Morning Call: November 18, 2009

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.