August 29, 2008: Morning Call
Fair Value: SP500 – 1300.77; NDX- 1918.01; DOW – 11715
Technical Levels:
SPX: 1205, 1235, 1250, 1262 support/1298-1300, 1337, 1365 resistance
NASDAQ: 2210, 2341, 2386 support / 2456, 2479, 2521, 2553 resistance:
Events:
05:00: Euro-zone Unemployment Rate: in-line at 7.3%
05:00: Euro-zone Consumer Confidence: weaker: 88.8 vs. consensus 89.3
08:30: Personal Income (July): 0.0%; July Spending (July): 0.2%
08:30: PCE Core (MoM): 0.3%; 2.4% YoY
09:45: Chicago Purchasing Manager (Aug): 50.0
10:00: University of Michigan Confidence (August): 62.0
Foreign Market Summary/Key Macro News:
SP futures are trading 5 points below fair value while the NASDAQ futures are trading 14 points below fair value at 7:40 am ahead of the Personal Income/Spending, PCE Core, Chicago PMI and the Michigan Confidence data. DELL’s weak Q2 earnings are the primary catalyst for the weakness in the futures. DELL cited pressure on gross margins for the earnings miss continuing a trend in the technology sector (AAPL, RIMM, MSFT, CSCO, NOK, TXN all saw gross margins fall short of expectations during the most recent quarter; technology stocks have been resilient because IT and consumer tech spending has held up relatively well during this economic downturn. In order to grow the top line, technology companies have been cutting prices. Continued gross margin pressure remains the greatest downside risk to the technology sector. Gross margins will be the most important metric to watch when tech companies begin reporting the next quarter in October. European markets are currently trading flat (up 0.10%) and have been in a narrow trading range all session. Basic materials and financials are outperforming on light volume. Asian markets closed sharply higher with the Nikkei rallying 2.3%, Shanghai up 2.4%, and India up 3.7%. Financials led a broad-based advance along with automakers and tech stocks. Japan reacted well to a report in the Nikkei saying the Japanese government was finalizing a ¥10T economic aid package, including an ¥8T measure to insure financing for small businesses. The yen is trading at ¥108.79 to the US dollar. Japan’s July unemployment rate was 4.0% vs. the 4.1% survey and 4/1% in June. July core consumer prices rose 2.4% y/y, its highest rate in a decade, vs. the 2.3% survey. Indian inflation rose 12.4% vs. consensus of 12.78% and the economy grew at 7.9% vs. consensus of 8%. Commodities: Crude oil is up one dollar to 116.60 and natural gas is flat ahead of Hurricane Gustav.
Impact Research Calls/Market Moving News:
DELL (25.21): Dell reports Q2 EPS $0.33 ex-items vs. Reuters $0.36. Note the figure excludes ($0.01) from the amortization of purchased intangibles and ($0.01) from severance and facility closures. GAAP EPS was $0.31. Revenues of 16.43B vs. street at 15.96B. Gross Margin weaker at 17.2% vs. street of 18.3%. While noting that their markets are always competitive, management confirms that their actions were not in response to heightened pressure from competitors but were rather driven by their desire to gain share. Almost all questions on the call have hit on this pricing topic, with management consistently reiterating that they can improve profitability going forward. They believe that the aggressive pricing actions can be reversed very quickly. When asked whether the consumer business will be profitable in the 2H of the year, management says that consumer profitability will improve over the next 4 quarters. Shares fell 10% in after-hours trading on Thursday night.
DELL (25.21): BMO Capital comments on DELL: “Even with revenue upside and material reduction in op ex, Dell delivered a terrible gross margin quarter, 110 bps lower than our forecast. Impact: Negative - Dell missed 1) our GAAP estimate by $0.03 (Street by $0.05, but the Street did not include charges), and 2) our non-GAAP estimate by $0.035 (Street by ~$0.03). Tax rate and share count negatively impacted the quarter vs. our estimates by $0.02. Forecasts: We are reducing our CY2009 EPS estimates to $1.65 from $1.77. Approximately $0.03 of our estimate change in FY2010 is based on higher tax rate and lower interest income. We estimate a 50 bp improvement in CY2009 op margins vs. the July 08 quarter, owing to recognition of deferred revenues, improved pricing, and operating leverage. Valuation: Given our estimate changes, we are lowering our target price to $25 from $26.50. Recommendation: We stay OUTPERFORM. Catalysts will be few until Dell demonstrates ability to both grow revenue and margins, which we don't think happens in a meaningful way until beginning of CY2009.”
DELL (25.21): Dell estimates lowered at UBS following Q2 results
Firm believes gross margins are unlikely to improve materially in the near term due to the increasing mix of consumer and indirect channels as well as from expectations of a continued challenging competitive environment that pressures ASPs. UBS also believes there is a risk that opex could increase. Target is lowered by $1 to $26. Rating is neutral.
BIDU (316.54); SINA (42.42); SOHU (77.44): Piper comments on Baidu.com (BIDU), Sohu.com (SOHU), and Sina (SINA) following the Olympics. The firm says BIDU traffic rebounded nicely after the Olympics and says the increase in traffic is better than company expectations, a positive for the September quarter. SINA and SOHU each saw essentially the same traffic trends during the Olympics with SOHU traffic declining 28% and SINA 24% by 28-Aug
BRCM (24.91): Broadcom announces that judge finds Qualcomm in contempt.
Broadcom announced that a federal judge today found Qualcomm in contempt of an injunction he ordered last December designed to prevent Qualcomm from continued infringement of three Broadcom patents. Judge James Selna found that Qualcomm violated the injunction by continuing to use and support infringing WCDMA chips and ordered Qualcomm to immediately cease such use and support. The court further found that Qualcomm violated the injunction by failing to pay royalties to Broadcom on its infringing QChat products. Citing the "egregiousness" of Qualcomm's conduct, the court ordered Qualcomm to pay Broadcom the gross profits Qualcomm has earned on its infringing QChat products. Judge Selna further ordered Qualcomm to pay Broadcom's attorneys fees in connection with the contempt proceedings. Additionally, the Court reserved determination of whether Qualcomm should also be held in contempt for post-injunction offers to sell infringing WCDMA chips pending additional discovery and proceedings.
