March 4, 2009: Morning Call
Fair Value: SP500 – 695.86; NDX: 1081.04; DOW: 6720.04
Technical Levels:
SPX: 685 support/752, 778, 800, 848-852 resistance
Events:
Pre-market EPS: BIG (.93/1.36B); COST (.60/16.84B); JOYG (.75/782.2M); TOL(-.44/426.1M)
04:00: Euro-zone PMI Services (Feb): 38.9; Composite: 36.2
07:00: MBA Mortgage Applications.
08:15: ADP employment Change (Feb): -620,000
10:00: ISM Non-Manufacturing (Feb): 41.0
10:00: Treasury Secretary Geithner speaks on the budget to Senate Finance committee
10:30: DOE Crude Oil and Gasoline Inventories
11:00: COST earnings call
12:00: Fed’s Lockhart speaks on the US economy
14:00: Fed’s Beige Book
14:00: TOL earnings call
16:00: Select Retail Companies report February Comps.
Post-market EPS: AUY (.04/222.7M); PETM (.59/1.36B); WTW (.53/360.1M)
Foreign Market Summary/Key Macro News/Commentary:
The S&P and NASDAQ futures are both trading 6 points above fair value at 7:30am ET. The S&P futures have recovered 20 points from the post-session lows last night (682). Foreign markets are higher on speculation that China is going to expand their fiscal stimulus programs. Asian markets rose with the exception of Australia (Japan up 0.85%, Hong Kong up 2.47%, Shanghai up 6.68%, South Korea up 3.17%, Australia down 1.64%, India up 0.23%). European markets are up 2.0% with mining and industrial shares leading the advance and health care and consumer staples lagging.
Impact Research Calls/Market Moving News:
Chinese Premier Wen Jiabao to announce new stimulus package tomorrow (5-Mar in China) – Bloomberg: Speaking outside a meeting of the economic group of the Chinese People’s Political Consultative Conference, former statistics bureau head Li Deshui does not indicate if the new package will be more than the CNY4B ($585B) package announced in November.
GOOG (325.48): At Morgan Stanley’s technology conference, GOOG CEO Eric Schmidt said the economy is “pretty dire” and that the next two quarters will be very tough. Schmidt also indicated that travel, automobile, and financial services segments have taken a hit. Schmidt said GOOG is not immune to the economic situation but is better positioned than most and that people are using the internet more during the recession. The S&P futures were trading 13 below fair value and GOOG shares traded as low as 311.50 following these comments(down 14 dollars). The statement by Schmidt should not have come as such a great surprise to market participants given the recent news flow on the economy and sharp declines in financial markets over the last 2 weeks. The post-market weakness was an over-reaction.
COST (40.69): Costco reports Q2 EPS $0.55 vs Reuters $0.60: Company reports revenues of $16.84B vs Reuters $16.84B. Q2 comps were (1%) in the US, (11%) internationally, (3%) overall. US comps (excluding the impact from gasoline deflation) were +4%; international (excluding the effects of foreign exchange) +8%. Results were hurt by weakness in non-foods sales, increased pre-holiday markdowns, lower gasoline profits, and the strengthening of the US dollar.
BIG (14.54): BIG reports Q4 EPS $0.96 vs Reuters $0.93, guides Q1 EPS $0.34-0.40 con't ops vs Reuters $0.35, guides f09 EPS $1.75-1.90 con't ops vs Reuters $1.70.
PALM (7.38): Palm guides Q3 revenue to $85-90M vs Reuters $155.2M: The company says that the revenue decline is the result of reduced demand for its maturing legacy smartphone products, the challenging economic environment and later-than-expected shipments of the Treo Pro in the US. Palm upgraded to buy from neutral at Piper Jaffray: Firm says new 'Pre' model will resonate with consumers
Washington Post discusses Treasury's toxic asset plans: Many of the specifics in the Post's report were covered by the WSJ last night. Like the WSJ, the Post reports that the Treasury is considering setting up several funds to purchase toxic assets, attracting private investors to manage and put their own money into these funds by offering to cap their losses and share in the risk of buying the assets. The Post was more specific regarding timing, saying that the Obama Administration is hoping to unveil the plan in the "next few weeks". The Post also noted many potential similarities between the plan and the now established TALF. The key difference between the two programs is that the TALF focuses on highly rated, new issues, while the toxic asset plan will focus on legacy assets - previously issued, lower rated securities. Yet in both cases, the government is looking to private investors to price the assets, giving them incentive to participate by providing financing and capping losses via non-recourse loans. The article notes that Blackstone (BX) CEO Stephen Schwartzman said that his firm has decided to look into buying assets offered in the TALF, though the firm has never bought such securities before. BX shares rose 19.3% on Tuesday
Mortgage relief bill to be tempered; bankruptcy judges to get less leeway - Washington Post: A compromise version of the bill limits homeowners' ability to ask a bankruptcy judge for help if they have already received or been offered a loan modification that lowered their payments to 31% of their income. They will also need to share any profit from the eventual sale of the home with lenders if a bankruptcy judge lowers the principal balance, and lowering the loan's interest rate will be preferred to cutting the balance.
HPQ (28.17): Hewlett-Packard upgraded to buy from hold at Argus Research: Target is $35.00.. Firm notes valuation and EDS potential
TOL (14.39): Toll Brothers reports Q1 EPS ($0.55): The net loss included pre-tax writedowns of $156.6M. Reuters is ($0.52). Company reports revenues of $409.0M vs Reuters $432.5M. Backlog, net signed contracts, and cash levels at end Q1 were reported on 11-Feb. Chairman, CEO Robert Toll says they are beginning to see some properties come to market at reasonable prices. TOL has not bought any yet, but are getting closer. Toll believes there are buyers on the fence, but that weak buyer confidence still impedes the market. TOL says it will not provide earnings guidance at this time, expects to deliver betweeen 2K-3K homes in f09 at an average delivered price of between $600-$625K per home, and expects lower f09 projected revenues
Wednesday, March 4, 2009
Tuesday, March 3, 2009
March 3, 2009: Morning Call
March 3, 2009: Morning Call
Fair Value: SP500 – 700.17; NDX: 1077.17; DOW: 6754.93
Technical Levels:
SPX: 685 support/752, 778, 800, 848-852 resistance
Events:
Pre-market EPS: AZO (1.84/1.38B); CHS (-.17/370.9M); MBI (-.47/393.3M); TSL (-0.01/220.2M)
08:00: Fed’s Lockhart speaks on the US economy
10:00: Fed’s Bernanke speaks before Senate Budget Committee
10:00: Pending Home Sales (Jan): -3.5%
10:00: MDR earnings call
10:30: DELL presents at Morgan Stanley Tech Conference
11:15: MSFT presents at Morgan Stanley Tech Conference
11:25: PNC presents at Sandler O’Neill Financial Services Conf.
11:30: DE presents at ISI Industrial Investor Conference
12:30: QCOM Annual General Meeting
12:30: Treasury Secretary Geithner testifies at House panel on Federal Budget
12:45: TXN presents at Morgan Stanley Tech Conference
14:10: HIG presents at Association of Insurance Financial Analysts Conf.
15:00: GOOG presents at Morgan Stanley Tech Conference
16:30: API Crude Oil and Gasoline Inventories
17:00: ABC Consumer Confidence
20:00: Chinese PMI Manufacturing
Post-market EPS: ADCT (-.11/274.4M);
Foreign Market Summary/Key Macro News/Commentary:
The S&P futures are trading 8.50 points above fair value while the NASDAQ futures are trading 13 points above fair value at 7:30 am ET. Asian markets declined but the losses were smaller than US listed ADRs were implying when US markets closed on Monday (Japan down 0.69%, Hong Kong down 2.3%, Australia down 0.95%, India down 2.0%, South Korea up 1.1%). Japan pared initial declines of as much as (2.6%) after the country’s Finance Minister said the government could not ignore excessive declines in stock prices. European markets are up 0.60% in volatile trading. Markets in London are still down 1% underperforming the rest of the Euro-zone. Basic material, energy, and banking sectors are all down more than 1.5%.
Impact Research Calls/Market Moving News:
Obama administration considering creating multiple investment funds to purchase toxic assets – WSJ: The Journal cites people familiar with the matter. The paper adds that while no final decision has been made when it comes to the structure of a private-public financing partnership, one leading idea is to establish separate funds run by private investment managers. The managers would have to put up a certain amount of capital, while additional financing would come from the government, which would share in any profit or loss. According to the article, the private investment managers would run the funds, and have the power to decide what assets to buy and what prices to pay. To encourage participation, the government would try to minimize risk for private investors, possibly by offering non-recourse loans
JPM (21.16): JPMorgan Chase made $5B in profit from over-the-counter fixed-income derivatives last year – Bloomberg: The wire cites people with knowledge of the results. JPM's total profit was $5.6B in 2008. In a separate story, the wire reports that Goldman Sachs (GS) and JPMorgan Chase have hiked their average underwriting fees by 50% y/y, from 1.9% to 2.9%.
MGM (3.05): MGM Mirage at risk of Chapter 11, reports Las Vegas Sun: The article notes the news last week that MGM had requested the remaining $842M under its $4.5B line of credit, which has created a risk of bankruptcy filing, according to analysts, noting that major loans are coming due over the next 2 years. A spokesman for the company declined to comment on the bankruptcy concerns or elaborate on the 27-Feb announcement. One source indicated that a delay to completion of CityCenter is one of many possibilities being considered by MGM until credit eases.
GE (7.60):UBS continues to expect a credit rating downgrade on General Electric:While the firm believes the dividend cut was necessary, it continues to expect a rating downgrade sometime shortly before or after Q1 results. UBS thinks that GE may need to raise additional capital and still sees downside to share prices over the next few months. Firm maintains Short-Term Sell rating. 12-month rating remains neutral with a target of $12.
