October 6, 2009: Morning Call
Fair Value: SP500 – 1036.30; NDX: 1674.18; DOW: 9540.16
Technical Levels:
SPX: 875-880, 910, 953, 986, 1003 support/ 1048, 1110 resistance
Events:
Pre-market EPS: PBG (1.07/3.76B)
04:30: UK Industrial Production (August): 0.2% MoM; -8.7% YoY
04:30: UK Manufacturing Production (August): 0.3% MoM; -9.3% YoY
09:00: MOS earnings call
09:00: CHK presents at Johnson Rice Energy Conference
09:00: TDW presents at Johnson Rice Energy Conference
11:15: SGR presents at Johnson Rice Energy Conference
13:00: Treasury auctions 39 billion of 3-year notes
15:30: BCRX presents at JMP Securities Healthcare Focus Conference
16:30: API Crude Oil and Gasoline Inventories
17:00: ABC Consumer Confidence
19:01: UK Nationwide Consumer Confidence (Sep): 68
21:45: Fed’s Hoenig speaks on the economy
Post-market EPS: YUM (.58/2.79B)
Foreign Market Summary/Key Macro News/Commentary:
Futures are trading sharply higher due to significant strength in Europe and a strong session overnight in Asia. Commodity prices are also up 1%-2% due to weakness in the dollar following a report in the Independent that Arab states are launching secret moves with China, Russia and France to stop using the U.S. dollar for oil trading. Kuwait's oil minister denied the story but also said that he expected stronger demand for crude from the United States and Europe. Gold is up 10 bucks to 1026 triggering strong pre-market gains in gold mining stocks. European markets are up 1.5% - 1.7%, near the highs of the session. UK Industrial production came in much weaker than consensus but market participants ignored the data point. Advancers lead decliners on the FTSE 100 by a margin of 19 to 1. Financials are strong after BofA upgraded their view on the sector to overweight. Asian markets closed higher (Japan up 0.18%, Hong Kong up 1.87%, Australia up 0.40%, Taiwan up 1.3%, South Korea down 0.56%, India up 0.55%). Financial stocks were the strongest across the region. Developers led Hong Kong up as luxury home sales almost tripled m/m. PC shares led Taiwan higher. Banking shares pared or reversed their gains, and Australia came off its highs after the central bank announced an unexpected 25bps increase in the cash rate. Banks gained in Japan when the country’s financial services minister said they would not need to raise provisions for bad loans if borrowers delay repayments. Mazda (7261.JP) and Takeuchi (6432.JP) rose after narrowing their FY loss forecasts. South Korea reversed gains following Australia's rate hike on fears it might be the next to raise rates. China remained closed for National Day.
Research Calls/Market Moving News:
RIMM (65.42): Research In Motion initiated underperform at Bernstein: Target is $60. This report came out last night after the market closed and could explain some of the relative weakness in RIMM shares yesterday.
NTRI (15.05): NTRI signs a distribution deal with WMT. Shares are trading up 25%. Short squeeze is in motion in the pre-market as there are 7.5 million shares short as of September 15 versus a float of 28.3 million shares.
AVCT (20.52): Emerson (EMR) to acquire Avocent for ~$1.2B Emerson and Avocent announced they have reached agreement for Emerson to acquire Avocent. The Avocent board unanimously endorsed the terms of an all-cash tender offer of $25 per share, or approximately $1.2B. The purchase is expected to close around 1-Jan-2010 pending customary regulatory approvals and acceptance of the offer by Avocent stockholders holding a majority of Avocent shares.
MOS (45.96): Mosaic reports Q1 EPS $0.23 vs Reuters $0.36: Company reports revenues of $1.46B vs Reuters $1.54B. Sales volumes for the Phosphates segment are expected to range from 1.8 to 2.2M ton for Q2 of fiscal 2010. Mosaic's realized DAP price, FOB plant, for Q2 of fiscal 2010 is estimated to be $265 to $305 per ton. Mosaic is not providing financial guidance on potash sales volumes or MOP selling price until market conditions normalize. Capital spending for fiscal 2010 is expected to grow to a range of $1.0B to $1.2B. Mosaic is executing its multi-year potash expansion plan as well as investing substantial funds to further improve operating performance of its existing plants and mines. SG&A is estimated to range from $350M to $370M in fiscal 2010 and the effective income tax rate is estimated in the high 20% range for the year. MOS shares are trading slightly higher despite the EPS miss.
DVN (66.34): Devon Energy downgraded to underperform from neutral at Credit Suisse: Target increased however to $59 from $54. Firm cites an expected loss of operational momentum due to a sharp fall in 2009 drilling activity, which could translate to significantly declining volumes for 2010.
INTC (19.10): Intel should report Q3 revenues above the midpoint of its guidance range, says Morgan Stanley: Q3 revenue estimate increased to $9.20B, vs. Reuters consensus of $9.00B and company guidance of $8.80-$9.20B. 2010 revenue estimate increased to $37.1B from $35.9B. Reuters is $36.74B; First Call $36.78B. The rating remains overweight; target $24.
ADBE (32.55): Oppenheimer is positive on Adobe Systems ahead of the upcoming analyst meeting: The firm would be buyers ahead of the 7-Oct meeting saying that investor focus has shifted from its upcoming product release by the OMTR acquisition. Believes the meeting will provide 'a more comprehensive overview' of the deal's benefits and preview new features in the upcoming CS5 release. The firm sees the multiple expanding back to historical levels in the near future because of improving fundamentals, a dominant market position and the upcoming product releases.
EXTR (2.87): Extreme Networks (EXTR) guides Q1 revenue to ~$66M vs Reuters $80.4M; FC $80.6M. Extreme shares are trading down 13% in the pre-market.
CHK (27.50): Chesapeake Energy downgraded to underperform from neutral at Credit Suisse: Target is $24. Firm notes valuation and risks to growth from light hedges and a potential loss of flexibility.
EMC (17.00): EMC reiterated overweight at Barclays after checks: Firm says their checks indicate that EMC is benefiting from a new product cycle and stronger storage demand in general. Barclays continues to believe that EMC is one of the primary beneficiaries of the "Utilization Era" with exposure to cloud computing, storage efficiency, server virtualization and desktop virtualization trends.
Tuesday, October 6, 2009
Monday, October 5, 2009
October 5, 2009: Morning Call
October 5, 2009: Morning Call
Fair Value: SP500 – 1021.05; NDX: 1661.03; DOW: 9428.08
Technical Levels:
SPX: 875-880, 910, 953, 986, 1003 support/ 1044, 1110 resistance
Events:
03:45: Italian PMI Services (Sep): 47.2 (actual: 48.5)
03:50: French PMI Services (Sep): 52.2 (actual: 53.2)
03:55: German PMI services (Sep): 52.2 (actual: 52.1)
04:00: Eurozone PMI Services, Composite (Sep): 50.6, 50.9 (actual: 50.9, 51.1)
04:30: Euro-zone Investor Confidence (Sep): -11.8 (actual: -12.6)
04:30: UK PMI Services (Sep): 54.5 (actual: 55.3)
05:00: Euro-zone Retail Sales (Aug): -0.5% MoM; -2.4% YoY (actual: -0.2%, -2.6%)
10:00: ISM Non-Manufacturing Index.