BRCM (53.97): JPMorgan sees little impact on Qualcomm from judge's ruling yesterday in Broadcom (BRCM) case. JPMorgan sees very little impact on QCOM fundamentals since the judge did not stop the company from selling WCDMA chipsets that employ workarounds to the infringed BRCM patents. The firm notes that the ruling will prevent QCOM from servicing WCMDA chips shipped from May-Dec 2007, the impact of which it sees as minute. , Reiterates overweight rating.
ENER (76.55): Energy Conversion target increased to $100 from $79 at UBS.
Firm notes Q4 results and raises estimates on improved sales visibility. Rating is buy.
SLM (16.95): SLM placed under review for possible downgrade by Moody's
Friday, August 29, 2008
Thursday, August 28, 2008
Weekly Catalyst Report: Week of September 1-5
Weekly Catalyst Report: Week of September 1-5:
Monday, September 1:
US Markets are closed for Labor Day
03:55: German PMI Manufacturing:
04:00: Euro-zone PMI Manufacturing
14:45: Fed’s Hoenig speaks on Financial Turmoil
Tuesday, September 2:
05:00: Euro-zone Producer Price Index (July)
10:00: ISM Manufacturing (August): 49.5; Prices Paid: No Bloomberg Est.
10:00: Construction Spending (July): -0.4%
11:00: HAL presents at Lehman CEO Energy Conference
11:40: SUN presents at Lehman CEO Energy Conference
13:00: APA presents at Lehman CEO Energy Conference
14:25: CHK presents at Lehman CEO Energy Conference
15:40: NE presents at Lehman CEO Energy Conference
16:05: GOOG presents at Citibank Tech Conference
17:00: ABC Consumer Confidence
18:00: NTAP Annual General Meeting
Post-market EPS: SNDA (.51/115.2M)
Wednesday, September 3:
Pre-market EPS: JOYG (.88/883.7M); SPLS (.22/4.64B)
05:00: Euro-zone Q2 preliminary GDP
07:45: DVN presents at Lehman CEO Energy Conference
08:00: QCOM presents at Kaufman Brothers Investor Conference
08:25: RIG presents at Lehman CEO Energy Conference
08:45: HD presents at Goldman Sachs Global Retailing Conference
09:15: CSCO presents at Citibank Tech Conference
09:45: OXY presents at Lehman CEO Energy Conference
09:50: NVLS presents at Citibank Tech Conference
10:00: US July Factory Orders (July): 0.5%
10:00: AIG presents at KBW Insurance Conference
10:25: JCP presents at Goldman Sachs Global Retailing Conference
10:25: CDNS presents at Citibank Tech Conference
11:00: AMAT presents at Citibank Tech Conference
11:00: JOYG earnings call
12:30: Fed’s Rosengren speaks on the economy
12:55: DELL presents at Citibank Tech Conference
13:45: TXN presents at Citibank Tech Conference
13:45: FSLR presents at Citibank Tech Conference
14:00: Fed’s Beige Book Economic Report will be released
14:55: BRCM presents at Citibank Tech Conference
16:00: Select Retailers will release August Same-Store-Sales Comps
Post-market EPS: HOV (-1.67/669.4M); GES (.49/461.0M); HRB (-.35/381.2M)
Thursday, September 4:
Pre-market EPS: CIEN (.37/253.7M); TOL (-.31/772.6M)
07:00: Bank of England Interest Rate Decision
07:00: Retailers will release August Same-Store-Sales Comps before to the open
07:45: ECB Rate Decision
08:00: JWN presents at Goldman Sachs Retail Conference
08:15: ADP Employment Change (August): -20,000
08:30: Non-Farm Productivity (Q2 Final): 2.8%; Unit Labor Costs: 0.7%
08:30: Initial Jobless Claims
08:30: SPWR presents at Raymond James London Conference
09:00: TEX analyst meeting
09:50: JNPR presents at Citibank Tech Conference
10:00: ISM Non-Manufacturing (August): 49.3
10:35: Natural Gas Storage Change
11:00: DOE/API Crude Oil and Gasoline Inventories
11:00: HOV earnings call
12:30: WMT presents at Goldman Sachs Retail Conference
13:40: Fed’s Fisher speaks on economic challenges
13:45: QCOM presents at Citibank Tech Conference
13:45: ACI presents at Lehman CEO Energy Conference
14:00: TOL earnings call
14:30: Fed’s Yellen speaks on US economy
16:10: MSFT presents at Citibank Tech Conference
Post-market EPS: ADCT (.26/387.4M); ATVI (.13/513.8M); COO (.66/285M)
Friday, September 5:
Pre-market EPS: NSM (.34/468.7M).
08:30: US August Payrolls: -70,000; Unemployment Rate: 5.7%
08:30: Average Hourly Earnings: 0.3% MoM; Weekly Hours: 33.6
15:55: Fed’s Yellen speaks on the US Economy
Monday, September 1:
US Markets are closed for Labor Day
03:55: German PMI Manufacturing:
04:00: Euro-zone PMI Manufacturing
14:45: Fed’s Hoenig speaks on Financial Turmoil
Tuesday, September 2:
05:00: Euro-zone Producer Price Index (July)
10:00: ISM Manufacturing (August): 49.5; Prices Paid: No Bloomberg Est.