GE (7.60): Investors likely to start worrying about GE's exposure to Eastern Europe – WSJ: In a "Heard on the Street" column, the Journal notes that in a presentation last year, GE said it had $26B of financial assets in central and eastern Europe at the end of 2007, up significantly from the $15B at the end of 2005. The paper adds that current exposure could be even higher, as GE noted in its 2008 annual report that 11% of its financial receivables were in developing markets, mainly Eastern Europe and Mexico. According to the article, if 9% of the total were in Eastern Europe, which could amount to more than $30B. The Journal goes on to point out that many of GE's loans in the region are consumer loans, which are typically not made against collateral.
FNM (.38); FRE (.38): Fannie, Freddie unlikely to fully return to private hands - NY Times: The Times reports that lawmakers and company executives are beginning to quietly acknowledge that Fannie Mae and Freddie Mac will most likely never fully return to private hands. The article notes that the biggest constraint is the fact that in order to become independent, the companies must repay public funds, with interest. However, even if the firms become profitable again, it could take them more than 100 years to pay back the government. The paper also points out that in just the last six weeks, the Obama administration has essentially transformed the GSEs into arms of the federal government, with regulators mandating that the companies oversee a sweeping new mortgage modification program, purchase greater numbers of loans, refinance millions of at-risk borrowers and loosen internal standards. The Times also cites low pay and the burden of second-guessing by government officials as a factor in the exodus of talent from the companies, including Monday's announcement of the unexpected departure of Freddie CEO David Moffett. The article goes on to note that lawmakers are discussing a number of possible options for Fannie and Freddie, ranging from outright nationalization to public-private hybrids.
Dividend cuts this year expected to be worst since 1938 – FT: According to S&P, S&P 500 dividends fell 36.3% in 1938. Thus far in 2009, dividend pay-outs are forecast to contract at least 22.6%. The S&P's current trailing dividend yield is 4%, with the FT noting that the consensus estimate for the 2009 S&P 500 dividend pay-out is 3.49%.
Fair Value: SP500 – 700.17; NDX: 1077.17; DOW: 6754.93
Technical Levels:
SPX: 685 support/752, 778, 800, 848-852 resistance
Events:
Pre-market EPS: AZO (1.84/1.38B); CHS (-.17/370.9M); MBI (-.47/393.3M); TSL (-0.01/220.2M)
08:00: Fed’s Lockhart speaks on the US economy
10:00: Fed’s Bernanke speaks before Senate Budget Committee
10:00: Pending Home Sales (Jan): -3.5%
10:00: MDR earnings call
10:30: DELL presents at Morgan Stanley Tech Conference
11:15: MSFT presents at Morgan Stanley Tech Conference
11:25: PNC presents at Sandler O’Neill Financial Services Conf.
11:30: DE presents at ISI Industrial Investor Conference
12:30: QCOM Annual General Meeting
12:30: Treasury Secretary Geithner testifies at House panel on Federal Budget
12:45: TXN presents at Morgan Stanley Tech Conference
14:10: HIG presents at Association of Insurance Financial Analysts Conf.
15:00: GOOG presents at Morgan Stanley Tech Conference
16:30: API Crude Oil and Gasoline Inventories
17:00: ABC Consumer Confidence
20:00: Chinese PMI Manufacturing
Post-market EPS: ADCT (-.11/274.4M);
Foreign Market Summary/Key Macro News/Commentary:
The S&P futures are trading 8.50 points above fair value while the NASDAQ futures are trading 13 points above fair value at 7:30 am ET. Asian markets declined but the losses were smaller than US listed ADRs were implying when US markets closed on Monday (Japan down 0.69%, Hong Kong down 2.3%, Australia down 0.95%, India down 2.0%, South Korea up 1.1%). Japan pared initial declines of as much as (2.6%) after the country’s Finance Minister said the government could not ignore excessive declines in stock prices. European markets are up 0.60% in volatile trading. Markets in London are still down 1% underperforming the rest of the Euro-zone. Basic material, energy, and banking sectors are all down more than 1.5%.
Impact Research Calls/Market Moving News:
Obama administration considering creating multiple investment funds to purchase toxic assets – WSJ: The Journal cites people familiar with the matter. The paper adds that while no final decision has been made when it comes to the structure of a private-public financing partnership, one leading idea is to establish separate funds run by private investment managers. The managers would have to put up a certain amount of capital, while additional financing would come from the government, which would share in any profit or loss. According to the article, the private investment managers would run the funds, and have the power to decide what assets to buy and what prices to pay. To encourage participation, the government would try to minimize risk for private investors, possibly by offering non-recourse loans
JPM (21.16): JPMorgan Chase made $5B in profit from over-the-counter fixed-income derivatives last year – Bloomberg: The wire cites people with knowledge of the results. JPM's total profit was $5.6B in 2008. In a separate story, the wire reports that Goldman Sachs (GS) and JPMorgan Chase have hiked their average underwriting fees by 50% y/y, from 1.9% to 2.9%.
MGM (3.05): MGM Mirage at risk of Chapter 11, reports Las Vegas Sun: The article notes the news last week that MGM had requested the remaining $842M under its $4.5B line of credit, which has created a risk of bankruptcy filing, according to analysts, noting that major loans are coming due over the next 2 years. A spokesman for the company declined to comment on the bankruptcy concerns or elaborate on the 27-Feb announcement. One source indicated that a delay to completion of CityCenter is one of many possibilities being considered by MGM until credit eases.
GE (7.60):UBS continues to expect a credit rating downgrade on General Electric:While the firm believes the dividend cut was necessary, it continues to expect a rating downgrade sometime shortly before or after Q1 results. UBS thinks that GE may need to raise additional capital and still sees downside to share prices over the next few months. Firm maintains Short-Term Sell rating. 12-month rating remains neutral with a target of $12.
GE (7.60): Investors likely to start worrying about GE's exposure to Eastern Europe – WSJ: In a "Heard on the Street" column, the Journal notes that in a presentation last year, GE said it had $26B of financial assets in central and eastern Europe at the end of 2007, up significantly from the $15B at the end of 2005. The paper adds that current exposure could be even higher, as GE noted in its 2008 annual report that 11% of its financial receivables were in developing markets, mainly Eastern Europe and Mexico. According to the article, if 9% of the total were in Eastern Europe, which could amount to more than $30B. The Journal goes on to point out that many of GE's loans in the region are consumer loans, which are typically not made against collateral.
FNM (.38); FRE (.38): Fannie, Freddie unlikely to fully return to private hands - NY Times: The Times reports that lawmakers and company executives are beginning to quietly acknowledge that Fannie Mae and Freddie Mac will most likely never fully return to private hands. The article notes that the biggest constraint is the fact that in order to become independent, the companies must repay public funds, with interest. However, even if the firms become profitable again, it could take them more than 100 years to pay back the government. The paper also points out that in just the last six weeks, the Obama administration has essentially transformed the GSEs into arms of the federal government, with regulators mandating that the companies oversee a sweeping new mortgage modification program, purchase greater numbers of loans, refinance millions of at-risk borrowers and loosen internal standards. The Times also cites low pay and the burden of second-guessing by government officials as a factor in the exodus of talent from the companies, including Monday's announcement of the unexpected departure of Freddie CEO David Moffett. The article goes on to note that lawmakers are discussing a number of possible options for Fannie and Freddie, ranging from outright nationalization to public-private hybrids.
Dividend cuts this year expected to be worst since 1938 – FT: According to S&P, S&P 500 dividends fell 36.3% in 1938. Thus far in 2009, dividend pay-outs are forecast to contract at least 22.6%. The S&P's current trailing dividend yield is 4%, with the FT noting that the consensus estimate for the 2009 S&P 500 dividend pay-out is 3.49%.
Monday, March 2, 2009
March 2, 2009: Morning Call
March 2, 2009: Morning Call
Fair Value: SP500 – 734.48; NDX: 1117.47; DOW: 7055.01
Technical Levels:
SPX: 685 support/752, 778, 800, 848-852 resistance
Events:
Pre-market EPS: ACAS (.64/263.0M); DISH (.48/2.95B); HBC; AIG
04:00: Euro-zone PMI Manufacturing Index (Feb): 33.6
05:00: Euro-zone CPI Estimate (YoY-Feb): 1.0%
08:30: Personal Income (Jan): -0.2%; Personal Spending: 0.4%
08:30: PCE Core (MoM): 0.1%; (YoY): 1.6%
10:00: ISM Manufacturing (Feb): 33.9; Prices Paid: 33.0
10:00: Construction Spending (Jan): -1.5%
11:30: Fed’s Rosengren speaks to bankers in Washington DC
12:45: Fed’s Lacker speaks on monetary policy.
18:20: AMAT presents at Morgan Stanley Tech Conference
Post-market EPS: MDR (.17/1.64B)
Foreign Market Summary/Key Macro News/Commentary:
The S&P futures are trading 16 points below fair value while the NASDAQ futures are trading 23 points below fair value at 8:15 am ET. Asian markets closed sharply lower (Japan down 3.8%, Hong Kong down 3.86%, Australia down 2.82%, South Korea down 4.0%, India down 3.2%). Financials and exporters led Asian lower, with the one exception being Shanghai (up 1.1%) as comments by Premier Wen helped the market buck the trend lower. Australian banks fell after a Moody's downgrade and Macquarie Group (MQG.AU) fell after saying it did not plan to increase its investment in its listed funds. Financials and carmakers paced Japan’s decline. European markets are down 3.5% with financial, mining and industrial stocks leading the decline. Financial stocks are making fresh 17-year lows on accelerating fears that the credit storm is intensifying.
Impact Research Calls/Market Moving News:
AIG (.42): AIG reports Q4 loss of 22.95 a share or 61.7 billion. The US has agreed to a new 30 billion equity capital facility. The structure of the deal is incredibly complicated. The Fed will exchange 40 billion in preferred shares into a new preferred issue but the main issue is the terms are far less punitive than the initial bailout.
BRK/A (78,600): Berkshire Hathaway reports worst year ever reports the WSJ: The company reported a small profit for Q4, down 96% y/y. Book value per share fell 9.6% in '08, the biggest decline since Warren Buffett took over in 1965. Buffett said the economy will be in “shambles and, for that matter, well beyond.”
HBC (34.80): HBC shares are down 20% after the company announced a rights offering at 254 pence each, with existing shareholders able to buy 5 shares for every 12 they already own. HBC reported a pretax loss of 15.5 billion from North American operations.