18:30: Fed's Dudley speaks on the economy
Post-market EPS: MOS (.36/1.54B)
Foreign Market Summary/Key Macro News/Commentary:
Futures are following Euro-zone markets higher this morning. S&Ps are 6 above fair value moving in lock step with European markets. Euro-zone markets are up 0.50% after opening slightly lower. Markets react positively to better than expected economic data out of Europe (Italian, French, Euro-zone PMI, and Euro-zone Retail Sales all beat consensus). Treasury Bonds are up 1/2 point. FOREX quiet as G7 statements over the weekend were a non-event, and commodities are mixed with crude off 1% but industrial commodities (Copper, lead, nickel) trading up. Basic materials are leading the advance after bearing the brunt of the sell-off last week. AA kicks off Q3 EPS season on Wednesday. Asian markets mostly declined (Japan down 0.60%, Hong Kong up 0.26%, Australia down 0.63%, South Korea down 2.6%, India down 1.56%). Hong Kong ended slightly up in volatile trading as China-related shares rose on optimism the country will not rein in its stimulus measures. Exporters like Nikon (7731.JP) were the main losers in Japan, but banks climbed 2-3% as worries about a loan-repayment moratorium subsided. Financials led Australia down. South Korea dropped sharply as investors priced in weakness from the 2-Oct holiday. China remained closed for National Day
Research Calls/Market Moving News:
BRCD (7.65): Brocade quietly puts itself on the block – WSJ: People familiar with the matter say no deal is imminent, but Hewlett-Packard (HPQ) is interested, and Oracle (ORCL) might be. Brocade's market cap is $3.2B. BRCD shares are up 16% in the pre-market.
RIMM (65.42): Research In Motion upgraded to buy from hold at Needham: The firm believes current sentiment is too pessimistic and has a price target of $85. “From being overly optimistic on RIM’s outlook, we believe investors have become unduly pessimistic following the release of second quarter earnings. Our previous hold rating was based on the premise that new competitors, such as forthcoming Android phones, would capture share from BlackBerry and dramatically slow its growth. We’re not rejecting the prospect of a more competitive environment, but we believe the impact on BlackBerry’s growth should be muted relative to its impact on other smartphone platforms. In contrast with its competitors, BlackBerry and the iPhone have demonstrated that the integrated software/hardware model is superior to the operating system license model embraced by Windows Mobile and other smartphones. The integrated model has enabled the two companies to construct platforms that trump competitors in terms of services, features and ease of use. RIM has the additional benefit of an email service that no competitor can come close to matching. We’re raising our fiscal 2010 earnings estimate from $4.55 to $4.60 on revenues of $15.5 billion (vs. consensus of $4.16 on revenues of $14.9 billion) and our 2011 estimate from $5.50 to $5.70 on revenues of $21.4 billion (vs. consensus of $4.87 on revenues of $18.3 billion). The major risk in our Buy rating is that with the advent of new competitors running on Google’s android platform, RIM’s growth rate could deteriorate far more quickly than we’ve assumed.”
WFC (26.28); CMA (28.78); COF (33.19): Goldman Sachs upgrades CMA, WFC; adds COF to Conviction Buy List: Wells Fargo (WFC) upgraded to buy from neutral; target increased to $35 from $31. Comerica (CMA) upgraded to neutral from sell; target increased to $31 from $19. Capital One (COF) is added to the Conviction Buy List. Target increased to $44 from $37.
MTW (8.14): MTW is upgraded to buy from hold at Deutsche Bank. Shares are one of the biggest percent gainers in the pre-market (up 8%).
AAPL (184.90): Blu-ray iMacs may arrive in a few weeks -- Silicon Alley Insider: The site speculates that the new machines could be announced this month. Sources indicate that licensing may finally have been worked out and the prices of the drives are now more reasonable. Separately, AppleInsider notes ads in Europe that appear to have been placed online premature and may indicate that in a few days there will be thinner iMacs, new thinner and lighter plastic Macbooks and speed-bumped Mac minis.
JPM (41.86); BAC (16.34): Barron's Follow Up is positive on JPMorgan (JPM) and Bank of America (BAC): The executive shuffle at JPMorgan (JPM) last week shows investors one more reason to be positive on the shares because the moves highlight the talent pool at the top of the bank for when Jamie Dimon eventually steps down. The stock could rise to more than $70 over the next few years. Bank of America (BAC) is emerging from the financial crisis in surprisingly strong shape. The bank is ready to deliver strong profits and big gains to investors. The stock could climb as high as $30 over the next 2 years.
BAC (16.34): Bank of America to pick "emergency CEO" this week in case Ken Lewis has to leave early – WSJ: A person familiar with the situation says work on the contingency plan, in case legal trouble forces Lewis to step down before 31-Dec, began after Lewis announced his retirement. A five-person board committee formed earlier this year to address concerns raised by regulators is in charge of the process.
GS (179.61): Goldman Sachs to receive $1B if CIT Group (CIT) files for bankruptcy – FT: People familiar with the matter say the payment arises from the structure of a $3B rescue finance package Goldman gave CIT 6-Jun-2008. The sources say Goldman would be likely to agree to postpone payment on part of the "make-whole amount."
Fair Value: SP500 – 1021.05; NDX: 1661.03; DOW: 9428.08
Technical Levels:
SPX: 875-880, 910, 953, 986, 1003 support/ 1044, 1110 resistance
Events:
03:45: Italian PMI Services (Sep): 47.2 (actual: 48.5)
03:50: French PMI Services (Sep): 52.2 (actual: 53.2)
03:55: German PMI services (Sep): 52.2 (actual: 52.1)
04:00: Eurozone PMI Services, Composite (Sep): 50.6, 50.9 (actual: 50.9, 51.1)
04:30: Euro-zone Investor Confidence (Sep): -11.8 (actual: -12.6)
04:30: UK PMI Services (Sep): 54.5 (actual: 55.3)
05:00: Euro-zone Retail Sales (Aug): -0.5% MoM; -2.4% YoY (actual: -0.2%, -2.6%)
10:00: ISM Non-Manufacturing Index.