10:00: Construction Spending (July): -0.4%
11:00: HAL presents at Lehman CEO Energy Conference
11:40: SUN presents at Lehman CEO Energy Conference
13:00: APA presents at Lehman CEO Energy Conference
14:25: CHK presents at Lehman CEO Energy Conference
15:40: NE presents at Lehman CEO Energy Conference
16:05: GOOG presents at Citibank Tech Conference
17:00: ABC Consumer Confidence
18:00: NTAP Annual General Meeting
Post-market EPS: SNDA (.51/115.2M)
Wednesday, September 3:
Pre-market EPS: JOYG (.88/883.7M); SPLS (.22/4.64B)
05:00: Euro-zone Q2 preliminary GDP
07:45: DVN presents at Lehman CEO Energy Conference
08:00: QCOM presents at Kaufman Brothers Investor Conference
08:25: RIG presents at Lehman CEO Energy Conference
08:45: HD presents at Goldman Sachs Global Retailing Conference
09:15: CSCO presents at Citibank Tech Conference
09:45: OXY presents at Lehman CEO Energy Conference
09:50: NVLS presents at Citibank Tech Conference
10:00: US July Factory Orders (July): 0.5%
10:00: AIG presents at KBW Insurance Conference
10:25: JCP presents at Goldman Sachs Global Retailing Conference
10:25: CDNS presents at Citibank Tech Conference
11:00: AMAT presents at Citibank Tech Conference
11:00: JOYG earnings call
12:30: Fed’s Rosengren speaks on the economy
12:55: DELL presents at Citibank Tech Conference
13:45: TXN presents at Citibank Tech Conference
13:45: FSLR presents at Citibank Tech Conference
14:00: Fed’s Beige Book Economic Report will be released
14:55: BRCM presents at Citibank Tech Conference
16:00: Select Retailers will release August Same-Store-Sales Comps
Post-market EPS: HOV (-1.67/669.4M); GES (.49/461.0M); HRB (-.35/381.2M)
Thursday, September 4:
Pre-market EPS: CIEN (.37/253.7M); TOL (-.31/772.6M)
07:00: Bank of England Interest Rate Decision
07:00: Retailers will release August Same-Store-Sales Comps before to the open
07:45: ECB Rate Decision
08:00: JWN presents at Goldman Sachs Retail Conference
08:15: ADP Employment Change (August): -20,000
08:30: Non-Farm Productivity (Q2 Final): 2.8%; Unit Labor Costs: 0.7%
08:30: Initial Jobless Claims
08:30: SPWR presents at Raymond James London Conference
09:00: TEX analyst meeting
09:50: JNPR presents at Citibank Tech Conference
10:00: ISM Non-Manufacturing (August): 49.3
10:35: Natural Gas Storage Change
11:00: DOE/API Crude Oil and Gasoline Inventories
11:00: HOV earnings call
12:30: WMT presents at Goldman Sachs Retail Conference
13:40: Fed’s Fisher speaks on economic challenges
13:45: QCOM presents at Citibank Tech Conference
13:45: ACI presents at Lehman CEO Energy Conference
14:00: TOL earnings call
14:30: Fed’s Yellen speaks on US economy
16:10: MSFT presents at Citibank Tech Conference
Post-market EPS: ADCT (.26/387.4M); ATVI (.13/513.8M); COO (.66/285M)
Friday, September 5:
Pre-market EPS: NSM (.34/468.7M).
08:30: US August Payrolls: -70,000; Unemployment Rate: 5.7%
08:30: Average Hourly Earnings: 0.3% MoM; Weekly Hours: 33.6
15:55: Fed’s Yellen speaks on the US Economy
August 28, Morning Call
August 28, 2008: Morning Call
Fair Value: SP500 – 1281.76; NDX- 1903.31; DOW – 11503
Technical Levels:
SPX: 1205, 1235, 1250, 1262 support/1298-1300, 1337, 1365 resistance
NASDAQ: 2210, 2341, 2386 support / 2456, 2479, 2521, 2553 resistance:
Events:
Pre-market EPS: DLM (.-0.05/742.7M); ENER (.23/77.4M); SHLD (.33/11.72B); TIF(.54/728.0M)
035:55: German Unemployment Rate: slightly weaker than expected
07:30: Wholesale Price Index
08:30: Q2 GDP Revision (Annualized): 2.8%; GDP Price Index: 1.1%
08:30: Core PCE QoQ: 2.1%
08:30: Initial Jobless Claims; Continuing Claims
10:30: Natural Gas Storage Change
16:30: NVLS Q3 2008 Guidance
17:00: DELL earnings call
Post-market EPS: ATVI (.13/513.8M; DELL (.36/15.91B);
Foreign Market Summary/Key Macro News:
SP futures are trading flat with fair value while the NASDAQ futures are 5 points below fair value ahead of the Q2 GDP, Q2 GDP Price Index, Q2 Personal Consumption, Initial Jobless Claims all released at 8:30 ET. European markets have paired early gains and are currently unchanged Credit Agricole, France’s third-biggest bank, rallied 6.1% after the company said its Tier 1 capital ratio held steady. Germany August Unemployment rate +7.6% vs consensus +7.8% with unemployment (40k) vs consensus (10k). Nationwide UK Aug change in house prices (10.5%) y/y vs consensus (9.6%) the largest annual fall since 1991 and the UK CBI August survey of retailers showed pessimism deepened to levels not seen since the survey started in 1983. MBI and ABK are also up in Europe after MBI was able to win new muni-bond insurance business despite losing the AAA rating. Asian markets: Asian markets were mixed. Oil stocks rose on higher crude and technology stocks retreated after Morgan Stanley cut its rating on Samsung Electronics (005930.KS). Japan wavered between gains and losses. Exporters and real-estate shares dropped on concerns about economic slowdowns domestically and globally. Hong Kong declined as China Mobile (941.HK) and Esprit Holdings (330.HK) went down on downgrades and worries about their earnings outlooks. Commodities: Crude Oil is trading up 1.50 to nearly 120 a barrel on continued fears about Hurricane Gustav; the latest weather models show the most likely path will take the Hurricane along the Gulf Coast near New Orleans. Natural Gas is up 2% to 8.80 as is Gold and Silver. There appears to be a 7-dollar premium built into Crude on worries that supplies will be disrupted due to offshore platforms being shut-in. Natural Gas has a 10% premium built in as well.
Impact Research Calls/Market Moving News:
TIF (39.61): TIF reports Q2 EPS of .63 cents versus consensus of .55 cents and revenues of 732.4 million vs. consensus of 728 million. TIF guides the FY to between 2.82 and 2.92 vs. prior guidance of 2.80-2.90. Street consensus for the FY is 2.83. Q2 worldwide constant dollar comps were down 1%. US, Japan, and Other Asia/Pacific comps were weaker than expected while Europe was stronger than expected. TIF shares are indicated 2 dollars higher in the pre-market.
SHLD (86.98): Sears Holdings reports Q2 EPS $0.21 ex-items vs Reuters $0.33: Company reports revenues of $11.76B vs. Reuters $11.72B. Total domestic comps (6.2%) vs. Street Account consensus (3 firms) (7.9%). Company expects to generate higher EBITDA in 2H of this year as compared to the corresponding period in 2007 due to benefits from lower domestic inventory levels and continued expense management. SHLD have not traded in the pre-market.
MBI (11.98): MBIA and FGIC Corp in pact to provide reinsurance to $184B of municipal bonds currently insured by FGIC—Reuters: MBI shares are indicated up almost 2 dollar in the pre-market.