STT (25.27): State Street downgraded to neutral from buy at Goldman Sachs
Defense sector downgraded to neutral from attractive; Lockheed Martin (LMT) removed from Conviction Buy List at Goldman Sachs: LLL remains on the Conviction Buy List, and is top pick. Both stocks remain rated buy.
BX (4.87): Blackstone Group upgraded to outperform from market perform at Keefe, Bruyette & Woods: Target is $6.00. Upgrade follows 27-Feb earnings announcement
ADBE (16.70): Adobe Systems upgraded to neutral from sell at UBS. Target is $18.
GE (8.51): Dividend cut not a panacea for GE – WSJ: In a "Heard on the Street" column, the Journal notes that savings from the dividend cut will amount to just $4.2B this year, According to the paper, that is not enough to fully dampen fears of larger writedowns in the finance business or the macro pressures facing the industrial business. The article goes on to note that while the cut amounted to a defensive move that was long overdue, it is still likely to exacerbate fears about the outlook for GE's businesses.
NEM (41.63); KGC (15.78): Newmont Mining (NEM) downgraded to neutral from overweight, Kinross Gold (KGC) upgraded to overweight from neutral at JPMorgan.
ABX (30.20): Barrick Gold upgraded to overweight from neutral at JPMorgan
Barron's cover looks at the health of the banking system: The Citi deal has everyone now focused on tangible capital, which is tangible common equity divided by tangible assets. Many analysts believe that 4% tangible capital ratio will emerge as the targeted minimum by the government. Previously, regulators focus on Tier 1 capital had been criticized as overstating financial strength. The change in focus should not be a problem for many regional banks with tangible capital ratios that exceed 5%. Among the larger banks, JP Morgan (JPM) is close to 4% and the cut to the dividend should add enough tangible capital to bring the bank over 4% this year. However, Bank of America (BAC) has a ratio of 2.6% and Wells Fargo's (WFC) is 2.8%. Both could hit the 4% mark with a conversion of preferred holders to common stock but the moves would dilute existing shareholders. Both banks have stated they don't see a need to raise capital right now. These concerns may mean opportunity for investors as many banks, including BAC, COF, KEY, STI and CMA, look cheap when compared to tangible book value. Dividend cuts may be possible at WFC, USB and PNC. Bernstein's John McDonald likes JPM with a target of $38. Bernstein likes CMA and USB among the regionals. Barron's is mixed on Citi and says preferred holders should convert, especially if the deal is as favorable as the 45 cents on the dollar offered the government and the fact that Citi will stop paying the dividend to the preferred.
Barron's summary
Cover: Looking at the health of the banking system, positive on JPM, CMA, USB. Special Report - Going Green: 5 plays on alternative energy: ABB, WMI, FPL, JEC and ETN. A look at the potential cost of the Obama Administration's plans to force America to go green. Lead Articles: The Obama budget plan includes a large tax bill for the investor class; Baxter (BAX) may reward investors if it delivers on earnings projections; It is far too soon to count Dell (DELL) out; Stericycle (SRCL) is likely to outshine the market for the next 18 months; Taxing Subject looks at the federal help offered to first time home buyers last year and this; Other Voices argues in favor of carbon capture and sequestration as a means of fighting global warming; Editorial considers the Obama economic plan and the fact that the crisis seems a reason to do things Obama would want to do anyway. Columns: The Trader is cautious on health care, gun makers, Best Buy (BBY) and Amazon (AMZN); The Striking Price notes the end of the Amex exchange and the start of the NYSE-Amex; Commodities Corner says some traders expect the positive trend among gold miners compared to gold to continue; Asia Trader says the problems in Asia will continue for some time, longer term positive on global equities given the projected decline of youth bulges in many countries; Euro Trader is positive on British Airways (BAY.LN); Current Yield notes the negative yields from Treasuries recently; Up and Down Wall Street considers Obama's trickle up economics and the Not-So-Great Depression; Streetwise looks at natural gas plays including UNG, PXD and FCG, notes that pharma M&A activity might trend towards smaller deals, positive for CVD and KNDL, mixed on the gun makers on the potential of the change in administration pulling demand forward; Economic Beat considers the risks in and to the new budget proposal from President Obama; Technology Trader considers potential M&A deals once the markets thaw; Plugged In looks at the differences between IBM and HPQ.
Fair Value: SP500 – 734.48; NDX: 1117.47; DOW: 7055.01
Technical Levels:
SPX: 685 support/752, 778, 800, 848-852 resistance
Events:
Pre-market EPS: ACAS (.64/263.0M); DISH (.48/2.95B); HBC; AIG
04:00: Euro-zone PMI Manufacturing Index (Feb): 33.6
05:00: Euro-zone CPI Estimate (YoY-Feb): 1.0%
08:30: Personal Income (Jan): -0.2%; Personal Spending: 0.4%
08:30: PCE Core (MoM): 0.1%; (YoY): 1.6%
10:00: ISM Manufacturing (Feb): 33.9; Prices Paid: 33.0
10:00: Construction Spending (Jan): -1.5%
11:30: Fed’s Rosengren speaks to bankers in Washington DC
12:45: Fed’s Lacker speaks on monetary policy.
18:20: AMAT presents at Morgan Stanley Tech Conference
Post-market EPS: MDR (.17/1.64B)
Foreign Market Summary/Key Macro News/Commentary:
The S&P futures are trading 16 points below fair value while the NASDAQ futures are trading 23 points below fair value at 8:15 am ET. Asian markets closed sharply lower (Japan down 3.8%, Hong Kong down 3.86%, Australia down 2.82%, South Korea down 4.0%, India down 3.2%). Financials and exporters led Asian lower, with the one exception being Shanghai (up 1.1%) as comments by Premier Wen helped the market buck the trend lower. Australian banks fell after a Moody's downgrade and Macquarie Group (MQG.AU) fell after saying it did not plan to increase its investment in its listed funds. Financials and carmakers paced Japan’s decline. European markets are down 3.5% with financial, mining and industrial stocks leading the decline. Financial stocks are making fresh 17-year lows on accelerating fears that the credit storm is intensifying.
Impact Research Calls/Market Moving News:
AIG (.42): AIG reports Q4 loss of 22.95 a share or 61.7 billion. The US has agreed to a new 30 billion equity capital facility. The structure of the deal is incredibly complicated. The Fed will exchange 40 billion in preferred shares into a new preferred issue but the main issue is the terms are far less punitive than the initial bailout.
BRK/A (78,600): Berkshire Hathaway reports worst year ever reports the WSJ: The company reported a small profit for Q4, down 96% y/y. Book value per share fell 9.6% in '08, the biggest decline since Warren Buffett took over in 1965. Buffett said the economy will be in “shambles and, for that matter, well beyond.”
HBC (34.80): HBC shares are down 20% after the company announced a rights offering at 254 pence each, with existing shareholders able to buy 5 shares for every 12 they already own. HBC reported a pretax loss of 15.5 billion from North American operations.
STT (25.27): State Street downgraded to neutral from buy at Goldman Sachs
Defense sector downgraded to neutral from attractive; Lockheed Martin (LMT) removed from Conviction Buy List at Goldman Sachs: LLL remains on the Conviction Buy List, and is top pick. Both stocks remain rated buy.
BX (4.87): Blackstone Group upgraded to outperform from market perform at Keefe, Bruyette & Woods: Target is $6.00. Upgrade follows 27-Feb earnings announcement
ADBE (16.70): Adobe Systems upgraded to neutral from sell at UBS. Target is $18.
GE (8.51): Dividend cut not a panacea for GE – WSJ: In a "Heard on the Street" column, the Journal notes that savings from the dividend cut will amount to just $4.2B this year, According to the paper, that is not enough to fully dampen fears of larger writedowns in the finance business or the macro pressures facing the industrial business. The article goes on to note that while the cut amounted to a defensive move that was long overdue, it is still likely to exacerbate fears about the outlook for GE's businesses.
NEM (41.63); KGC (15.78): Newmont Mining (NEM) downgraded to neutral from overweight, Kinross Gold (KGC) upgraded to overweight from neutral at JPMorgan.
ABX (30.20): Barrick Gold upgraded to overweight from neutral at JPMorgan
Barron's cover looks at the health of the banking system: The Citi deal has everyone now focused on tangible capital, which is tangible common equity divided by tangible assets. Many analysts believe that 4% tangible capital ratio will emerge as the targeted minimum by the government. Previously, regulators focus on Tier 1 capital had been criticized as overstating financial strength. The change in focus should not be a problem for many regional banks with tangible capital ratios that exceed 5%. Among the larger banks, JP Morgan (JPM) is close to 4% and the cut to the dividend should add enough tangible capital to bring the bank over 4% this year. However, Bank of America (BAC) has a ratio of 2.6% and Wells Fargo's (WFC) is 2.8%. Both could hit the 4% mark with a conversion of preferred holders to common stock but the moves would dilute existing shareholders. Both banks have stated they don't see a need to raise capital right now. These concerns may mean opportunity for investors as many banks, including BAC, COF, KEY, STI and CMA, look cheap when compared to tangible book value. Dividend cuts may be possible at WFC, USB and PNC. Bernstein's John McDonald likes JPM with a target of $38. Bernstein likes CMA and USB among the regionals. Barron's is mixed on Citi and says preferred holders should convert, especially if the deal is as favorable as the 45 cents on the dollar offered the government and the fact that Citi will stop paying the dividend to the preferred.