18:30: Fed's Dudley speaks on the economy
Post-market EPS: MOS (.36/1.54B)
Foreign Market Summary/Key Macro News/Commentary:
Futures are following Euro-zone markets higher this morning. S&Ps are 6 above fair value moving in lock step with European markets. Euro-zone markets are up 0.50% after opening slightly lower. Markets react positively to better than expected economic data out of Europe (Italian, French, Euro-zone PMI, and Euro-zone Retail Sales all beat consensus). Treasury Bonds are up 1/2 point. FOREX quiet as G7 statements over the weekend were a non-event, and commodities are mixed with crude off 1% but industrial commodities (Copper, lead, nickel) trading up. Basic materials are leading the advance after bearing the brunt of the sell-off last week. AA kicks off Q3 EPS season on Wednesday. Asian markets mostly declined (Japan down 0.60%, Hong Kong up 0.26%, Australia down 0.63%, South Korea down 2.6%, India down 1.56%). Hong Kong ended slightly up in volatile trading as China-related shares rose on optimism the country will not rein in its stimulus measures. Exporters like Nikon (7731.JP) were the main losers in Japan, but banks climbed 2-3% as worries about a loan-repayment moratorium subsided. Financials led Australia down. South Korea dropped sharply as investors priced in weakness from the 2-Oct holiday. China remained closed for National Day
Research Calls/Market Moving News:
BRCD (7.65): Brocade quietly puts itself on the block – WSJ: People familiar with the matter say no deal is imminent, but Hewlett-Packard (HPQ) is interested, and Oracle (ORCL) might be. Brocade's market cap is $3.2B. BRCD shares are up 16% in the pre-market.
RIMM (65.42): Research In Motion upgraded to buy from hold at Needham: The firm believes current sentiment is too pessimistic and has a price target of $85. “From being overly optimistic on RIM’s outlook, we believe investors have become unduly pessimistic following the release of second quarter earnings. Our previous hold rating was based on the premise that new competitors, such as forthcoming Android phones, would capture share from BlackBerry and dramatically slow its growth. We’re not rejecting the prospect of a more competitive environment, but we believe the impact on BlackBerry’s growth should be muted relative to its impact on other smartphone platforms. In contrast with its competitors, BlackBerry and the iPhone have demonstrated that the integrated software/hardware model is superior to the operating system license model embraced by Windows Mobile and other smartphones. The integrated model has enabled the two companies to construct platforms that trump competitors in terms of services, features and ease of use. RIM has the additional benefit of an email service that no competitor can come close to matching. We’re raising our fiscal 2010 earnings estimate from $4.55 to $4.60 on revenues of $15.5 billion (vs. consensus of $4.16 on revenues of $14.9 billion) and our 2011 estimate from $5.50 to $5.70 on revenues of $21.4 billion (vs. consensus of $4.87 on revenues of $18.3 billion). The major risk in our Buy rating is that with the advent of new competitors running on Google’s android platform, RIM’s growth rate could deteriorate far more quickly than we’ve assumed.”
WFC (26.28); CMA (28.78); COF (33.19): Goldman Sachs upgrades CMA, WFC; adds COF to Conviction Buy List: Wells Fargo (WFC) upgraded to buy from neutral; target increased to $35 from $31. Comerica (CMA) upgraded to neutral from sell; target increased to $31 from $19. Capital One (COF) is added to the Conviction Buy List. Target increased to $44 from $37.
MTW (8.14): MTW is upgraded to buy from hold at Deutsche Bank. Shares are one of the biggest percent gainers in the pre-market (up 8%).
AAPL (184.90): Blu-ray iMacs may arrive in a few weeks -- Silicon Alley Insider: The site speculates that the new machines could be announced this month. Sources indicate that licensing may finally have been worked out and the prices of the drives are now more reasonable. Separately, AppleInsider notes ads in Europe that appear to have been placed online premature and may indicate that in a few days there will be thinner iMacs, new thinner and lighter plastic Macbooks and speed-bumped Mac minis.
JPM (41.86); BAC (16.34): Barron's Follow Up is positive on JPMorgan (JPM) and Bank of America (BAC): The executive shuffle at JPMorgan (JPM) last week shows investors one more reason to be positive on the shares because the moves highlight the talent pool at the top of the bank for when Jamie Dimon eventually steps down. The stock could rise to more than $70 over the next few years. Bank of America (BAC) is emerging from the financial crisis in surprisingly strong shape. The bank is ready to deliver strong profits and big gains to investors. The stock could climb as high as $30 over the next 2 years.
BAC (16.34): Bank of America to pick "emergency CEO" this week in case Ken Lewis has to leave early – WSJ: A person familiar with the situation says work on the contingency plan, in case legal trouble forces Lewis to step down before 31-Dec, began after Lewis announced his retirement. A five-person board committee formed earlier this year to address concerns raised by regulators is in charge of the process.
GS (179.61): Goldman Sachs to receive $1B if CIT Group (CIT) files for bankruptcy – FT: People familiar with the matter say the payment arises from the structure of a $3B rescue finance package Goldman gave CIT 6-Jun-2008. The sources say Goldman would be likely to agree to postpone payment on part of the "make-whole amount."
Wednesday, September 23, 2009
September 23, 2009: Morning Call
September 23, 2009: Morning Call
Fair Value: SP500 – 1067.09; NDX: 1732.69; DOW: 9767.36
Technical Levels:
SPX: 875-880, 910, 953, 986, 1044 support/ 1110 resistance
Events:
Pre-market EPS: AZO (4.45/2.2B); GIS (1.03/3.48B)
07:00: MBA Mortgage Applications
09:30: GENZ presents at UBS Healthcare conference
09:30: Treasury Secretary Geithner testifies on regulatory reform
10:00: President Obama addresses UN General Assembly
10:30: DOE Crude Oil and Gasoline Inventories
13:00: DNDN presents at UBS Healthcare conference
13:00: Treasury Auctions 40 billion in 5-year notes
14:15: FOMC Interest Rate Decision: 0.25%
16:15: HPQ Analyst Meeting
Post-market EPS: NKE (.97/4.9B); BBBY (.47/1.9B); CTAS (.39/880.0M); PAYX (.34/504M); RHT(.15/179.0M)
Foreign Market Summary/Key Macro News/Commentary:
The S&P futures are trading 3 points above fair value and the NASDAQ futures are trading 7 points above fair value at 7:45am ET. European markets are up 0.50% led once again by basic material and technology stocks. Economic data in Europe was mixed (France Sep Business Conf Indicator 85 vs con 81. France Sep Prelim Manf PMI 52.5 vs con 51.4. France Sep Prelim Svcs PMI 52.2 vs con 50.2. Germany Sep adv Svcs PMI 52.2 vs con 54.0. Germany Sep adv Manf PMI 49.6 vs con 50.8. Eurozone Sep adv Manf PMI 49.0 vs con 49.7. Eurozone Sep adv Svcs PMI 50.6 vs con 50.5. BOE voted 9-0 to keep £175B purchase plan and said data suggests a likely upward revision to UK Q2 GDP. EuroZone Jul Ind New Orders -24.3% y/y vs consensus –25.9%). Asian markets closed lower with the exception of Australia (Hong Kong down 0.49%, Australia up 1.51%, Shanghai down 2.2%, Taiwan down 1.2%, South Korea down 0.07%, India down 1.0%). Weakness in Shanghai weighed on markets across the region. Gains in energy, materials, and financial stocks led Australia up. Hong Kong’s performance was restrained by China’s. Geely Auto (175.HK) surged 19% after raising HK$2.59B from Goldman Sachs (GS). Japan was closed for the Autumnal Equinox.