ENER (78.34): Energy Conversion reports Q4 EPS $0.24 vs. Reuters $0.23 (78.34)Company reports revenues of $82.4M vs. Reuters $77.4M. As of 30-Jun, the solar product sales pipeline was $1.8B, as compared to $1.2B at the end of the fiscal Q3. Guides Q1 revenues to $95-98M vs. Reuters $88.5M. Guides next year revenues to $455-485M vs. Reuters $444.9M. Guides Q1 gross margin to ~31% and between 33-35% for H2 of the year. ENER shares are indicated up 5 bucks in the pre-market.
CHL (61.51): China Mobile, a key Chinese stock, is down 3 bucks after JPM cut their rating. The decline erased Wednesday’s gain following CHL’s earnings release. JP Morgan is concerned about rising competition in China’s telecommunications market, which may restrict earnings growth.
CAT (69.56): Caterpillar to consider price increases to cover higher raw materials costs – Bloomberg: At a press briefing, chairman James Owens says the increases will be similar to those by competitors. He adds that the company's order book for mining is full until 2010.
AAPL (174.67): More artists, record companies choosing not to offer releases on iTunes – WSJ: The concerned parties believe selling single songs on iTunes is penny-wise, pound-foolish for the music industry. In some cases, they want the options, which Apple refuses, to sell albums as a whole or charge more than $0.99 per song. This is an old story.
KO (53.79): Coca-Cola downgraded to neutral from outperform at Credit Suisse, removed from Focus List
Fair Value: SP500 – 1281.76; NDX- 1903.31; DOW – 11503
Technical Levels:
SPX: 1205, 1235, 1250, 1262 support/1298-1300, 1337, 1365 resistance
NASDAQ: 2210, 2341, 2386 support / 2456, 2479, 2521, 2553 resistance:
Events:
Pre-market EPS: DLM (.-0.05/742.7M); ENER (.23/77.4M); SHLD (.33/11.72B); TIF(.54/728.0M)
035:55: German Unemployment Rate: slightly weaker than expected
07:30: Wholesale Price Index
08:30: Q2 GDP Revision (Annualized): 2.8%; GDP Price Index: 1.1%
08:30: Core PCE QoQ: 2.1%
08:30: Initial Jobless Claims; Continuing Claims
10:30: Natural Gas Storage Change
16:30: NVLS Q3 2008 Guidance
17:00: DELL earnings call
Post-market EPS: ATVI (.13/513.8M; DELL (.36/15.91B);
Foreign Market Summary/Key Macro News:
SP futures are trading flat with fair value while the NASDAQ futures are 5 points below fair value ahead of the Q2 GDP, Q2 GDP Price Index, Q2 Personal Consumption, Initial Jobless Claims all released at 8:30 ET. European markets have paired early gains and are currently unchanged Credit Agricole, France’s third-biggest bank, rallied 6.1% after the company said its Tier 1 capital ratio held steady. Germany August Unemployment rate +7.6% vs consensus +7.8% with unemployment (40k) vs consensus (10k). Nationwide UK Aug change in house prices (10.5%) y/y vs consensus (9.6%) the largest annual fall since 1991 and the UK CBI August survey of retailers showed pessimism deepened to levels not seen since the survey started in 1983. MBI and ABK are also up in Europe after MBI was able to win new muni-bond insurance business despite losing the AAA rating. Asian markets: Asian markets were mixed. Oil stocks rose on higher crude and technology stocks retreated after Morgan Stanley cut its rating on Samsung Electronics (005930.KS). Japan wavered between gains and losses. Exporters and real-estate shares dropped on concerns about economic slowdowns domestically and globally. Hong Kong declined as China Mobile (941.HK) and Esprit Holdings (330.HK) went down on downgrades and worries about their earnings outlooks. Commodities: Crude Oil is trading up 1.50 to nearly 120 a barrel on continued fears about Hurricane Gustav; the latest weather models show the most likely path will take the Hurricane along the Gulf Coast near New Orleans. Natural Gas is up 2% to 8.80 as is Gold and Silver. There appears to be a 7-dollar premium built into Crude on worries that supplies will be disrupted due to offshore platforms being shut-in. Natural Gas has a 10% premium built in as well.
Impact Research Calls/Market Moving News:
TIF (39.61): TIF reports Q2 EPS of .63 cents versus consensus of .55 cents and revenues of 732.4 million vs. consensus of 728 million. TIF guides the FY to between 2.82 and 2.92 vs. prior guidance of 2.80-2.90. Street consensus for the FY is 2.83. Q2 worldwide constant dollar comps were down 1%. US, Japan, and Other Asia/Pacific comps were weaker than expected while Europe was stronger than expected. TIF shares are indicated 2 dollars higher in the pre-market.
SHLD (86.98): Sears Holdings reports Q2 EPS $0.21 ex-items vs Reuters $0.33: Company reports revenues of $11.76B vs. Reuters $11.72B. Total domestic comps (6.2%) vs. Street Account consensus (3 firms) (7.9%). Company expects to generate higher EBITDA in 2H of this year as compared to the corresponding period in 2007 due to benefits from lower domestic inventory levels and continued expense management. SHLD have not traded in the pre-market.
MBI (11.98): MBIA and FGIC Corp in pact to provide reinsurance to $184B of municipal bonds currently insured by FGIC—Reuters: MBI shares are indicated up almost 2 dollar in the pre-market.
ENER (78.34): Energy Conversion reports Q4 EPS $0.24 vs. Reuters $0.23 (78.34)Company reports revenues of $82.4M vs. Reuters $77.4M. As of 30-Jun, the solar product sales pipeline was $1.8B, as compared to $1.2B at the end of the fiscal Q3. Guides Q1 revenues to $95-98M vs. Reuters $88.5M. Guides next year revenues to $455-485M vs. Reuters $444.9M. Guides Q1 gross margin to ~31% and between 33-35% for H2 of the year. ENER shares are indicated up 5 bucks in the pre-market.
CHL (61.51): China Mobile, a key Chinese stock, is down 3 bucks after JPM cut their rating. The decline erased Wednesday’s gain following CHL’s earnings release. JP Morgan is concerned about rising competition in China’s telecommunications market, which may restrict earnings growth.
CAT (69.56): Caterpillar to consider price increases to cover higher raw materials costs – Bloomberg: At a press briefing, chairman James Owens says the increases will be similar to those by competitors. He adds that the company's order book for mining is full until 2010.
AAPL (174.67): More artists, record companies choosing not to offer releases on iTunes – WSJ: The concerned parties believe selling single songs on iTunes is penny-wise, pound-foolish for the music industry. In some cases, they want the options, which Apple refuses, to sell albums as a whole or charge more than $0.99 per song. This is an old story.