Barron's summary
Cover: Looking at the health of the banking system, positive on JPM, CMA, USB. Special Report - Going Green: 5 plays on alternative energy: ABB, WMI, FPL, JEC and ETN. A look at the potential cost of the Obama Administration's plans to force America to go green. Lead Articles: The Obama budget plan includes a large tax bill for the investor class; Baxter (BAX) may reward investors if it delivers on earnings projections; It is far too soon to count Dell (DELL) out; Stericycle (SRCL) is likely to outshine the market for the next 18 months; Taxing Subject looks at the federal help offered to first time home buyers last year and this; Other Voices argues in favor of carbon capture and sequestration as a means of fighting global warming; Editorial considers the Obama economic plan and the fact that the crisis seems a reason to do things Obama would want to do anyway. Columns: The Trader is cautious on health care, gun makers, Best Buy (BBY) and Amazon (AMZN); The Striking Price notes the end of the Amex exchange and the start of the NYSE-Amex; Commodities Corner says some traders expect the positive trend among gold miners compared to gold to continue; Asia Trader says the problems in Asia will continue for some time, longer term positive on global equities given the projected decline of youth bulges in many countries; Euro Trader is positive on British Airways (BAY.LN); Current Yield notes the negative yields from Treasuries recently; Up and Down Wall Street considers Obama's trickle up economics and the Not-So-Great Depression; Streetwise looks at natural gas plays including UNG, PXD and FCG, notes that pharma M&A activity might trend towards smaller deals, positive for CVD and KNDL, mixed on the gun makers on the potential of the change in administration pulling demand forward; Economic Beat considers the risks in and to the new budget proposal from President Obama; Technology Trader considers potential M&A deals once the markets thaw; Plugged In looks at the differences between IBM and HPQ.
Friday, February 27, 2009
February 27, 2009: Morning Call
February 27, 2009: Morning Call
Fair Value: SP500 – 752.24; NDX: 1127.63; DOW: 7174.49
Technical Levels:
SPX: 685 support/742-746, 778, 800, 848-852 resistance
Events:
Pre-market EPS: IPG (.29/1.92B); FRO (1.05/315.8M); DT (.23/20.18)
05:00: Euro-zone CPI (Jan): -0.9% MoM; 1.1% YoY
05:00: Euro-zone Core CPI (Jan): 1.8% YoY
05:00: Euro-zone Unemployment Rate (Jan): 8.1%
08:30: US GDP QoQ (Annualized): -5.4% (revised from preliminary –3.8%)
09:45: Chicago Purchasing Manager (Feb): 34.0
10:00: University of Michigan Confidence (Feb): 56.5
13:00: QCOM presents at Goldman Sachs Tech and Internet Conference
13:20: BRCM presents at Goldman Sachs Tech and Internet Conference
Foreign Market Summary/Key Macro News/Commentary:
The S&P futures are trading 18 points below fair value while the NASDAQ futures are trading 20 points below fair value. The S&P futures are currently trading below the November 21 intra-day lows (741) following the official details of the Citibank rescue package. Although the media is widely reporting this transaction as another give-away for Citibank shareholders, the terms are punitive and private stakeholders in Citibank will be effectively required to participate. The Obama administration is clearly unwilling to rescue financial institutions without taking the appropriate pound of flesh from the stakeholders. Financial stocks are trading down 7% with Citibank down 40% and BAC down 22.0%. GDP was also revised sharply lower to –6.2% versus consensus of –5.4%, the steepest contraction since 1982. European markets are trading down 3.5% extending the losses 2% in reaction to the Citibank news and weak GDP.
Impact Research Calls/Market Moving News:
C (2.46): The US government agrees to convert 25 billion of preferred securities into common equity at 3.25 a share a share so long as private holders agree to convert 27.5 billion in preferred shares into common on the same terms. The press release is complicated but it looks like the “private holders” are going to be incentivized to convert because the dilution would be even worse if the current deal was voted down (If shareholders do not approve the transaction, warrants will be issued at 1 penny). Citibank will also suspend dividends on preferred shares. The US government will own approximately 36% of Citi’s outstanding common stock. Shares outstanding will move to 21 billion from 5 billion. Citibank shares are down 38% to 1.50.
FNM (0.49): FNM reports a Q4 loss of 25.2 billion or 4.47 per share. At December 31, 2008, the company's total liabilities exceeded its total assets by $15.2B. FNM's mortgage credit book of business increased to $3.1 trillion as of December 31, 2008 from $2.9 trillion as of December 31, 2007. The company expect that the current crisis in the U.S. and global financial markets will continue, which will continue to adversely affect financial results throughout 2009. Following a decline of approximately 9% in 2008, FNM expects that home prices will decline another 7% to 12% on a national basis in 2009. The company continues to expect its credit loss ratio in 2009 will exceed its credit loss ratio in 2008.
FDIC may more than double fees it charges banks – WSJ: The Journal cites people familiar with the matter. The move is intended to replenish the government's deposit-insurance fund. The article notes that the FDIC had $18.8B in its deposit-insurance fund at the end of Q4 to protect roughly $4.8T in insured deposits, the lowest level since the S&L crisis. According to the paper, the FDIC is required by law to develop a plan to restore the fund any time its falls below 1.15% of insured deposits. It was 0.4% at the end of Q4. While banks typically pay between 12 cents and 14 cents for every $100 of insured deposits, sources tell the Journal that the government is considering an additional 20 cent charge.
ADBE (16.70): Adobe Systems downgraded to market perform from outperform at Wachovia
Goldman Sachs downgrades European mining stocks: NHY.NO, RIO.LN, KAZ.LN (pre-European open): Norsk Hydro (NHY.NO) downgraded to sell from neutral. Rio Tinto (RIO.LN) downgraded to sell from neutral. Kazakmys (KAZ.LN) downgraded to neutral from buy
DELL (8.21): Dell reports Q4 EPS $0.29 ex-items vs Reuters $0.28: First Call $0.26. Company reports revenues of $13.43B vs Reuters $14.06B; First Call $14.25B.
SNDA (31.90): Shanda Interactive downgraded to underperform from neutral at Credit Suisse: Target increased however to $25.60 from $23.10. The firm cites concerns on growth sustainability, new product contribution, and unattractive valuation.
CHK (15.44): Chesapeake Energy upgraded to outperform from underperform at Calyon Securities: Target remains $19.00. Firm believes yesterday's selloff was an overreaction and thinks operations will not be materially impacted
Fair Value: SP500 – 752.24; NDX: 1127.63; DOW: 7174.49
Technical Levels:
SPX: 685 support/742-746, 778, 800, 848-852 resistance
Events:
Pre-market EPS: IPG (.29/1.92B); FRO (1.05/315.8M); DT (.23/20.18)
05:00: Euro-zone CPI (Jan): -0.9% MoM; 1.1% YoY
05:00: Euro-zone Core CPI (Jan): 1.8% YoY
05:00: Euro-zone Unemployment Rate (Jan): 8.1%
08:30: US GDP QoQ (Annualized): -5.4% (revised from preliminary –3.8%)
09:45: Chicago Purchasing Manager (Feb): 34.0
10:00: University of Michigan Confidence (Feb): 56.5
13:00: QCOM presents at Goldman Sachs Tech and Internet Conference
13:20: BRCM presents at Goldman Sachs Tech and Internet Conference
Foreign Market Summary/Key Macro News/Commentary:
The S&P futures are trading 18 points below fair value while the NASDAQ futures are trading 20 points below fair value. The S&P futures are currently trading below the November 21 intra-day lows (741) following the official details of the Citibank rescue package. Although the media is widely reporting this transaction as another give-away for Citibank shareholders, the terms are punitive and private stakeholders in Citibank will be effectively required to participate. The Obama administration is clearly unwilling to rescue financial institutions without taking the appropriate pound of flesh from the stakeholders. Financial stocks are trading down 7% with Citibank down 40% and BAC down 22.0%. GDP was also revised sharply lower to –6.2% versus consensus of –5.4%, the steepest contraction since 1982. European markets are trading down 3.5% extending the losses 2% in reaction to the Citibank news and weak GDP.
Impact Research Calls/Market Moving News:
C (2.46): The US government agrees to convert 25 billion of preferred securities into common equity at 3.25 a share a share so long as private holders agree to convert 27.5 billion in preferred shares into common on the same terms. The press release is complicated but it looks like the “private holders” are going to be incentivized to convert because the dilution would be even worse if the current deal was voted down (If shareholders do not approve the transaction, warrants will be issued at 1 penny). Citibank will also suspend dividends on preferred shares. The US government will own approximately 36% of Citi’s outstanding common stock. Shares outstanding will move to 21 billion from 5 billion. Citibank shares are down 38% to 1.50.
FNM (0.49): FNM reports a Q4 loss of 25.2 billion or 4.47 per share. At December 31, 2008, the company's total liabilities exceeded its total assets by $15.2B. FNM's mortgage credit book of business increased to $3.1 trillion as of December 31, 2008 from $2.9 trillion as of December 31, 2007. The company expect that the current crisis in the U.S. and global financial markets will continue, which will continue to adversely affect financial results throughout 2009. Following a decline of approximately 9% in 2008, FNM expects that home prices will decline another 7% to 12% on a national basis in 2009. The company continues to expect its credit loss ratio in 2009 will exceed its credit loss ratio in 2008.
FDIC may more than double fees it charges banks – WSJ: The Journal cites people familiar with the matter. The move is intended to replenish the government's deposit-insurance fund. The article notes that the FDIC had $18.8B in its deposit-insurance fund at the end of Q4 to protect roughly $4.8T in insured deposits, the lowest level since the S&L crisis. According to the paper, the FDIC is required by law to develop a plan to restore the fund any time its falls below 1.15% of insured deposits. It was 0.4% at the end of Q4. While banks typically pay between 12 cents and 14 cents for every $100 of insured deposits, sources tell the Journal that the government is considering an additional 20 cent charge.
ADBE (16.70): Adobe Systems downgraded to market perform from outperform at Wachovia
Goldman Sachs downgrades European mining stocks: NHY.NO, RIO.LN, KAZ.LN (pre-European open): Norsk Hydro (NHY.NO) downgraded to sell from neutral. Rio Tinto (RIO.LN) downgraded to sell from neutral. Kazakmys (KAZ.LN) downgraded to neutral from buy
DELL (8.21): Dell reports Q4 EPS $0.29 ex-items vs Reuters $0.28: First Call $0.26. Company reports revenues of $13.43B vs Reuters $14.06B; First Call $14.25B.
SNDA (31.90): Shanda Interactive downgraded to underperform from neutral at Credit Suisse: Target increased however to $25.60 from $23.10. The firm cites concerns on growth sustainability, new product contribution, and unattractive valuation.
