Morning Call: December 17, 2009

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.