KO (53.79): Coca-Cola downgraded to neutral from outperform at Credit Suisse, removed from Focus List
Wednesday, August 27, 2008
NTAP - Unusual Call Volume Increase
Unusual Option Volume Alert: NTAP calls options are actively trading with the front-month 25 and 27.50 calls seeing the bulk of the volume. October 25 and 30 calls are also active. At this point, buyers appear in control of the price action given that the implied volatility in the September 25 calls has moved up more than 20% today to 37-38 from 30 yesterday.
Deep Discounters Weak in Early Trade
Deep Discount Retailers weak after DLTR lowered guidance - DLTR sees FY EPS of 2.33-2.43 vs. consensus of 2.44 FDO and BIG are among the weakest names in the S&P 500 in early trading (down about 3%). Recall that DRI warned yesterday (dropped 12.4% on Tuesday to 28.25). We could see the "trade down" thesis unwind which would negatively impact the WMT and COST's of the world that have dramtically outperformed YTD.
August 27, 2008: Morning Call
August 27, 2008: Morning Call
Fair Value: SP500 – 1271.21; NDX- 1889.05; DOW – 11408
Technical Levels:
SPX: 1205, 1235, 1250 support/1298-1300, 1337, 1365 resistance
NASDAQ: 2210, 2341, 2386 support / 2456, 2479, 2521, 2553 resistance:
Events:
Pre-market EPS: AEO (.28/709.9M); DLTR (.40/1.06B)
08:30: Durable Goods Orders (July): 0.1%; Ex-Trans: -0.4%
08:35: Fed’s Lockhart speaks on Inflation
10:35: DOE/API Crude Oil and Gasoline Inventories
Post-market EPS: GEF (1.11/969.3M); MW (.71/550.5M)
Foreign Market Summary/Key Macro News:
SP futures are trading 3 points below fair value while the NASDAQ futures are trading 2.50 points below fair value at 7:50 am ET. Although the broader averages have settled into a trading range (1262-1298) following the July 15 lows, the price action has been sloppy at best. Fears about a global economic recession and concerns that 2H earnings estimates are too high have lead to a very weak underlying bid in the broader averages. Key events today include the Durable Goods at 8:30 ET, Fed’s Lockhart’s speech on inflation at 08:35 ET, and the Crude supply data at 10:35 ET. European markets are trading weaker (-0.70%) on light volumes coming towards the end of the summer holidays. Decliners on the FTSE100 lead advancers 7-3. Best performing sectors in Europe include Materials (up 0.40%) and Energy (0.20%). Worst include Autos (-1.8%) and Banks (-1.1%). Asian markets: Asian markets were mostly higher today. Technology stocks fell, and energy stocks advanced. Japan dipped slightly on concerns about the global economy. Property shares dropped after another builder Sohken (8911.JP), collapsed. Hong Kong advanced on buying in heavyweights like China Life Insurance (2628.HK) and China Mobile (941.HK). After reporting record H1 profits, China Mobile led the region up in the afternoon and China Cosco Holdings (1919.HK) also advanced after reporting a doubling of earnings. Crude oil is trading up 1.37 to 117.60 and natural gas is up 5% on fears that Tropical Storm Gustav is going to track into the Gulf of Mexico as a Category 3+ storm. The underlying bid in commodities also appears to be getting an assist from Russia’s decision to recognize the independence of South Ossetia and Abkhazia; Russia’s President is also meeting with China’s President today to seek support for Russia’s recognition of the two break-away regions in Georgia.
Impact Research Calls/Market Moving News:
GS (155.91): Morgan Stanley cuts their Q3 estimate on GS to a new street low of 1.35 from 3.00. Morgan Stanley is citing the erosion in equity and fixed income markets and corresponding weakness in return on equity. Morgan Stanley is expecting ROE to hit a cycle-low of 7%. Weak client flows and principal investment activity headwinds have intensified. 16 analysts have taken their numbers lower on GS since August 7. According to Bloomberg, Atlantic Equities was the first firm to take numbers lower on August 7. They lowered their estimates for Q3 a second time in the last two weeks. He lowered EPS to 1.60 this morning from 3 bucks (on August 7, he lowered numbers to 3 from 3.89). Q3 consensus on GS has now dropped to 2.40 from nearly 4 dollars a little over a month ago.
WSJ Page One article on maturing bank debt piggybacks on the Bloomberg article yesterday: “At issue are so-called floating-rate notes -- securities used heavily by banks in 2006 to borrow money. A big chunk of those notes, which typically mature in two years, will come due over the next year or so, at a time when banks are struggling to raise fresh funds. That's forcing banks to sell assets, compete heavily for deposits and issue expensive new debt. The crunch will begin next month, when some $95 billion in floating-rate notes mature. JPM analyst Alex Roever estimates that financial institutions will have to pay off at least $787 billion in floating-rate notes and other medium-term obligations before the end of 2009. That's about 43% more than they had to redeem in the previous 16 months. As banks scramble to pay the floating-rate notes, they could see profit margins shrink as wary investors demand higher interest rates for new borrowings. They're also likely to become less willing to make new loans to consumers and companies, aggravating economic downturns in both the U.S. and Europe.”
WSJ Heard on the Street article says the infrastructure sector could run into problems: “Rising inflation and tightening credit seem to be damping the global infrastructure party, at least temporarily. Morgan Stanley recently estimated that 8%, or $60 billion, of the $750 billion of infrastructure projects slated for 2008 are being delayed or canceled. That is four times historical cancellation rates of 2% a year, according to the Morgan Stanley and World Bank data. The report cites 40 canceled or delayed projects so far this year, including a $2.4 billion high-speed train between Singapore and Kuala Lumpur and a $3 billion aluminum smelter in Abu Dhabi. The most common reasons cited: rising costs and tight credit. Morgan Stanley projects global infrastructure spending will grow 3% this year, down from 10% last year. Next year, the firm thinks big-project spending could be flat, or even decline.”
GOOG (474.16): Fortune article says GOOG is struggling to break into the enterprise software sector with the Apps product.
MT (74.90): ArcelorMittal faces strike by United Steelworkers - WSJ Saying negotiations have stalled, the union wants members to vote to authorize a strike. MT is "optimistic" the sides will agree on terms by 30-Aug, but the union is unhappy at the company's proposal to increase retiree health-care contributions by 39%. MT appears to feel the agreement the union reached 12-Aug with US Steel (X) were overly generous, but the company is not commenting on specific issues it has problems with.