CHK (15.44): Chesapeake Energy upgraded to outperform from underperform at Calyon Securities: Target remains $19.00. Firm believes yesterday's selloff was an overreaction and thinks operations will not be materially impacted
Thursday, February 26, 2009
February 26, 2009: Morning Call
February 26, 2009: Morning Call
Fair Value: SP500 – 764.34; NDX: 1161.42; DOW: 7263.61
Technical Levels:
SPX: 685, 741-755 support/ 778, 800, 848-852, 899-908 resistance
Events:
Pre-market EPS: AMT (.14/407.5M); BYD (.14/426.2M); CKP (.40/241.0M); CVC(.31/2.07B); DYN (-.02/809.4M); EP (.21/1.17B); ESV (2.07/615.1M); FTO(.41/1.61B); NDAQ (.51/1.02B); RDC (1.10/580.4M); SWY (.81/14.44B); SHLD(2.68/13.99B)
05:00: Euro-zone Consumer Confidence (Feb): -31 (weaker at –33)
08:00: NDAQ earnings call
08:30: Durable Goods Orders (Jan): -2.3%: Ex-Transportation: -2.0%
08:30: Initial Jobless Claims (w/e Feb 21)
08:30: JPM Investor Day
10:00: New Home Sales (Jan): 329,000; -0.3% MoM
10:30: EIA Natural Gas Storage Change
12:00: V presents at Goldman Sachs Tech and Internet Conference
16:15: MSFT presents at Goldman Sachs Tech and Internet Conference
Post-market EPS: ADSK (.21/485.4M); DELL (.28/14.5B); GPS (.32/4.28B); KSS(1.02/5.19B); PSA (1.27/440.6M); RSG (.42/1.06B); SNDA (.67/146.0M); SGMS(.23/277.0M)
****Potential Events: INTC may revise quarterly guidance given that the company’s quiet period begins after the close of business tomorrow until their Q1 earning’s release on April 13.
Foreign Market Summary/Key Macro News/Commentary:
The S&P futures are trading 12 points above fair value while the NASDAQ futures are trading 10 points above fair value. The EuroStoxx 50 index is up 2.5% snapping an 8-day losing streak. Financial stocks are surging 7% following the UK asset protection plan. The most distressed financial stocks in Europe are up 10%-25%. Asian markets closed mixed (Japan unchanged, Hong Kong down 0.80%, Shanghai down 4.95% -three day decline of almost 10%, India up 0.60%, Australia up 0.54%, South Korea down 1.08%). A weaker yen continued to support exporters in Japan, but the overall market ended the day lower. China Mobile (CHL) was weak in Hong Kong. China was the region’s biggest loser, declining after a rumor surfaced that regulators will restrict financial companies’ investments in equities.
Impact Research Calls/Market Moving News:
UK Government presents its Asset Protection Plan: Under the plan, in return for a fee, the Treasury will provide to each participating institution protection against credit losses incurred on one or more portfolios of defined assets to the extent that credit losses exceed a "first loss" amount to be borne by the institution. The plan aims to target those assets where there is the greatest amount of uncertainty about their future performance. The Treasury protection will cover 90%. of the credit losses, which exceed this "first loss" amount, with each participating institution retaining a further residual exposure of 10%. of any credit losses exceeding this amount. Both the "first loss" amount and the residual exposure provide an appropriate incentive for participating institutions to endeavour to keep losses to a minimum on those assets included in the Scheme. Protection under the plan is offered, in the first instance, to those UK incorporated authorized deposit-takers (including UK subsidiaries of foreign institutions) with more than £ 25B of eligible assets. Affiliated entities of those deposit-takers will also be considered by the Treasury for participation under the plan. The Treasury will consider extending the plan more widely to other UK incorporated authorized deposit-takers (including UK subsidiaries of foreign institutions). Eligible institutions are entitled to request to participate in the Scheme until 31 March 2009. European banks, particularly UK banks, are surging higher on the plan.
RBS (6.59); LLOY LN (57.40): Reports a full year loss of 24.1 billion pounds versus expectations of a 25.9 billion pound loss. RBS shares are surging 25% after the UK announced an asset insurance plan for RBS that will backstop 300 billion of RBS assets. LLOY is also up 25% on speculation the company is set to announce an asset insurance plan with the UK Treasury. The government stake in RBS now approximately 84% according to the UK Finance minister.
JPM (21.73): Ahead of their investor day, JPM says Q1 forecast “roughly in line with analyst estimates.” JPM also said “Wamu home lending hasn’t had losses beyond view” and that credit card defaults have been in-line with expectation. Recall that on Monday, Jamie Dimon said the first two months of the quarter were “solidly profitable” and that Q1 outlook “roughly in line with analyst estimates.”
UBS (8.76): UBS shares are up 13% after the CEO was replaced with the former head of Credit Suisse, Oswald Gruebel.
C (2.52): Citi deal with government may come as soon as Thursday – WSJ: Recall that it has been widely reported that Citi is on the verge of a deal that would boost the government's stake in the bank to as much as 40%. Citing people familiar with the situation, the Journal says that a deal could be announced as soon as Thursday. The article goes on to discuss some of the complications that are likely to arise from the government owning such a large stake, particularly when it comes to Citi's prized Mexican operations. The Journal points out that Mexican law bars any institution that is more than 10%-owned by a foreign government from running a bank in that country. According to the paper, some Citi executives are worried that the bank may be forced to unload Banamex, which is loathe to do. However, sources say that the issue is likely to be resolved through diplomatic channels between the US and Mexico.
BAC (5.16): Bank of America looking to sell First Republic – WSJ: The Journal cites people familiar with the situation. First Republic, a private bank, was purchased by Merrill Lynch for $1.8B in September of 2007. Potential buyers include Goldman Sachs (GS) and Morgan Stanley (MS). The article goes on to note that BofA executives are considering other non-core assets and businesses for divestment.
White House sees US deficit to reach $1.75T in f09 -- Dow Jones, citing an administration official: The figure includes a $250B placeholder for possible bank rescue, which could fund $750B in assets. The White House leaves Fannie (FNM) and Freddie Mac (FRE) operations off the budget. The deficit is expected to be 12% of GDP this year. The budget will also propose raising taxes on investment managers' "carried interest." The budget is officially to be released at 11 ET.
CRM (28.10): Salesforce.com reports Q4 GAAP EPS $0.11 vs First Call $0.07: Company reports revenues of $289.6M vs Reuters $285.3M. Guides Q1 GAAP EPS to $0.10-0.11 vs First Call $0.10; guides revenues to $304-305M vs Reuters $306.9M. Guides f10 EPS to $0.54-0.55 vs First Call $0.51; guides revenues to $1.30-1.33B vs prior $1.35-1.36B and Reuters $1.33B.
AVB (44.47): Bank of America upgrades AVB to buy from neutral.
Government offers details of bank stress test – NYTimes: The NYTimes reports the Obama administration ordered the nation's 19 biggest banks on Wednesday to undergo stress tests to check whether they could hold up if the economy deteriorated further. But analysts say the administration's worst projections, which it describes as unlikely, are not much more dire than what many private forecasters already expect. According to the new Treasury Department guidelines, the banks would have to assume that the economy contracts by 3.3% this year and remains almost flat in 2010. They would also have to assume that housing prices fall another 22% this year and that unemployment would shoot to 8.9% this year and hit 10.3% in 2010. "I don't think they are harsh enough," said David Hendler, an analyst at CreditSights, who said the dire projection was too optimistic about the growth that would be generated from President Obama's stimulus program. "That would be a pleasant outcome, but you have to plan for the worst." The average outlook of private-sector forecasters envisions the economy shrinking by 2% this year and unemployment peaking just below 9% in 2010. The average forecast for housing prices is a decline of 14% this year and an additional 4% next year
GM (2.55): General Motors reports Q4 adjusted EPS ($9.65) vs Reuters ($7.40): Company reports revenues of $30.80B. End of year cash equivalents were $14B. General Motors says cash flow burn in Q1 is "significant" but is consistent with its internal plans.
AGU (36.57): Agrium downgraded to neutral from buy at UBS: Target cut to $40.00 from $43.00. The firm cites valuation and the implications from the bid for CF Industries (CF).
Fair Value: SP500 – 764.34; NDX: 1161.42; DOW: 7263.61
Technical Levels:
SPX: 685, 741-755 support/ 778, 800, 848-852, 899-908 resistance
Events:
Pre-market EPS: AMT (.14/407.5M); BYD (.14/426.2M); CKP (.40/241.0M); CVC(.31/2.07B); DYN (-.02/809.4M); EP (.21/1.17B); ESV (2.07/615.1M); FTO(.41/1.61B); NDAQ (.51/1.02B); RDC (1.10/580.4M); SWY (.81/14.44B); SHLD(2.68/13.99B)
05:00: Euro-zone Consumer Confidence (Feb): -31 (weaker at –33)
08:00: NDAQ earnings call
08:30: Durable Goods Orders (Jan): -2.3%: Ex-Transportation: -2.0%
08:30: Initial Jobless Claims (w/e Feb 21)
08:30: JPM Investor Day
10:00: New Home Sales (Jan): 329,000; -0.3% MoM
10:30: EIA Natural Gas Storage Change
12:00: V presents at Goldman Sachs Tech and Internet Conference
16:15: MSFT presents at Goldman Sachs Tech and Internet Conference
Post-market EPS: ADSK (.21/485.4M); DELL (.28/14.5B); GPS (.32/4.28B); KSS(1.02/5.19B); PSA (1.27/440.6M); RSG (.42/1.06B); SNDA (.67/146.0M); SGMS(.23/277.0M)
****Potential Events: INTC may revise quarterly guidance given that the company’s quiet period begins after the close of business tomorrow until their Q1 earning’s release on April 13.
