, 2009: Morning Call

2009-06-16T08:53:00.001-04:00

June 16, 2009: Morning Call

Fair Value: SP500 – 919.80; NDX: 1456.86; DOW: 8559.64

Technical Levels:

SPX: 765, 788, 832, 875-880 support/ 935-943 resistance

Events:

Pre-market EPS: BBY (.33/10.16B); FDS (.72/155.4M); SFD (-.56/3.07B)
05:00: Euro-zone CPI (May): 0.0% MoM; 0.0% YoY; Core CPI (May): 1.6% YoY
05:00: Euro-zone ZEW Economic Sentiment Survey (June): 34.0 (actual: better at 42.7)
08:30: US Producer Price Index (May): 0.6% MoM; Ex-Food/Energy: 0.1% MoM
08:30: US Producer Price Index (May): -4.4% YoY; Ex-Food/Energy: 3.2% YoY
08:30: US Housing Starts (May): 480,000; Building Permits: 500,000
09:15: Industrial Production (May): -0.8%; Capacity Utilization: 68.5%
10:00: BBY earnings call
13:00: NVDA Analyst Day
14:15: ORCL presents at Knight Capital Investor Conference
14:15: IBM presents at Knight Capital Investor Conference
15:15: GS presents at Knight Capital Investor Conference
16:30: API Crude Oil and Gasoline Inventories
17:00: ADBE earnings call
Post-market EPS: ADBE (.34/695.8M)

Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 2 points above fair value while the NASDAQ futures are trading 7 points above fair value at 7:30am ET. The US dollar snapped a two-day rally (Euro is up 0.75% to 1.3903; British Pound is up 0.87% to 1.6461) due to stronger German and Euro-zone confidence, higher UK CPI, and chatter that BRIC countries may diversify their reserves among themselves in order to reduce dollar dependence. Commodities have reversed some of Monday’s decline on the weaker dollar (Crude is up 1.8% to 71.94). Treasury bonds are little changed. Asian markets closed lower except for India, which reversed opening losses (Japan down 2.8%, Hong Kong down 1.8%, Australia down 1.7%, South Korea down 0.95%, India up 0.55%). Financial, commodity, and energy shares led the decline in Asia following the sell-off on Wall Street on Monday. European markets are up 0.50% near the highs of the session. Mining shares (down 0.25%) continue to lag while banks (up 1.0%) and defensive sectors (food retail and pharmaceuticals) outperform. (UBSN.VX) traded lower after being placed on review for possible downgrade by Moody's. Natl Bank of Greece (ETE.GA) proposes a rights issue to raise approx €1.25B. The shares fell and pressured other Greek bank shares. Rio Tinto (RIO.LN) said trading outlook for rest of 2009 remains uncertain.

Research Calls/Market Moving News:

BAC (13.33): Sandler O’Neill analyst Jeff Harte comments on BAC’s May Master Trust data: “BAC: Net charge-offs were 12.50%, compared with 10.47% in April and the current three month average of 10.76%. This 203 basis point sequential monthly increase was more than we anticipated and suggests that our 10.75% domestic credit card net charge-off rate for 2Q09 may be low. It is noteworthy that BAC's 1Q09 reported domestic NCO ratio of 9.81% was 91 basis points below the trust's same period average. Delinquencies (30+ days) reported were 7.95%, versus 8.01% in April and the current three-month average of 7.94%. The portfolio yield increased to 19.40%, compared with 18.41% in April and a current three-month average of 18.73%. The excess spread decreased to 3.77%, from 4.72% last month and the three-month average of 4.76%.

RIMM (80.38): Research In Motion target increased to $92 from $85 at Thomas Weisel Partners: Firm sees a solid May quarter and an in line Aug outlook, with continued market share gains as RIMM rolls out several upgrades and "new" platforms. Target increased due to recent increases in the market multiple. Rating is overweight.

RIMM (80.38): Research In Motion to sell BlackBerry Tour later this summer: The smartphone will be available at Sprint (S) for $199.99 with a new line of service or eligible upgrade, two-year service agreement, and $50 instant rebate and $100 mail-in rebate. The phone will operate globally. Bloomberg reports that co-CEO Jim Balsillie says the Tour will be sold in Canada through BCE (BCE.CN) and Telus (T.CN). Balsillie declines to comment on when RIMM might introduce a touchscreen Storm with a pullout keyboard.

IBM (107.62): IBM target raised to $140 from $120 at Thomas Weisel Partners: Firm notes the company's recurring revenue base makes IBM less cyclical, and believes low single digit revenue growth, modest margin expansion, acquisitions, and share repurchases support high single digit EPS growth. Estimates are unchanged. Rating is overweight.

Canaccord Adams initiates FFIV, BRCD, CSCO, EMC, NTAP with buy ratings: F5 Networks (FFIV) initiated speculative buy with $41.50 target. Brocade (BRCD) initiated buy with $10 target. Cisco Systems (CSCO) initiated buy with $23 target. EMC (EMC) initiated buy with $15 target. NetApp (NTAP) initiated buy with $22.50 target.

MSFT (23.42): Microsoft target increased to $26 from $22 at Jefferies: Firm notes that Windows 7 is due out on 22-Oct and expects a large, rapid PC upgrade cycle starting in late in 2010. Buy rating is reiterated

CMI (34.02): Cummins initiated buy at Goldman Sachs: Target is $42.

LZB (3.64): La-Z-Boy reports Q4 EPS $0.07 ex-items vs Reuters ($0.11): Company reports revenues of $284.5M vs Reuters $296.5M. Shares are trading up 25%.

Secondary Issuance: HAR (9M share secondary); MMR (11M share secondary); BRKR (35M share secondary), GWR (4M share secondary).