JCG (26.64): J. Crew Group reports Q2 EPS $0.28 vs Reuters $0.32 Company reports revenues of $336.3M vs Reuters $336.8M. Company reports comps (0.4%) vs consensus of +0.9%. Gross margin decreased to 41.0% of revenues from 43.7% of revenues in Q2 of fiscal 2007. Guides Q3 EPS to $0.28-0.33 vs Reuters $0.46. Guides full year EPS to $1.44-1.54 vs prior $1.70-1.75 and vs Reuters $1.71. The company's revised expectations for the H2 of fiscal 2008 include comparable store sales growth in the range of flat to slightly negative, direct sales growth in the high single-digits and net square footage expansion of approximately 10% to 11%. Shares dropped sharply in post-market trading on Tuesday.
NOK (26.04): Nokia downgraded to hold from add at West LB Equity Markets (pre-European open): Price target decreased to €18.50 from €19.50. Firm cites lower ASP estimates for H2 2008, 2009 and 2010 and reduced margin assumptions for NSN.
AMR (9.61): AMR Corp downgraded to sell from hold at Citi: Target increased to $9 from $6.70, but downgraded on valuation. Firm also raises targets on JBLU to $6.50 from $4.65 and LUV to $15.50 from $14.50 due to the recent decline in oil prices.
Fair Value: SP500 – 1271.21; NDX- 1889.05; DOW – 11408
Technical Levels:
SPX: 1205, 1235, 1250 support/1298-1300, 1337, 1365 resistance
NASDAQ: 2210, 2341, 2386 support / 2456, 2479, 2521, 2553 resistance:
Events:
Pre-market EPS: AEO (.28/709.9M); DLTR (.40/1.06B)
08:30: Durable Goods Orders (July): 0.1%; Ex-Trans: -0.4%
08:35: Fed’s Lockhart speaks on Inflation
10:35: DOE/API Crude Oil and Gasoline Inventories
Post-market EPS: GEF (1.11/969.3M); MW (.71/550.5M)
Foreign Market Summary/Key Macro News:
SP futures are trading 3 points below fair value while the NASDAQ futures are trading 2.50 points below fair value at 7:50 am ET. Although the broader averages have settled into a trading range (1262-1298) following the July 15 lows, the price action has been sloppy at best. Fears about a global economic recession and concerns that 2H earnings estimates are too high have lead to a very weak underlying bid in the broader averages. Key events today include the Durable Goods at 8:30 ET, Fed’s Lockhart’s speech on inflation at 08:35 ET, and the Crude supply data at 10:35 ET. European markets are trading weaker (-0.70%) on light volumes coming towards the end of the summer holidays. Decliners on the FTSE100 lead advancers 7-3. Best performing sectors in Europe include Materials (up 0.40%) and Energy (0.20%). Worst include Autos (-1.8%) and Banks (-1.1%). Asian markets: Asian markets were mostly higher today. Technology stocks fell, and energy stocks advanced. Japan dipped slightly on concerns about the global economy. Property shares dropped after another builder Sohken (8911.JP), collapsed. Hong Kong advanced on buying in heavyweights like China Life Insurance (2628.HK) and China Mobile (941.HK). After reporting record H1 profits, China Mobile led the region up in the afternoon and China Cosco Holdings (1919.HK) also advanced after reporting a doubling of earnings. Crude oil is trading up 1.37 to 117.60 and natural gas is up 5% on fears that Tropical Storm Gustav is going to track into the Gulf of Mexico as a Category 3+ storm. The underlying bid in commodities also appears to be getting an assist from Russia’s decision to recognize the independence of South Ossetia and Abkhazia; Russia’s President is also meeting with China’s President today to seek support for Russia’s recognition of the two break-away regions in Georgia.
Impact Research Calls/Market Moving News:
GS (155.91): Morgan Stanley cuts their Q3 estimate on GS to a new street low of 1.35 from 3.00. Morgan Stanley is citing the erosion in equity and fixed income markets and corresponding weakness in return on equity. Morgan Stanley is expecting ROE to hit a cycle-low of 7%. Weak client flows and principal investment activity headwinds have intensified. 16 analysts have taken their numbers lower on GS since August 7. According to Bloomberg, Atlantic Equities was the first firm to take numbers lower on August 7. They lowered their estimates for Q3 a second time in the last two weeks. He lowered EPS to 1.60 this morning from 3 bucks (on August 7, he lowered numbers to 3 from 3.89). Q3 consensus on GS has now dropped to 2.40 from nearly 4 dollars a little over a month ago.
WSJ Page One article on maturing bank debt piggybacks on the Bloomberg article yesterday: “At issue are so-called floating-rate notes -- securities used heavily by banks in 2006 to borrow money. A big chunk of those notes, which typically mature in two years, will come due over the next year or so, at a time when banks are struggling to raise fresh funds. That's forcing banks to sell assets, compete heavily for deposits and issue expensive new debt. The crunch will begin next month, when some $95 billion in floating-rate notes mature. JPM analyst Alex Roever estimates that financial institutions will have to pay off at least $787 billion in floating-rate notes and other medium-term obligations before the end of 2009. That's about 43% more than they had to redeem in the previous 16 months. As banks scramble to pay the floating-rate notes, they could see profit margins shrink as wary investors demand higher interest rates for new borrowings. They're also likely to become less willing to make new loans to consumers and companies, aggravating economic downturns in both the U.S. and Europe.”
WSJ Heard on the Street article says the infrastructure sector could run into problems: “Rising inflation and tightening credit seem to be damping the global infrastructure party, at least temporarily. Morgan Stanley recently estimated that 8%, or $60 billion, of the $750 billion of infrastructure projects slated for 2008 are being delayed or canceled. That is four times historical cancellation rates of 2% a year, according to the Morgan Stanley and World Bank data. The report cites 40 canceled or delayed projects so far this year, including a $2.4 billion high-speed train between Singapore and Kuala Lumpur and a $3 billion aluminum smelter in Abu Dhabi. The most common reasons cited: rising costs and tight credit. Morgan Stanley projects global infrastructure spending will grow 3% this year, down from 10% last year. Next year, the firm thinks big-project spending could be flat, or even decline.”