Foreign Market Summary/Key Macro News/Commentary:
The S&P futures are trading 12 points above fair value while the NASDAQ futures are trading 10 points above fair value. The EuroStoxx 50 index is up 2.5% snapping an 8-day losing streak. Financial stocks are surging 7% following the UK asset protection plan. The most distressed financial stocks in Europe are up 10%-25%. Asian markets closed mixed (Japan unchanged, Hong Kong down 0.80%, Shanghai down 4.95% -three day decline of almost 10%, India up 0.60%, Australia up 0.54%, South Korea down 1.08%). A weaker yen continued to support exporters in Japan, but the overall market ended the day lower. China Mobile (CHL) was weak in Hong Kong. China was the region’s biggest loser, declining after a rumor surfaced that regulators will restrict financial companies’ investments in equities.
Impact Research Calls/Market Moving News:
UK Government presents its Asset Protection Plan: Under the plan, in return for a fee, the Treasury will provide to each participating institution protection against credit losses incurred on one or more portfolios of defined assets to the extent that credit losses exceed a "first loss" amount to be borne by the institution. The plan aims to target those assets where there is the greatest amount of uncertainty about their future performance. The Treasury protection will cover 90%. of the credit losses, which exceed this "first loss" amount, with each participating institution retaining a further residual exposure of 10%. of any credit losses exceeding this amount. Both the "first loss" amount and the residual exposure provide an appropriate incentive for participating institutions to endeavour to keep losses to a minimum on those assets included in the Scheme. Protection under the plan is offered, in the first instance, to those UK incorporated authorized deposit-takers (including UK subsidiaries of foreign institutions) with more than £ 25B of eligible assets. Affiliated entities of those deposit-takers will also be considered by the Treasury for participation under the plan. The Treasury will consider extending the plan more widely to other UK incorporated authorized deposit-takers (including UK subsidiaries of foreign institutions). Eligible institutions are entitled to request to participate in the Scheme until 31 March 2009. European banks, particularly UK banks, are surging higher on the plan.
RBS (6.59); LLOY LN (57.40): Reports a full year loss of 24.1 billion pounds versus expectations of a 25.9 billion pound loss. RBS shares are surging 25% after the UK announced an asset insurance plan for RBS that will backstop 300 billion of RBS assets. LLOY is also up 25% on speculation the company is set to announce an asset insurance plan with the UK Treasury. The government stake in RBS now approximately 84% according to the UK Finance minister.
JPM (21.73): Ahead of their investor day, JPM says Q1 forecast “roughly in line with analyst estimates.” JPM also said “Wamu home lending hasn’t had losses beyond view” and that credit card defaults have been in-line with expectation. Recall that on Monday, Jamie Dimon said the first two months of the quarter were “solidly profitable” and that Q1 outlook “roughly in line with analyst estimates.”
UBS (8.76): UBS shares are up 13% after the CEO was replaced with the former head of Credit Suisse, Oswald Gruebel.
C (2.52): Citi deal with government may come as soon as Thursday – WSJ: Recall that it has been widely reported that Citi is on the verge of a deal that would boost the government's stake in the bank to as much as 40%. Citing people familiar with the situation, the Journal says that a deal could be announced as soon as Thursday. The article goes on to discuss some of the complications that are likely to arise from the government owning such a large stake, particularly when it comes to Citi's prized Mexican operations. The Journal points out that Mexican law bars any institution that is more than 10%-owned by a foreign government from running a bank in that country. According to the paper, some Citi executives are worried that the bank may be forced to unload Banamex, which is loathe to do. However, sources say that the issue is likely to be resolved through diplomatic channels between the US and Mexico.
BAC (5.16): Bank of America looking to sell First Republic – WSJ: The Journal cites people familiar with the situation. First Republic, a private bank, was purchased by Merrill Lynch for $1.8B in September of 2007. Potential buyers include Goldman Sachs (GS) and Morgan Stanley (MS). The article goes on to note that BofA executives are considering other non-core assets and businesses for divestment.
White House sees US deficit to reach $1.75T in f09 -- Dow Jones, citing an administration official: The figure includes a $250B placeholder for possible bank rescue, which could fund $750B in assets. The White House leaves Fannie (FNM) and Freddie Mac (FRE) operations off the budget. The deficit is expected to be 12% of GDP this year. The budget will also propose raising taxes on investment managers' "carried interest." The budget is officially to be released at 11 ET.
CRM (28.10): Salesforce.com reports Q4 GAAP EPS $0.11 vs First Call $0.07: Company reports revenues of $289.6M vs Reuters $285.3M. Guides Q1 GAAP EPS to $0.10-0.11 vs First Call $0.10; guides revenues to $304-305M vs Reuters $306.9M. Guides f10 EPS to $0.54-0.55 vs First Call $0.51; guides revenues to $1.30-1.33B vs prior $1.35-1.36B and Reuters $1.33B.
AVB (44.47): Bank of America upgrades AVB to buy from neutral.
Government offers details of bank stress test – NYTimes: The NYTimes reports the Obama administration ordered the nation's 19 biggest banks on Wednesday to undergo stress tests to check whether they could hold up if the economy deteriorated further. But analysts say the administration's worst projections, which it describes as unlikely, are not much more dire than what many private forecasters already expect. According to the new Treasury Department guidelines, the banks would have to assume that the economy contracts by 3.3% this year and remains almost flat in 2010. They would also have to assume that housing prices fall another 22% this year and that unemployment would shoot to 8.9% this year and hit 10.3% in 2010. "I don't think they are harsh enough," said David Hendler, an analyst at CreditSights, who said the dire projection was too optimistic about the growth that would be generated from President Obama's stimulus program. "That would be a pleasant outcome, but you have to plan for the worst." The average outlook of private-sector forecasters envisions the economy shrinking by 2% this year and unemployment peaking just below 9% in 2010. The average forecast for housing prices is a decline of 14% this year and an additional 4% next year
GM (2.55): General Motors reports Q4 adjusted EPS ($9.65) vs Reuters ($7.40): Company reports revenues of $30.80B. End of year cash equivalents were $14B. General Motors says cash flow burn in Q1 is "significant" but is consistent with its internal plans.
AGU (36.57): Agrium downgraded to neutral from buy at UBS: Target cut to $40.00 from $43.00. The firm cites valuation and the implications from the bid for CF Industries (CF).
Wednesday, February 25, 2009
February 25, 2009: Morning Call
February 25, 2009: Morning Call
Fair Value: SP500 – 772.44; NDX: 1172.03; DOW: 7339.97
Technical Levels:
SPX: 685, 741-755 support/ 778, 800, 848-852, 899-908 resistance
Events:
Pre-market EPS: CMS (.24/1.64B); ABK (-.68/406.1M); CNP (.27/2.86B); DISCA(.29/937.4M); DLM (.22/953.3M); GRMN (.96/1.12B); HK (.02/226.7M); KBR (.41/2.96B); DLTR (1.13/1.42B); RRD (.56/2.71B); TJX (.52/5.42B)
07:00: MBA Mortgage Applications
08:35: ALL presents at Merrill Lynch Insurance Conference
10:00: Existing Home Sales (Jan): 4.81M; 1.4% MoM
10:30: DOE Crude Oil and Gasoline Inventories
11:45: CSCO presents at Goldman Sachs Tech and Internet Conference
14:00: AFL presents at Merrill Lynch Insurance Conference
15:20: INTC presents at Goldman Sachs Tech and Internet Conference
16:00: YHOO presents at Goldman Sachs Tech and Internet Conference
20:20: GOOG presents at Goldman Sachs Tech and Internet Conference
Post-market EPS: CRM (.18/285.4M); ESRX (.83/5.48B); FLR (.92/5.87B); FLS(1.92/1.31B); GEF (.35/698.9M); LTD (.64/3.05B); TEG (1.60/3.78B); URI(.45/792.1M)
*****Potential Events: Treasury could make an announcement on the “stress test” plan details/metrics. Citibank capital injection plan also rumored to potentially occur today.
Foreign Market Summary/Key Macro News/Commentary:
The S&P futures are trading 5.50 points below fair value while the NASDAQ futures are trading 12 points below fair value at 7:45am ET. US equity futures have been closely tracking the intra-day pattern in European markets this morning. European markets are up 0.50% but off the opening highs of 1.5%-2.0%. The pullback in Europe seemed to be caused by weakness in the British pound, which reversed early gains at around 6am following a report that EU officials are concerned by a “very rapid” drop in the pound that “raises questions about the financial stability of the British economy.” Asian markets closed higher (Japan up 2.65%, Hong Kong up 1.61%, Australia down 0.12%, Shanghai up 0.10%, India up 0.91%). Exporters rose in Japan on a weaker yen. Honda (7267.JP) jumped after an official said it had vastly exceeded its sales target for Insight hybrid cars. But investors remained wary of news the government might expand share buying to support the stock market. Hong Kong pared gains when the city’s Financial Secretary predicted the economy would shrink (2-3%) this year.
Impact Research Calls/Market Moving News:
FSLR (137.68): First Solar trades lower: FSLR guided f09 GAAP revenue to $1.8-$1.9B. FSLR also guided Q1 revenues flat to slightly down. Q4 reported revenues were $433.7M. Reuters consensus for Q1 is $408.1M; First Call $405.8M. FSLR says that 10-15% of 2009 volumes are at risk of default, says inventory may increase in 1H09, and sees serious risk from oversupply conditions. FSLR also said it is lowering module pricing on a "selective basis." FSLR shares are trading down 23 dollars to 114. Other solar stocks moved lower after hours in reaction to the FSLR decline.
FSLR (137.68): First Solar downgraded to sell from source of funds at ThinkEquity: Target reduced to $60. Kaufman Brothers also downgraded the shares to sell from hold.
WYNN: Wynn Resorts reports Q4 adjusted EPS $0.07 vs Bloomberg .43 cents: Wynn says that it experienced a dramatic deceleration in business from the casino and non-gaming departments starting in October. In addition, the 15.3% table games hold was the lowest experienced by its Las Vegas properties since Wynn Las Vegas' opening in April 2005. Average Daily Rate (ADR) was $281 compared to $298 in Q4 of 2007 and occupancy was 79.7% compared to 94.3%, generating RevPAR of $224, (20.3%) y/y. Wynn Resorts says it is seeing changing behavior patterns at the gaming tables - conf call : Chairman and CEO Steve Wynn notes that gamblers are playing for shorter amounts of time and are less inclined to let winners run. Also points out that casinos catering to lower-end customers seem to be holding up better, fitting with the consumer trade-down theme. Wynn extremely concerned about rhetoric out of Washington towards Las Vegas as Obama administration seems to be looking for a pound of flesh from business. Only good news out of Las Vegas is the fact that the company controls $5B worth of assets, but only owes $2.8B against them, leaving its balance sheet under-leveraged. Company much more upbeat about China, where Macau volumes have been decent. Company concedes that it has not been able to hold room rates, but does point out that it has found ways to save up to $45M in costs in Macau. WYNN shares are trading down 4 dollars to 21.75.