Research Calls/Market Moving News:
GIS (60.97): General Mills reports Q1 EPS $1.28 ex-items vs Reuters $1.03: Company reports revenues of $3.52B vs Reuters $3.50B. Pound volume matched year-ago levels, reflecting the loss of 2 points of growth from divested product lines. Raises f10 EPS guidance to $4.40-4.45 ex-items from $4.20-4.25 vs Reuters $4.27.
PALM (17.07): Jefferies comments on speculation of a Nokia acquisition of Palm: The firm says PALM would give a potential buyer a PC class OS and US centric high-end handset. Jefferies says investors fear a hefty bid premium, which could cloud the strategic rationale for such a deal. The firm says PC OEMs could create a bidding war for the company with a hefty premium to the company's current market cap but says for NOK strategic merits could outweigh the price as it would leave the company roughly 1 yr behind AAPL regarding software development vs 2-3.
PALM (17.07): Susquehanna initiates PALM with a neutral rating: "Palm is still a turnaround story with its financial success reliant on the newly released webOS operating system and new devices in an increasingly competitive smartphone market. While we anticipate Palm to expand its carrier partners both in the U.S. and internationally, and expect sell-in unit shipment growth to ramp accordingly, we believe the current valuation reflects an optimistic adoption rate of webOS devices. We initiate with a Neutral rating as Palm’s estimated earnings power is within the range of our Bull- Bear scenario. In our view, Palm’s new webOS platform is well developed and robust; however, its success will be limited in the near term due to Palm’s exclusive distribution through Sprint. We view the recent price decrease for the Pre to $149 (from $199 at launch) with caution as it may signal that it needed to be repositioned in order to achieve the price elasticity required to reinvigorate unit sales. Longer term, we are cautious regarding the webOS platform’s sustainable competitive advantage, especially compared to RIM in enterprise and Apple in retail with more than 75,000 applications in its App Store. Positively, we expect Palm to return to cash flow positive in 2HFY10 predicated on the successful sell-in of webOS products to an expanding base of wireless carriers, hitting operating profit inflection point volume targets, and a streamlined operating structure. Shares are trading at 1.1x FY11 EV/Sales, and 19x our $0.90 earnings power estimate."
ETFC (1.92): Company announces the completion of the ATM offering of 80.2 million shares of stock with net proceeds of 147 million, implying an average price of 1.83.
Life Insurance Sector Downgraded to in-line from attractive at Morgan Stanley. PRU cut to equal weight from overweight.
FDX (76.16): FedEx estimates raised at Morgan Stanley: The firm believes that even if there was a gradual macro recovery, the company's current run rate implies large EPS and volume gains in 2H f10. Morgan Stanley says consensus estimates are still underestimating the growth potential and operating leverage at FDX. Shares remain equal weight rated. F11 EPS estimates are raised to $4.85 with f12raised to $5.72.
AMZN (93.75): Amazon.com estimates and target raised at Bernstein: The firm notes questions regarding the company's longer term growth prospects given decelerating media revenues but says overall, they believe the category will begin to recover in late 2009. The video game segment is expected to benefit from lower console prices and a strong lineup of new titles. F10 EPS estimates are raised to $2.29 from $2.27 with the target for the shares raised to $95 from $90.
X (50.24); AKS (23.06); STLD (17.77): UBS comments on North American Steel: Firm notes that sudden 2H auto demand has driven near-term sheet forecast higher. UBS raises Q4 steel price forecast to reflect the higher value. Firm cautions that it sees downside risks for sheet prices amid capacity restarts and excess global supply signaled by China's recent shift to a net exporter. Firm sees a stronger Q4 for X and AKS. Firm sees a potential upside into 2010 for SCHN, RS. Top pick is STLD. Construction exposure likely pressures GNA, CMC.
U.S. and Europe differ over capital requirements for banks says the WSJ: This will be a topic for discussion at the G20 meeting and European leaders are saying the U.S. proposals will put European banks at a disadvantage. The U.S. wants to create stricter rules and force banks to hold more capital on hand. French and German regulators say the U.S. proposals would force their banks to raise much more capital than U.S. firms. U.S. banks were required to hold more capital than European institutions before the crisis, giving them more ground to make up. Another issue is the efforts of the banks to resist tighter regulation. Government officials will not try to reach an agreement at the G20 meeting but only to create some momentum behind talks on the issue.
Secondary’s: Goodrich Petroleum (GDP) announces $150M convertible offering through JP Morgan; ATP Oil & Gas (ATPG) announces 5.3M share secondary offering through JPMorgan and Credit Suisse, commenced $125M convertible pref offering, provides operations update; PennantPark Investment (PNNT) announces 8M share secondary offering through SunTrust and BMO; Qiagen (QGEN) to issue 27.5M shares in private placement through Deutsche, Goldman, JPMorgan; Incyte (INCY) announces 18M share secondary offering through Goldman, announces $250M convertible note offering; Gaylord Entertainment (GET) proposes $200M convertible private placement. RailAmerica (RA) increases IPO to $450M from $300M through JPM, Citi, Deutsche and Morgan Stanley; US Airways Group (LCC) annouces 26.3M share secondary offering through Citi; Calpine Corporation (CPN) announced a 20M share offering by holder Harbinger Capital through Morgan Stanley.
Fair Value: SP500 – 1067.09; NDX: 1732.69; DOW: 9767.36
Technical Levels:
SPX: 875-880, 910, 953, 986, 1044 support/ 1110 resistance
Events:
Pre-market EPS: AZO (4.45/2.2B); GIS (1.03/3.48B)
07:00: MBA Mortgage Applications
09:30: GENZ presents at UBS Healthcare conference
09:30: Treasury Secretary Geithner testifies on regulatory reform
10:00: President Obama addresses UN General Assembly
10:30: DOE Crude Oil and Gasoline Inventories
13:00: DNDN presents at UBS Healthcare conference
13:00: Treasury Auctions 40 billion in 5-year notes
14:15: FOMC Interest Rate Decision: 0.25%
16:15: HPQ Analyst Meeting
Post-market EPS: NKE (.97/4.9B); BBBY (.47/1.9B); CTAS (.39/880.0M); PAYX (.34/504M); RHT(.15/179.0M)
Foreign Market Summary/Key Macro News/Commentary:
The S&P futures are trading 3 points above fair value and the NASDAQ futures are trading 7 points above fair value at 7:45am ET. European markets are up 0.50% led once again by basic material and technology stocks. Economic data in Europe was mixed (France Sep Business Conf Indicator 85 vs con 81. France Sep Prelim Manf PMI 52.5 vs con 51.4. France Sep Prelim Svcs PMI 52.2 vs con 50.2. Germany Sep adv Svcs PMI 52.2 vs con 54.0. Germany Sep adv Manf PMI 49.6 vs con 50.8. Eurozone Sep adv Manf PMI 49.0 vs con 49.7. Eurozone Sep adv Svcs PMI 50.6 vs con 50.5. BOE voted 9-0 to keep £175B purchase plan and said data suggests a likely upward revision to UK Q2 GDP. EuroZone Jul Ind New Orders -24.3% y/y vs consensus –25.9%). Asian markets closed lower with the exception of Australia (Hong Kong down 0.49%, Australia up 1.51%, Shanghai down 2.2%, Taiwan down 1.2%, South Korea down 0.07%, India down 1.0%). Weakness in Shanghai weighed on markets across the region. Gains in energy, materials, and financial stocks led Australia up. Hong Kong’s performance was restrained by China’s. Geely Auto (175.HK) surged 19% after raising HK$2.59B from Goldman Sachs (GS). Japan was closed for the Autumnal Equinox.