GOOG (474.16): Fortune article says GOOG is struggling to break into the enterprise software sector with the Apps product.
MT (74.90): ArcelorMittal faces strike by United Steelworkers - WSJ Saying negotiations have stalled, the union wants members to vote to authorize a strike. MT is "optimistic" the sides will agree on terms by 30-Aug, but the union is unhappy at the company's proposal to increase retiree health-care contributions by 39%. MT appears to feel the agreement the union reached 12-Aug with US Steel (X) were overly generous, but the company is not commenting on specific issues it has problems with.
JCG (26.64): J. Crew Group reports Q2 EPS $0.28 vs Reuters $0.32 Company reports revenues of $336.3M vs Reuters $336.8M. Company reports comps (0.4%) vs consensus of +0.9%. Gross margin decreased to 41.0% of revenues from 43.7% of revenues in Q2 of fiscal 2007. Guides Q3 EPS to $0.28-0.33 vs Reuters $0.46. Guides full year EPS to $1.44-1.54 vs prior $1.70-1.75 and vs Reuters $1.71. The company's revised expectations for the H2 of fiscal 2008 include comparable store sales growth in the range of flat to slightly negative, direct sales growth in the high single-digits and net square footage expansion of approximately 10% to 11%. Shares dropped sharply in post-market trading on Tuesday.
NOK (26.04): Nokia downgraded to hold from add at West LB Equity Markets (pre-European open): Price target decreased to €18.50 from €19.50. Firm cites lower ASP estimates for H2 2008, 2009 and 2010 and reduced margin assumptions for NSN.
AMR (9.61): AMR Corp downgraded to sell from hold at Citi: Target increased to $9 from $6.70, but downgraded on valuation. Firm also raises targets on JBLU to $6.50 from $4.65 and LUV to $15.50 from $14.50 due to the recent decline in oil prices.
Tuesday, August 26, 2008
August26, 2008: Morning Call
August 26, 2008: Morning Call
Fair Value: SP500 – 1266.97; NDX- 1893.07; DOW – 11388
Technical Levels: SPX: 1205, 1235, 1250 support/1298-1300, 1337, 1365 resistance
NASDAQ: 2210, 2341, 2386 support / 2456, 2479, 2521, 2553 resistance
Events:
Pre-market EPS: BIG (.27/1.09B); BMO (1.21/2.70B); CHS (0.03/413.6M); DAKT(.17//140.0M); SAFM (-0.05/462.2M); RTP (No Bloomberg Estimates)
02:45: French Housing Starts (July): -28.2% 3M YoY Change - slightly better
04:00: German IFO Survey Business Climate - weaker than expected
04:00: RTP earnings call - 1H net in-line
09:00: S&P/CaseShiller Home Price Index (June): -16.4% - headline better at -15.9% vs. -16.2% /3-month annualized at -10.05% - indicates slightly improved housing market conditions: no major reaction in equity futures.
10:00: US August Consumer Confidence (Aug): 53.0
10:00: Richmond Fed Manufacturing Index
10:00: New Home Sales (July): 525,000; -0.9% MoM
14:00: FOMC Minutes from the August 5 Meeting
17:00: ABC Consumer Confidence
Post-market EPS: BGP (-.29/803.7M); JCG (.33/338.2M)
Foreign Market Summary/Key Macro News:
SP futures are trading 3 points above fair value while the NASDAQ futures are trading 5 points above fair value ahead of August Consumer Confidence and July New Home Sales at 1000ET. S&P/CaseShiller Home Price Index will be released at 0900ET with FOMC minutes released at 1400ET. Asian markets: Asian exchanges followed Wall Street lower. Banks paced losses on renewed worries about the health of the US economy as the overnight sell-off spread to the region. A stronger yen meant exporters led declines in Japan, though banks fared badly on downgrades and higher real-estate-related bankruptcies. Hong Kong closed off the day’s lows as Chinese insurers rose after China Life Insurance (2628.HK) announced better-than-expected H1 results. European markets are modestly lower but the UK is down 1.4% because it was closed yesterday for a bank holiday. The German IFO confidence index came in weaker than expected. Best performing sectors include technology and utilities. The weakest sectors in European trading are basic resources, energy, and insurance companies. Banks are also down 1.0%.
Impact Research Calls/Market Moving News:
BRCM (26.17): Broadcom downgraded to perform from outperform at Oppenheimer Firms cites potential of y/y decelerating revenue growth beginning 4Q08
BRCM (26.17): Broadcom maintained overweight at Thomas Weisel Partners after acquisition. Target is $36. The firm believes yesterday's announcement that BRCM will acquire the Digital TV business from AMD will enhance BRCM's current DTV product portfolio and position the company in the space. Thomas Weisel also views this acquisition as a strategic step toward BRCM possibly introducing an SoC addressing the converged internet and DTV market.
JPM (36.13): JPMorgan Chase says market value of investments in Fannie Mae (FNM), Freddie Mac (FRE) falls by half to $600M in Q3 to date (36.13)
In an 8-K, JPM says the decline could affect Q3 earnings.
RTP (379.65): Rio Tinto reports H1 net $5.47B ex-items vs Bloomberg $5.36B and year-ago $3.53B: Company reports revenues of $27.19B vs Bloomberg $20.71B and year-ago $12.06B. Company reports underlying Ebitda $11.41B vs Bloomberg $10.12B and year-ago $6.61B. Interim dividend increased 31% to $0.68. The Group continues to perform strongly, and the outlook remains positive.
LEH (13.45): Korea Development Bank told not to bid for Lehman Brothers - London Times: Sources close to the bank tell the paper government officials are insisting the financial commitment a purchase would entail constitutes “too great a risk at a difficult time."
V (73.32); MA (234.20): Visa (V) and Mastercard (MA) initiated with outperform ratings at William Blair.
EOG (102.21): EOG Resources (EOG) upgraded, Talisman Energy (TLM) downgraded at Bernstein: EOG upgraded to market perform from underperform, tp $127. TLM downgraded to market perform from outperform, tp $29.
Banks have $871B in bonds maturing thru 2009, face higher rates - Bloomberg
Bloomberg reports that domestic securities firms have $871B in bonds maturing through 2009. As the banks refinance their debts, according to the report, investors are seeking yields that are 4.14% higher than treasuries, vs +0.76% above treasuries last year. The difference will cost $23B in additional interest annually.