C (2.60): Citi's relationship with the government off to a rocky start – WSJ: One government official says Citi is so huge as to be "unmanageable." Executives are having trouble pleasing the government while simultaneously trying to rebound from five consecutive quarterly losses. But it's not obvious whom they should be trying to please: No single person or entity is in charge of the federal oversight of the bank, and the government is trying to be neither an active nor a passive investor. The article details frustrations arising from government directives that can be either conflicting or inscrutable. Officials told regulators the bank was profitable in January.
Housing downturn spurs increase in all-cash sales – WSJ: Citing a report from Raymond James, the Journal notes that homes financed with cash comprised one-third of sales in Phoenix last moth, up from 19% in the year-earlier period. According to the Sacramento Association of Realtors, all-cash sales accounted for 24% of home sales in Sacramento last month, up from 8% in January 2008 and 3% in January 2007. The paper adds that cash sales are up even more in many Florida markets. The Journal suggests that this trend is an indication that bargain hunters have descended on some of the most severely depressed housing markets in search of great deals.
ALL (18.64): Allstate cuts quarterly dividend to .20 cents from .41 cents.
LNC (13.04): LNC cuts quarterly dividend to .01 cent from .21 cents.
T (23.25): AT&T (T) upgraded to overweight from neutral at JPMorgan.
WFC (13.05): WSJ encourages Wells Fargo to cut its dividend: A "Heard on the Street" column notes the stock yields 10% now, and the bank has a Tier 1 capital ratio of only 7.9%. The column wonders why Wells Fargo has not already followed JPMorgan Chase's lead when it slashed its dividend 87% yesterday.
MSFT (17.17): Microsoft estimates and target lowered at UBS: Target lowered to $21 from $23. Firm lowers FY10 estimates below consensus to reflect lower revenue growth and share buyback assumptions. Rating is buy
Fair Value: SP500 – 772.44; NDX: 1172.03; DOW: 7339.97
Technical Levels:
SPX: 685, 741-755 support/ 778, 800, 848-852, 899-908 resistance
Events:
Pre-market EPS: CMS (.24/1.64B); ABK (-.68/406.1M); CNP (.27/2.86B); DISCA(.29/937.4M); DLM (.22/953.3M); GRMN (.96/1.12B); HK (.02/226.7M); KBR (.41/2.96B); DLTR (1.13/1.42B); RRD (.56/2.71B); TJX (.52/5.42B)
07:00: MBA Mortgage Applications
08:35: ALL presents at Merrill Lynch Insurance Conference
10:00: Existing Home Sales (Jan): 4.81M; 1.4% MoM
10:30: DOE Crude Oil and Gasoline Inventories
11:45: CSCO presents at Goldman Sachs Tech and Internet Conference
14:00: AFL presents at Merrill Lynch Insurance Conference
15:20: INTC presents at Goldman Sachs Tech and Internet Conference
16:00: YHOO presents at Goldman Sachs Tech and Internet Conference
20:20: GOOG presents at Goldman Sachs Tech and Internet Conference
Post-market EPS: CRM (.18/285.4M); ESRX (.83/5.48B); FLR (.92/5.87B); FLS(1.92/1.31B); GEF (.35/698.9M); LTD (.64/3.05B); TEG (1.60/3.78B); URI(.45/792.1M)
*****Potential Events: Treasury could make an announcement on the “stress test” plan details/metrics. Citibank capital injection plan also rumored to potentially occur today.
Foreign Market Summary/Key Macro News/Commentary:
The S&P futures are trading 5.50 points below fair value while the NASDAQ futures are trading 12 points below fair value at 7:45am ET. US equity futures have been closely tracking the intra-day pattern in European markets this morning. European markets are up 0.50% but off the opening highs of 1.5%-2.0%. The pullback in Europe seemed to be caused by weakness in the British pound, which reversed early gains at around 6am following a report that EU officials are concerned by a “very rapid” drop in the pound that “raises questions about the financial stability of the British economy.” Asian markets closed higher (Japan up 2.65%, Hong Kong up 1.61%, Australia down 0.12%, Shanghai up 0.10%, India up 0.91%). Exporters rose in Japan on a weaker yen. Honda (7267.JP) jumped after an official said it had vastly exceeded its sales target for Insight hybrid cars. But investors remained wary of news the government might expand share buying to support the stock market. Hong Kong pared gains when the city’s Financial Secretary predicted the economy would shrink (2-3%) this year.
Impact Research Calls/Market Moving News:
FSLR (137.68): First Solar trades lower: FSLR guided f09 GAAP revenue to $1.8-$1.9B. FSLR also guided Q1 revenues flat to slightly down. Q4 reported revenues were $433.7M. Reuters consensus for Q1 is $408.1M; First Call $405.8M. FSLR says that 10-15% of 2009 volumes are at risk of default, says inventory may increase in 1H09, and sees serious risk from oversupply conditions. FSLR also said it is lowering module pricing on a "selective basis." FSLR shares are trading down 23 dollars to 114. Other solar stocks moved lower after hours in reaction to the FSLR decline.
FSLR (137.68): First Solar downgraded to sell from source of funds at ThinkEquity: Target reduced to $60. Kaufman Brothers also downgraded the shares to sell from hold.
WYNN: Wynn Resorts reports Q4 adjusted EPS $0.07 vs Bloomberg .43 cents: Wynn says that it experienced a dramatic deceleration in business from the casino and non-gaming departments starting in October. In addition, the 15.3% table games hold was the lowest experienced by its Las Vegas properties since Wynn Las Vegas' opening in April 2005. Average Daily Rate (ADR) was $281 compared to $298 in Q4 of 2007 and occupancy was 79.7% compared to 94.3%, generating RevPAR of $224, (20.3%) y/y. Wynn Resorts says it is seeing changing behavior patterns at the gaming tables - conf call : Chairman and CEO Steve Wynn notes that gamblers are playing for shorter amounts of time and are less inclined to let winners run. Also points out that casinos catering to lower-end customers seem to be holding up better, fitting with the consumer trade-down theme. Wynn extremely concerned about rhetoric out of Washington towards Las Vegas as Obama administration seems to be looking for a pound of flesh from business. Only good news out of Las Vegas is the fact that the company controls $5B worth of assets, but only owes $2.8B against them, leaving its balance sheet under-leveraged. Company much more upbeat about China, where Macau volumes have been decent. Company concedes that it has not been able to hold room rates, but does point out that it has found ways to save up to $45M in costs in Macau. WYNN shares are trading down 4 dollars to 21.75.
C (2.60): Citi's relationship with the government off to a rocky start – WSJ: One government official says Citi is so huge as to be "unmanageable." Executives are having trouble pleasing the government while simultaneously trying to rebound from five consecutive quarterly losses. But it's not obvious whom they should be trying to please: No single person or entity is in charge of the federal oversight of the bank, and the government is trying to be neither an active nor a passive investor. The article details frustrations arising from government directives that can be either conflicting or inscrutable. Officials told regulators the bank was profitable in January.
Housing downturn spurs increase in all-cash sales – WSJ: Citing a report from Raymond James, the Journal notes that homes financed with cash comprised one-third of sales in Phoenix last moth, up from 19% in the year-earlier period. According to the Sacramento Association of Realtors, all-cash sales accounted for 24% of home sales in Sacramento last month, up from 8% in January 2008 and 3% in January 2007. The paper adds that cash sales are up even more in many Florida markets. The Journal suggests that this trend is an indication that bargain hunters have descended on some of the most severely depressed housing markets in search of great deals.
ALL (18.64): Allstate cuts quarterly dividend to .20 cents from .41 cents.
LNC (13.04): LNC cuts quarterly dividend to .01 cent from .21 cents.
T (23.25): AT&T (T) upgraded to overweight from neutral at JPMorgan.
WFC (13.05): WSJ encourages Wells Fargo to cut its dividend: A "Heard on the Street" column notes the stock yields 10% now, and the bank has a Tier 1 capital ratio of only 7.9%. The column wonders why Wells Fargo has not already followed JPMorgan Chase's lead when it slashed its dividend 87% yesterday.
MSFT (17.17): Microsoft estimates and target lowered at UBS: Target lowered to $21 from $23. Firm lowers FY10 estimates below consensus to reflect lower revenue growth and share buyback assumptions. Rating is buy
Tuesday, February 24, 2009
February 24, 2009: Morning Call
February 24, 2009: Morning Call
Fair Value: SP500 – 742.49; NDX: 1129.27; DOW: 7104.33
Technical Levels:
SPX: 685, 741-755 support/ 778, 800, 848-852, 899-908 resistance
Events:
Pre-market EPS: DAKT (.11/124.4M); FE (1.04/3.36B); FWLT (.97/1.81B); HD(.15/14.64B); HNZ (.65/2.58B); HSIC (.88/1.77B); M (1.01/7.86B); RSH(.73/1.38B); TGT (.83/19.6B); BX (-.27/-566.0M)
05:00: Euro-zone Industrial New Orders (Dec)
09:00: S&P/CaseShiller Home Price Index (Dec): -18.25%
09:00: HD earnings call
10:00: US Consumer Confidence (Feb): 35
10:00: US House Price Index (Dec.): -1.7%
10:00: Richmond Fed Manufacturing Index: -47
10:00: Bernanke Report on the Economy and Fed Policy/Testifies before Senate
10:30: TGT earnings call
11:00: BX earnings call
11:30: Fed’s Fisher speaks on the financial crisis
12:00: Fed’s Duke speaks about the Community Reinvestment Act
14:00: House hearing on TARP oversight and accountability
14:30: FDIC’s Bair news conference to announce bank and thrift industry results for Q4
16:30: API Crude Oil and Gasoline Inventories
16:30: FSLR earnings call
21:00: President Obama addresses joint session of Congress
Post-market EPS: DWA (.66/232.0M); FSLR (1.29/408.8M); NBR (.83/1.45B); RRC(.22/260.0M); WYNN (.41/696.4M)
Foreign Market Summary/Key Macro News/Commentary:
The S&P futures are trading 7 points above fair value while the NASDAQ futures are trading 12 points above fair value at 7:15 am ET. Asian markets closed lower (Japan down 1.46%, Hong Kong down 2.86%, Australia down 0.58%, Shanghai down 4.51%, South Korea down 3.47%, India down 0.24%). Banks were big losers. In Japan, Nomura Holdings (8604.JP) fell on dilution worries after announcing plans to raise ¥291.2B in share sales and Modec Inc (6269.JP) plunged on forecast of lower profits. Hong Kong was hurt by expectations of a conservative budget’s being announced tomorrow and worsening Q4 GDP figures. Earnings concerns dragged on all sectors in South Korea. Commodities producers and financials led China down. European markets are down 1.5%. Mining and insurance shares are leading the move lower and auto companies were particularly weak following broker downgrades (Daimler (DAI.GR) was downgraded at Bernstein and BMW Group (BMW.GR) downgraded at Morgan Stanley). Indices fell as much as (3%) on the open.