Research Calls/Market Moving News:
GIS (60.97): General Mills reports Q1 EPS $1.28 ex-items vs Reuters $1.03: Company reports revenues of $3.52B vs Reuters $3.50B. Pound volume matched year-ago levels, reflecting the loss of 2 points of growth from divested product lines. Raises f10 EPS guidance to $4.40-4.45 ex-items from $4.20-4.25 vs Reuters $4.27.
PALM (17.07): Jefferies comments on speculation of a Nokia acquisition of Palm: The firm says PALM would give a potential buyer a PC class OS and US centric high-end handset. Jefferies says investors fear a hefty bid premium, which could cloud the strategic rationale for such a deal. The firm says PC OEMs could create a bidding war for the company with a hefty premium to the company's current market cap but says for NOK strategic merits could outweigh the price as it would leave the company roughly 1 yr behind AAPL regarding software development vs 2-3.
PALM (17.07): Susquehanna initiates PALM with a neutral rating: "Palm is still a turnaround story with its financial success reliant on the newly released webOS operating system and new devices in an increasingly competitive smartphone market. While we anticipate Palm to expand its carrier partners both in the U.S. and internationally, and expect sell-in unit shipment growth to ramp accordingly, we believe the current valuation reflects an optimistic adoption rate of webOS devices. We initiate with a Neutral rating as Palm’s estimated earnings power is within the range of our Bull- Bear scenario. In our view, Palm’s new webOS platform is well developed and robust; however, its success will be limited in the near term due to Palm’s exclusive distribution through Sprint. We view the recent price decrease for the Pre to $149 (from $199 at launch) with caution as it may signal that it needed to be repositioned in order to achieve the price elasticity required to reinvigorate unit sales. Longer term, we are cautious regarding the webOS platform’s sustainable competitive advantage, especially compared to RIM in enterprise and Apple in retail with more than 75,000 applications in its App Store. Positively, we expect Palm to return to cash flow positive in 2HFY10 predicated on the successful sell-in of webOS products to an expanding base of wireless carriers, hitting operating profit inflection point volume targets, and a streamlined operating structure. Shares are trading at 1.1x FY11 EV/Sales, and 19x our $0.90 earnings power estimate."
ETFC (1.92): Company announces the completion of the ATM offering of 80.2 million shares of stock with net proceeds of 147 million, implying an average price of 1.83.
Life Insurance Sector Downgraded to in-line from attractive at Morgan Stanley. PRU cut to equal weight from overweight.
FDX (76.16): FedEx estimates raised at Morgan Stanley: The firm believes that even if there was a gradual macro recovery, the company's current run rate implies large EPS and volume gains in 2H f10. Morgan Stanley says consensus estimates are still underestimating the growth potential and operating leverage at FDX. Shares remain equal weight rated. F11 EPS estimates are raised to $4.85 with f12raised to $5.72.
AMZN (93.75): Amazon.com estimates and target raised at Bernstein: The firm notes questions regarding the company's longer term growth prospects given decelerating media revenues but says overall, they believe the category will begin to recover in late 2009. The video game segment is expected to benefit from lower console prices and a strong lineup of new titles. F10 EPS estimates are raised to $2.29 from $2.27 with the target for the shares raised to $95 from $90.
X (50.24); AKS (23.06); STLD (17.77): UBS comments on North American Steel: Firm notes that sudden 2H auto demand has driven near-term sheet forecast higher. UBS raises Q4 steel price forecast to reflect the higher value. Firm cautions that it sees downside risks for sheet prices amid capacity restarts and excess global supply signaled by China's recent shift to a net exporter. Firm sees a stronger Q4 for X and AKS. Firm sees a potential upside into 2010 for SCHN, RS. Top pick is STLD. Construction exposure likely pressures GNA, CMC.
U.S. and Europe differ over capital requirements for banks says the WSJ: This will be a topic for discussion at the G20 meeting and European leaders are saying the U.S. proposals will put European banks at a disadvantage. The U.S. wants to create stricter rules and force banks to hold more capital on hand. French and German regulators say the U.S. proposals would force their banks to raise much more capital than U.S. firms. U.S. banks were required to hold more capital than European institutions before the crisis, giving them more ground to make up. Another issue is the efforts of the banks to resist tighter regulation. Government officials will not try to reach an agreement at the G20 meeting but only to create some momentum behind talks on the issue.
Secondary’s: Goodrich Petroleum (GDP) announces $150M convertible offering through JP Morgan; ATP Oil & Gas (ATPG) announces 5.3M share secondary offering through JPMorgan and Credit Suisse, commenced $125M convertible pref offering, provides operations update; PennantPark Investment (PNNT) announces 8M share secondary offering through SunTrust and BMO; Qiagen (QGEN) to issue 27.5M shares in private placement through Deutsche, Goldman, JPMorgan; Incyte (INCY) announces 18M share secondary offering through Goldman, announces $250M convertible note offering; Gaylord Entertainment (GET) proposes $200M convertible private placement. RailAmerica (RA) increases IPO to $450M from $300M through JPM, Citi, Deutsche and Morgan Stanley; US Airways Group (LCC) annouces 26.3M share secondary offering through Citi; Calpine Corporation (CPN) announced a 20M share offering by holder Harbinger Capital through Morgan Stanley.