ENER (77.07): Cowen sees upside to the quarter for Energy Conversion:
The firm believes ENER can meet or beat their $0.20 estimate vs. First Call at $0.16 given revenue and margin upside. Cowen says Street estimates could rise, particularly on greater operating leverage and increased backlog. The firm sees upside of 50% vs. the market for the next 12 months.
Heard on the Street looks at the recent carnage in the mining stocks - WSJ
The Journal reports that the Dow Jones Basic Resources STOXX index, which includes some of the world's most prominent metals companies, is down 26% in the past three months. The paper adds that the decline has left commodities stocks trading at historically low multiples of expected earnings, a dynamic that suggests that the shares are either undervalued, or that investors have become skeptical with regards to a continued run of earnings growth. According to the article, such concern seems to be the overriding factor, as even if commodities prices do not decline further, surging input costs could still hamper margins and slow earnings growth. The column goes on to highlight the fact that consolidation, which has provided some insulation from price wars and over-investment, has yet to be tested in the face of a deteriorating global growth profile.
Fair Value: SP500 – 1266.97; NDX- 1893.07; DOW – 11388
Technical Levels: SPX: 1205, 1235, 1250 support/1298-1300, 1337, 1365 resistance
NASDAQ: 2210, 2341, 2386 support / 2456, 2479, 2521, 2553 resistance
Events:
Pre-market EPS: BIG (.27/1.09B); BMO (1.21/2.70B); CHS (0.03/413.6M); DAKT(.17//140.0M); SAFM (-0.05/462.2M); RTP (No Bloomberg Estimates)
02:45: French Housing Starts (July): -28.2% 3M YoY Change - slightly better
04:00: German IFO Survey Business Climate - weaker than expected
04:00: RTP earnings call - 1H net in-line
09:00: S&P/CaseShiller Home Price Index (June): -16.4% - headline better at -15.9% vs. -16.2% /3-month annualized at -10.05% - indicates slightly improved housing market conditions: no major reaction in equity futures.
10:00: US August Consumer Confidence (Aug): 53.0
10:00: Richmond Fed Manufacturing Index
10:00: New Home Sales (July): 525,000; -0.9% MoM
14:00: FOMC Minutes from the August 5 Meeting
17:00: ABC Consumer Confidence
Post-market EPS: BGP (-.29/803.7M); JCG (.33/338.2M)
Foreign Market Summary/Key Macro News:
SP futures are trading 3 points above fair value while the NASDAQ futures are trading 5 points above fair value ahead of August Consumer Confidence and July New Home Sales at 1000ET. S&P/CaseShiller Home Price Index will be released at 0900ET with FOMC minutes released at 1400ET. Asian markets: Asian exchanges followed Wall Street lower. Banks paced losses on renewed worries about the health of the US economy as the overnight sell-off spread to the region. A stronger yen meant exporters led declines in Japan, though banks fared badly on downgrades and higher real-estate-related bankruptcies. Hong Kong closed off the day’s lows as Chinese insurers rose after China Life Insurance (2628.HK) announced better-than-expected H1 results. European markets are modestly lower but the UK is down 1.4% because it was closed yesterday for a bank holiday. The German IFO confidence index came in weaker than expected. Best performing sectors include technology and utilities. The weakest sectors in European trading are basic resources, energy, and insurance companies. Banks are also down 1.0%.
Impact Research Calls/Market Moving News:
BRCM (26.17): Broadcom downgraded to perform from outperform at Oppenheimer Firms cites potential of y/y decelerating revenue growth beginning 4Q08
BRCM (26.17): Broadcom maintained overweight at Thomas Weisel Partners after acquisition. Target is $36. The firm believes yesterday's announcement that BRCM will acquire the Digital TV business from AMD will enhance BRCM's current DTV product portfolio and position the company in the space. Thomas Weisel also views this acquisition as a strategic step toward BRCM possibly introducing an SoC addressing the converged internet and DTV market.
JPM (36.13): JPMorgan Chase says market value of investments in Fannie Mae (FNM), Freddie Mac (FRE) falls by half to $600M in Q3 to date (36.13)
In an 8-K, JPM says the decline could affect Q3 earnings.
RTP (379.65): Rio Tinto reports H1 net $5.47B ex-items vs Bloomberg $5.36B and year-ago $3.53B: Company reports revenues of $27.19B vs Bloomberg $20.71B and year-ago $12.06B. Company reports underlying Ebitda $11.41B vs Bloomberg $10.12B and year-ago $6.61B. Interim dividend increased 31% to $0.68. The Group continues to perform strongly, and the outlook remains positive.
LEH (13.45): Korea Development Bank told not to bid for Lehman Brothers - London Times: Sources close to the bank tell the paper government officials are insisting the financial commitment a purchase would entail constitutes “too great a risk at a difficult time."
V (73.32); MA (234.20): Visa (V) and Mastercard (MA) initiated with outperform ratings at William Blair.
EOG (102.21): EOG Resources (EOG) upgraded, Talisman Energy (TLM) downgraded at Bernstein: EOG upgraded to market perform from underperform, tp $127. TLM downgraded to market perform from outperform, tp $29.
Banks have $871B in bonds maturing thru 2009, face higher rates - Bloomberg
Bloomberg reports that domestic securities firms have $871B in bonds maturing through 2009. As the banks refinance their debts, according to the report, investors are seeking yields that are 4.14% higher than treasuries, vs +0.76% above treasuries last year. The difference will cost $23B in additional interest annually.
ENER (77.07): Cowen sees upside to the quarter for Energy Conversion:
The firm believes ENER can meet or beat their $0.20 estimate vs. First Call at $0.16 given revenue and margin upside. Cowen says Street estimates could rise, particularly on greater operating leverage and increased backlog. The firm sees upside of 50% vs. the market for the next 12 months.
Heard on the Street looks at the recent carnage in the mining stocks - WSJ
The Journal reports that the Dow Jones Basic Resources STOXX index, which includes some of the world's most prominent metals companies, is down 26% in the past three months. The paper adds that the decline has left commodities stocks trading at historically low multiples of expected earnings, a dynamic that suggests that the shares are either undervalued, or that investors have become skeptical with regards to a continued run of earnings growth. According to the article, such concern seems to be the overriding factor, as even if commodities prices do not decline further, surging input costs could still hamper margins and slow earnings growth. The column goes on to highlight the fact that consolidation, which has provided some insulation from price wars and over-investment, has yet to be tested in the face of a deteriorating global growth profile.
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