Impact Research Calls/Market Moving News:
JPM (19.51): JPMorgan Chase cuts quarterly dividend by 86.8% to $0.05 from $0.38. JPMorgan Chase says Q1 financial performance quarter-to-date is solidly profitable: First-quarter 2009 financial performance quarter-to-date is solidly profitable even after significant additions to reserves, and the outlook for the quarter is roughly in line with analyst expectations. The company said it hopes to re turn to a more normalized dividend payout ratio as soon as feasible after the environment has stabilized. JPMorgan says dividend cut is not directly related to TARP: The company says that while its performance and capital are already strong, today's action provides it with maximum flexibility to protect our company in a more highly stressed environment, and is not directly related to TARP. JPM says that the decision to retain additional common equity does, however, help position it to repay TARP as soon as is prudent. Repayment of TARP will ultimately be worked out in consultation with the Treasury and other regulators, and in consideration of the best interests of the banking system overall.
Washington Post discusses announcement by Obama administration regarding terms financial institutions will receive: The Obama administration has changed the terms of the emergency aid banks have received, allowing them to repay the government with common stock instead of cash. Officials say the adjustment is supposed to give banks more capital, not nationalize the banking system. Converting the government's holdings to common stock will allow the industry to save billions of dollars in dividends.
AAPL (86.95): Apple downgraded to underperform from outperform at Calyon Securities -- Dow Jones
GS (80.07): Goldman Sachs mentioned positively at Morgan Stanley: Firm says that shares may rebound in Q1, on the potential for a more rational market and improved competitive dynamics. Further, Goldman management stressed to the firm that it plans to be very mindful in its cost cutting, and not underestimate its ability to capture competitive opportunities.
COF (9.13): Capital One downgraded to neutral from overweight at JPMorgan
HD (18.71): Home Depot reports Q4 EPS $0.19 ex-items vs Reuters $0.15: Company reports revenues of $14.61B vs Reuters $14.63B. Q4 comps. (13.0%) vs. consensus (12.2%). HD sees f09 total sales ~(9%) and comps. in the negative high single digits.
JWN (11.33): Nordstrom reports Q4 EPS $0.31 vs Reuters $0.30. Total sales in Q4 were $2.30B as reported on 5-Feb. Guides 2009 EPS to $1.10-1.40 vs Reuters $1.24. For the 2009 fiscal year, Nordstrom expects same-store sales to decrease 10 to 15%
BIDU (131.76): Google China hopes to "eat up" Baidu (BIDU)'s 33% market share this year, says China Business News - JLM Pacific Epoch :Google China president Lee Kai Fu says two third of Chinese search engine users use both Baidu and Google.
GM (1.77): General Motors to release Q4 results 26-Feb at 07:00: Conference call will be at 08:30
MS (18.82): Morgan Stanley's CEO John Mack tells Charlie Rose the U.S. is "ahead in deleveraging" – Bloomberg: Mack adds that he thinks China will keep lending to the U.S. The statements were reportedly made in an interview set to air this evening on PBS.
BRCD (2.80): Brocade downgraded to hold from buy at Argus Research
Fair Value: SP500 – 742.49; NDX: 1129.27; DOW: 7104.33
Technical Levels:
SPX: 685, 741-755 support/ 778, 800, 848-852, 899-908 resistance
Events:
Pre-market EPS: DAKT (.11/124.4M); FE (1.04/3.36B); FWLT (.97/1.81B); HD(.15/14.64B); HNZ (.65/2.58B); HSIC (.88/1.77B); M (1.01/7.86B); RSH(.73/1.38B); TGT (.83/19.6B); BX (-.27/-566.0M)
05:00: Euro-zone Industrial New Orders (Dec)
09:00: S&P/CaseShiller Home Price Index (Dec): -18.25%
09:00: HD earnings call
10:00: US Consumer Confidence (Feb): 35
10:00: US House Price Index (Dec.): -1.7%
10:00: Richmond Fed Manufacturing Index: -47
10:00: Bernanke Report on the Economy and Fed Policy/Testifies before Senate
10:30: TGT earnings call
11:00: BX earnings call
11:30: Fed’s Fisher speaks on the financial crisis
12:00: Fed’s Duke speaks about the Community Reinvestment Act
14:00: House hearing on TARP oversight and accountability
14:30: FDIC’s Bair news conference to announce bank and thrift industry results for Q4
16:30: API Crude Oil and Gasoline Inventories
16:30: FSLR earnings call
21:00: President Obama addresses joint session of Congress
Post-market EPS: DWA (.66/232.0M); FSLR (1.29/408.8M); NBR (.83/1.45B); RRC(.22/260.0M); WYNN (.41/696.4M)
Foreign Market Summary/Key Macro News/Commentary:
The S&P futures are trading 7 points above fair value while the NASDAQ futures are trading 12 points above fair value at 7:15 am ET. Asian markets closed lower (Japan down 1.46%, Hong Kong down 2.86%, Australia down 0.58%, Shanghai down 4.51%, South Korea down 3.47%, India down 0.24%). Banks were big losers. In Japan, Nomura Holdings (8604.JP) fell on dilution worries after announcing plans to raise ¥291.2B in share sales and Modec Inc (6269.JP) plunged on forecast of lower profits. Hong Kong was hurt by expectations of a conservative budget’s being announced tomorrow and worsening Q4 GDP figures. Earnings concerns dragged on all sectors in South Korea. Commodities producers and financials led China down. European markets are down 1.5%. Mining and insurance shares are leading the move lower and auto companies were particularly weak following broker downgrades (Daimler (DAI.GR) was downgraded at Bernstein and BMW Group (BMW.GR) downgraded at Morgan Stanley). Indices fell as much as (3%) on the open.
Impact Research Calls/Market Moving News:
JPM (19.51): JPMorgan Chase cuts quarterly dividend by 86.8% to $0.05 from $0.38. JPMorgan Chase says Q1 financial performance quarter-to-date is solidly profitable: First-quarter 2009 financial performance quarter-to-date is solidly profitable even after significant additions to reserves, and the outlook for the quarter is roughly in line with analyst expectations. The company said it hopes to re turn to a more normalized dividend payout ratio as soon as feasible after the environment has stabilized. JPMorgan says dividend cut is not directly related to TARP: The company says that while its performance and capital are already strong, today's action provides it with maximum flexibility to protect our company in a more highly stressed environment, and is not directly related to TARP. JPM says that the decision to retain additional common equity does, however, help position it to repay TARP as soon as is prudent. Repayment of TARP will ultimately be worked out in consultation with the Treasury and other regulators, and in consideration of the best interests of the banking system overall.
Washington Post discusses announcement by Obama administration regarding terms financial institutions will receive: The Obama administration has changed the terms of the emergency aid banks have received, allowing them to repay the government with common stock instead of cash. Officials say the adjustment is supposed to give banks more capital, not nationalize the banking system. Converting the government's holdings to common stock will allow the industry to save billions of dollars in dividends.
AAPL (86.95): Apple downgraded to underperform from outperform at Calyon Securities -- Dow Jones
GS (80.07): Goldman Sachs mentioned positively at Morgan Stanley: Firm says that shares may rebound in Q1, on the potential for a more rational market and improved competitive dynamics. Further, Goldman management stressed to the firm that it plans to be very mindful in its cost cutting, and not underestimate its ability to capture competitive opportunities.
COF (9.13): Capital One downgraded to neutral from overweight at JPMorgan
HD (18.71): Home Depot reports Q4 EPS $0.19 ex-items vs Reuters $0.15: Company reports revenues of $14.61B vs Reuters $14.63B. Q4 comps. (13.0%) vs. consensus (12.2%). HD sees f09 total sales ~(9%) and comps. in the negative high single digits.
JWN (11.33): Nordstrom reports Q4 EPS $0.31 vs Reuters $0.30. Total sales in Q4 were $2.30B as reported on 5-Feb. Guides 2009 EPS to $1.10-1.40 vs Reuters $1.24. For the 2009 fiscal year, Nordstrom expects same-store sales to decrease 10 to 15%
BIDU (131.76): Google China hopes to "eat up" Baidu (BIDU)'s 33% market share this year, says China Business News - JLM Pacific Epoch :Google China president Lee Kai Fu says two third of Chinese search engine users use both Baidu and Google.
GM (1.77): General Motors to release Q4 results 26-Feb at 07:00: Conference call will be at 08:30
MS (18.82): Morgan Stanley's CEO John Mack tells Charlie Rose the U.S. is "ahead in deleveraging" – Bloomberg: Mack adds that he thinks China will keep lending to the U.S. The statements were reportedly made in an interview set to air this evening on PBS.
BRCD (2.80): Brocade downgraded to hold from buy at Argus Research
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