Tuesday, September 22, 2009
September 22, 2009: Morning Call
September 22, 2009: Morning Call
Fair Value: SP500 – 1060.10; NDX: 1730.17; DOW: 9716.56
Technical Levels:
SPX: 875-880, 910, 953, 986, 1044 support/1110 resistance
Events:
Pre-market EPS: KMX (.18/1.7B); CCL (1.18/4.04B); CAG (.34/3.09B); FDS(.74/154.0M)
03:00: EU’s Lowe speaks at Anti-trust conference
04:00: CS Investor/Analyst Day
10:00: Richmond Fed Manufacturing Index (Sep): 15
10:00: US House Price Index (July): 0.5%
10:00: LOW Analyst/Investor Day
10:30: LH presents at UBS Healthcare conference
11:00: MSFT Business Update Call
12:30: MYGN presents at UBS Healthcare conference
13:00: BRCD analyst day
13:00: Treasury Auctions 43 billion in 2-year notes and 27 billion in 1year notes
13:30: CELG presents at UBS Healthcare Conference
14:30: VRTS presents at UBS Healthcare Conference
16:30: API Crude Oil and Gasoline Inventories
Foreign Market Summary/Key Macro News/Commentary:
The S&P and NASDAQ futures are trading 8 points above fair value and close to the highs of the overnight session. European markets are up 0.80% to 1.25% with basic material, energy, and technology stocks leading the rally. The Euro is breaking out to fresh relative highs against the dollar on expectations of faster global economic growth, which is lending a solid bid to commodities and gold (commodities are up 1.5% to 3.0%). Russian markets are the strongest in Europe (up 3.3%), a sign that market participants continue to reach for risky assets. Asian markets closed mixed (Hong Kong up 1.06%, Australia down 0.30%, Shanghai down 2.4%, South Korea up 1.56%, India up 0.87%). According to Bloomberg, Asian Development Bank said Asia, excluding Japan, would grow 3.9% this year, better than the March estimate of 3.4%. In addition, government data showed net crude oil imports by China last month was the second-highest on record.
Research Calls/Market Moving News:
GOOG (497.00): Google target increased to $560 from $480 at Canaccord Adams: Firm expects Q3 to be seasonally in line with expectations, but sees more upside growth to Q4 than consensus is modeling. Rating is buy.
Calyon analyst Mike Mayo remains cautious on the banking sector -- CNBC: Even if the downside in the credit cycle may be over, which is not clear, Mayo notes several differences as compared to the emergence from normal credit cycles, including potential disinflation, deleveraging, de-risking, the deposit insurance fund to decipher, and a decline in deposit service charges.
DNDN (29.46): Dendreon initiated outperform at Leerink Swann
Banks benefiting from CDO liquidations – FT: The FT reports that billions of dollars of worth of collateralized debt obligations (CDOs) are bing liquidated, allowing banks, insurance companies and other investors to clear toxic assets from their balance sheets. According to the article, while hundreds of billions of dollars of CDOs have defaulted, the structures can only be liquidated if the underlying collateral can be sold. In recent weeks, more investors have been purchasing the underlying assets at deep discounts, leading to better liquidity in the market and helping to boost prices for some existing CDOs. The FT goes on to note that the recent rally has been particularly significant for CDOs backed by corporate bonds and loans.
C (4.43): Government of Singapore reduces stake in Citi to below 5% -- wires: In a statement, GIC said that it had reduced its stake below 5% through open market sales and that the stake was consistent with what it had intended when it invested in Citi through convertible securities. GIC had held more than 9% as a result of the exchange of convertible securities on 11-Sep, together with the U.S. Government and other private investors. GIC said it would continue its investment in Citi as it was confident in its long-term prospects.
BAC (17.25): Bank of America to pay $425M to terminate asset guarantee term sheet: BAC announced that it has reached an agreement with the U.S. Government to terminate its term sheet with respect to the guarantee of up to $118B in assets by the U.S. Government. The term sheet was executed in connection with Bank of America's acquisition of Merrill Lynch in January 2009. Bank of America also announced that it had received FDIC approval to exit the debt guarantee program under the FDIC's Temporary Liquidity Guarantee Program.
Citi upgrades ANR, BTU: Alpha Natural Resources (ANR) upgraded to buy from hold; target increased to $46 from $32. Peabody Energy (BTU) upgraded to buy from hold; target increased to $46 from $34. The firm has a more positive stance on met coal, raising its forecast for met to $200/ton from $140/ton for 2010-11. Citi prefers CONSOL Energy (CNX), ANR and BTU. ACI, MEE and PCX remain rated hold.
M (17.79): Macy's upgraded to buy from hold at Citi: Target increased to $30 from $15. The firm sees revenue improvement from the My Macy's initiative, as well as potential operating margin improvement, following meetings with management.
HPQ (46.35); DELL (16.01): Hewlett Packard (HPQ) upgraded, DELL downgraded at Credit Suisse: HPQ upgraded to outperform from neutral, target increased to $55 from $44. Cost-cutting and leverage from opex, as well as a potential catalyst in the analyst day on Thursday, are cited. DELL downgraded to neutral from outperform, target reduced to $16 from $19. The firm is concerned about DELL's acquisition strategy, noting the difficulty of integrating Perot (PER).
Fair Value: SP500 – 1060.10; NDX: 1730.17; DOW: 9716.56
Technical Levels:
SPX: 875-880, 910, 953, 986, 1044 support/1110 resistance
Events:
Pre-market EPS: KMX (.18/1.7B); CCL (1.18/4.04B); CAG (.34/3.09B); FDS(.74/154.0M)
03:00: EU’s Lowe speaks at Anti-trust conference
04:00: CS Investor/Analyst Day
10:00: Richmond Fed Manufacturing Index (Sep): 15
10:00: US House Price Index (July): 0.5%
10:00: LOW Analyst/Investor Day
10:30: LH presents at UBS Healthcare conference
11:00: MSFT Business Update Call
12:30: MYGN presents at UBS Healthcare conference
13:00: BRCD analyst day
13:00: Treasury Auctions 43 billion in 2-year notes and 27 billion in 1year notes
13:30: CELG presents at UBS Healthcare Conference
14:30: VRTS presents at UBS Healthcare Conference
16:30: API Crude Oil and Gasoline Inventories
Foreign Market Summary/Key Macro News/Commentary:
The S&P and NASDAQ futures are trading 8 points above fair value and close to the highs of the overnight session. European markets are up 0.80% to 1.25% with basic material, energy, and technology stocks leading the rally. The Euro is breaking out to fresh relative highs against the dollar on expectations of faster global economic growth, which is lending a solid bid to commodities and gold (commodities are up 1.5% to 3.0%). Russian markets are the strongest in Europe (up 3.3%), a sign that market participants continue to reach for risky assets. Asian markets closed mixed (Hong Kong up 1.06%, Australia down 0.30%, Shanghai down 2.4%, South Korea up 1.56%, India up 0.87%). According to Bloomberg, Asian Development Bank said Asia, excluding Japan, would grow 3.9% this year, better than the March estimate of 3.4%. In addition, government data showed net crude oil imports by China last month was the second-highest on record.
Research Calls/Market Moving News:
GOOG (497.00): Google target increased to $560 from $480 at Canaccord Adams: Firm expects Q3 to be seasonally in line with expectations, but sees more upside growth to Q4 than consensus is modeling. Rating is buy.
Calyon analyst Mike Mayo remains cautious on the banking sector -- CNBC: Even if the downside in the credit cycle may be over, which is not clear, Mayo notes several differences as compared to the emergence from normal credit cycles, including potential disinflation, deleveraging, de-risking, the deposit insurance fund to decipher, and a decline in deposit service charges.
DNDN (29.46): Dendreon initiated outperform at Leerink Swann
Banks benefiting from CDO liquidations – FT: The FT reports that billions of dollars of worth of collateralized debt obligations (CDOs) are bing liquidated, allowing banks, insurance companies and other investors to clear toxic assets from their balance sheets. According to the article, while hundreds of billions of dollars of CDOs have defaulted, the structures can only be liquidated if the underlying collateral can be sold. In recent weeks, more investors have been purchasing the underlying assets at deep discounts, leading to better liquidity in the market and helping to boost prices for some existing CDOs. The FT goes on to note that the recent rally has been particularly significant for CDOs backed by corporate bonds and loans.
C (4.43): Government of Singapore reduces stake in Citi to below 5% -- wires: In a statement, GIC said that it had reduced its stake below 5% through open market sales and that the stake was consistent with what it had intended when it invested in Citi through convertible securities. GIC had held more than 9% as a result of the exchange of convertible securities on 11-Sep, together with the U.S. Government and other private investors. GIC said it would continue its investment in Citi as it was confident in its long-term prospects.
BAC (17.25): Bank of America to pay $425M to terminate asset guarantee term sheet: BAC announced that it has reached an agreement with the U.S. Government to terminate its term sheet with respect to the guarantee of up to $118B in assets by the U.S. Government. The term sheet was executed in connection with Bank of America's acquisition of Merrill Lynch in January 2009. Bank of America also announced that it had received FDIC approval to exit the debt guarantee program under the FDIC's Temporary Liquidity Guarantee Program.
Citi upgrades ANR, BTU: Alpha Natural Resources (ANR) upgraded to buy from hold; target increased to $46 from $32. Peabody Energy (BTU) upgraded to buy from hold; target increased to $46 from $34. The firm has a more positive stance on met coal, raising its forecast for met to $200/ton from $140/ton for 2010-11. Citi prefers CONSOL Energy (CNX), ANR and BTU. ACI, MEE and PCX remain rated hold.
M (17.79): Macy's upgraded to buy from hold at Citi: Target increased to $30 from $15. The firm sees revenue improvement from the My Macy's initiative, as well as potential operating margin improvement, following meetings with management.
HPQ (46.35); DELL (16.01): Hewlett Packard (HPQ) upgraded, DELL downgraded at Credit Suisse: HPQ upgraded to outperform from neutral, target increased to $55 from $44. Cost-cutting and leverage from opex, as well as a potential catalyst in the analyst day on Thursday, are cited. DELL downgraded to neutral from outperform, target reduced to $16 from $19. The firm is concerned about DELL's acquisition strategy, noting the difficulty of integrating Perot (PER).
Monday, September 21, 2009
September 21, 2009: Morning Call
September 21, 2009: Morning Call
Fair Value: SP500 – 1063.71; NDX: 1723.85; DOW: 9758.10
Technical Levels:
SPX: 875-880, 910, 953, 986 support/ 1044, 1110 resistance
Events:
Pre-market EPS: LEN (-.51/772.9M)
08:30: AMGN presents at UBS Healthcare conference
09:30: GILD presents at UBS Healthcare conference
09:30: HGSI presents at UBS Healthcare conference
10:00: US Leading Indicators (August): 0.7%
10:00: AMAT Investor Meeting
11:00: LEN earnings call
13:00: Treasury Auctions 29 billion in 3 month bills and 29 billion in 6 month bills
13:00: NKE Annual General Meeting
14:00: ISRG presents at UBS Healthcare Conference
15:00: BCRX presents at UBS Healthcare Conference
15:30: VVUS presents at UBS Healthcare Conference
17:30: New York Fed’s Cummings speaks on economic recovery
Foreign Market Summary/Key Macro News/Commentary:
The S&P futures are trading 9 points below fair value and the NASDAQ futures are trading 12 points below fair value. European markets are down 0.8% to 1.25%, with the basic resource sector bearing the brunt, as gold dropped below $1,000/oz and copper fell to a one-week low. Profit takers step in as fears equity moves have been overdone are tempered by the threat of increased share issuance, with weekend press talk of an impending RBS placement. Comments from President Obama ahead of G20 meeting Thurs/Fri highlighted his expectations that “the jobs picture is not going to improve considerably,” possibly getting “a little bit worse.” The US dollar rose to a one week high against the yen, and gained against the €uro, on speculation that the Fed will begin preparing the market for the end of quantitative easing. The two-day FOMC meeting starts tomorrow. Asian markets closed lower (Hong Kong down 0.70%, Australia down 0.34%, Shanghai up 0.28%, South Korea down 0.32%). Japan and India were closed for holidays.
Research Calls/Market Moving News:
PER (17.91): Dell (DELL) to purchase Perot Systems (PER) for $30/share cash: Dell and Perot Systems have entered a definitive agreement for Dell to acquire Perot Systems in a transaction valued at approximately $3.9B. Terms of the agreement were approved yesterday by the boards of directors of both companies. Over the past four quarters Dell and Perot Systems had a combined $16B in enterprise-hardware and IT-services revenue, with about $8B from enhanced services and support. Under the terms of the agreement, Dell will commence a tender offer to acquire all of the outstanding Class A common stock of Perot Systems for $30 per share in cash. The transaction is not subject to a financing condition. The transaction, which is subject to customary government approvals and the satisfaction of other customary conditions, is expected to close in Dell’s November-January fiscal quarter. Once the acquisition is complete, Perot Systems will become Dell’s services unit and be led from Plano by Peter Altabef, the current Perot Systems CEO. At the same time, Dell directors are expected to consider Ross Perot Jr., Perot Systems’ chairman of the board, for appointment to the Dell board. Based on current estimates, the transaction is expected to be accretive to Dell’s GAAP earnings in its fiscal 2012. Company will hold an analysts call with Dell and Perot Systems executives at 8:30ET at www.dell.com/investor
POT (97.14): Potash guides f09 EPS to $3.25-3.75 vs prior $4.00-5.00 and Reuters $4.06: Potash inventories that can be measured in the retail chain - this excludes less easily identified inventories in China - have been largely eliminated and potash levels in soils around the world have been significantly reduced. This creates a progressively higher risk to crop yields as soil fertility is continually diminished. While the immediate impact has been masked by good weather and residual soil nutrient levels in markets with healthy long-term fertilization and agronomic practices, such as the US and Australia, yields for key crops in several other major growing regions are expected to be substantially below 2008 levels. A significant rebound is required to address this situation and POT expects 2010 global potash demand to be in the range of 50-55M tonnes.
BCRX (10.02): BioCryst Pharmaceuticals, Inc. today announced that it has received a request for proposal (RFP) from the U.S. Department of Health & Human Services (HHS) for the supply of intravenous (i.v) peramivir for the treatment of critically ill influenza patients under Emergency Use Authorization (EUA). The RFP indicates that the minimum and maximum order quantities to be ordered by the government are 1,000 and 40,000 courses of anti-viral treatment. The RFP specifies that BioCryst would also be required to maintain the ability to manufacture additional treatment courses dependent on the volume and size of anti-viral orders received from HHS for additional needs for either treatment or prophylaxis. The current RFP process may or may not result in a government order for peramivir and does not guarantee issuance of an EUA.
VVUS (10.94): Vivus still plans to present at UBS Global Life Sciences Conference today at 15:30 ET, we're told: Though the company is still expected to present at the conference, our sources have indicated that VVUS has cancelled 1-on-1 meetings and the breakout session. The reason for those cancellations is unclear.
ARNA (5.18): Arena Pharmaceuticals downgraded to market perform from outperform at Leerink Swann
BK (30.30): Bank of New York Mellon (BK) downgraded to neutral from buy at Goldman Sachs: Trust Bank sector is downgraded to neutral from attractive. The firm is positive on Northern Trust (NTRS), given its equity market leverage. The rating is buy; target $68.
MA (223.57); V (73.79): Transaction Processing sector downgraded to neutral from attractive at Goldman Sachs: The firm cites limited upside. Buy-rated stocks remain V, MA and WU. Note TSS was removed from the Conviction Sell List, as previously reported.
EMC (17.00): EMC downgraded to neutral from overweight at Piper Jaffray: The firm cites valuation and relatively high exposure to the European market for the downgrade of the shares.
WFC (28.49); RF (6.13); MI (8.10); CMA (30.65): Bernstein upgrades MI, RF, WFC; downgrades CMA: Upgrade: Marshall & Ilsley (MI) upgraded to outperform from market perform. Regions Financial (RF) upgraded to outperform from market perform. Wells Fargo (WFC) upgraded to outperform from market perform. Downgrade: Comerica (CMA) downgraded to market perform from outperform.
COST (47.55): Costco upgraded to outperform from market perform at William Blair - wires
POT (97.14); MOS (54.25): Soleil Securities downgrades MOS, POT: Mosaic (MOS) downgraded to hold from buy; target cut to $56 from $65. Potash (POT) downgraded to hold from buy; target cut to $88 from $105
New financial rules to be discussed at G20 summit in Pittsburgh will surely put the hurt on banks – WSJ: The plan is intended to make risk-taking by banks that are too big to fail so painful that they won't be inclined to take them. Such banks, as well as banks that engage in a lot of short-term borrowing or invest in hard-to-sell assets will need to keep larger capital cushions. Without details on things like exactly how much larger these capital cushions will need to be, their exact effect on banks' profits isn't known. But using some guesses, an analysis suggests profits could be reduced by 30% at large banks, or more at the largest ones.
BAC (17.63): Bank of America directors to be briefed today on options should CEO Kenneth Lewis be charged with fraud – WSJ: A person familiar with the situation says the board backs Lewis and has not been surprised by any of the allegations leveled by New York Attorney General Andrew Cuomo, but the board has confirmed a just-in-case new succession plan. Sources say options include either choosing from internal candidates or bringing in an outsider
GOOG (491.46): LA Times looks at challenges facing Google in China: While Google's ongoing struggles with the Chinese government are well documented, a growing band of critics say the company's biggest problem is that China requires it to play a game it has never played before and market itself. While the company has largely grown by word of mouth elsewhere, most Chinese people can't even pronounce Google's name, which has undergone several iterations in the country as a result. Baidu (BIDU) ran an effective ad a few years ago sending the message to the Chinese net populace that it spoke their language and understood their needs, while Google was a foreign company that didn't. While in the west, "to Google" means "to search for something online," the verb in China is "to Baidu." Google has a couple of aces up its sleeve, however, in that China Mobile (941.HK) is introducing cellphones that use the Android operating system, and Google has a partnership with music labels to offer legal free downloads of songs.
Fair Value: SP500 – 1063.71; NDX: 1723.85; DOW: 9758.10
Technical Levels:
SPX: 875-880, 910, 953, 986 support/ 1044, 1110 resistance
Events:
Pre-market EPS: LEN (-.51/772.9M)
08:30: AMGN presents at UBS Healthcare conference
09:30: GILD presents at UBS Healthcare conference
09:30: HGSI presents at UBS Healthcare conference
10:00: US Leading Indicators (August): 0.7%
10:00: AMAT Investor Meeting
11:00: LEN earnings call
13:00: Treasury Auctions 29 billion in 3 month bills and 29 billion in 6 month bills
13:00: NKE Annual General Meeting
14:00: ISRG presents at UBS Healthcare Conference
15:00: BCRX presents at UBS Healthcare Conference
15:30: VVUS presents at UBS Healthcare Conference
17:30: New York Fed’s Cummings speaks on economic recovery
Foreign Market Summary/Key Macro News/Commentary:
The S&P futures are trading 9 points below fair value and the NASDAQ futures are trading 12 points below fair value. European markets are down 0.8% to 1.25%, with the basic resource sector bearing the brunt, as gold dropped below $1,000/oz and copper fell to a one-week low. Profit takers step in as fears equity moves have been overdone are tempered by the threat of increased share issuance, with weekend press talk of an impending RBS placement. Comments from President Obama ahead of G20 meeting Thurs/Fri highlighted his expectations that “the jobs picture is not going to improve considerably,” possibly getting “a little bit worse.” The US dollar rose to a one week high against the yen, and gained against the €uro, on speculation that the Fed will begin preparing the market for the end of quantitative easing. The two-day FOMC meeting starts tomorrow. Asian markets closed lower (Hong Kong down 0.70%, Australia down 0.34%, Shanghai up 0.28%, South Korea down 0.32%). Japan and India were closed for holidays.
Research Calls/Market Moving News:
PER (17.91): Dell (DELL) to purchase Perot Systems (PER) for $30/share cash: Dell and Perot Systems have entered a definitive agreement for Dell to acquire Perot Systems in a transaction valued at approximately $3.9B. Terms of the agreement were approved yesterday by the boards of directors of both companies. Over the past four quarters Dell and Perot Systems had a combined $16B in enterprise-hardware and IT-services revenue, with about $8B from enhanced services and support. Under the terms of the agreement, Dell will commence a tender offer to acquire all of the outstanding Class A common stock of Perot Systems for $30 per share in cash. The transaction is not subject to a financing condition. The transaction, which is subject to customary government approvals and the satisfaction of other customary conditions, is expected to close in Dell’s November-January fiscal quarter. Once the acquisition is complete, Perot Systems will become Dell’s services unit and be led from Plano by Peter Altabef, the current Perot Systems CEO. At the same time, Dell directors are expected to consider Ross Perot Jr., Perot Systems’ chairman of the board, for appointment to the Dell board. Based on current estimates, the transaction is expected to be accretive to Dell’s GAAP earnings in its fiscal 2012. Company will hold an analysts call with Dell and Perot Systems executives at 8:30ET at www.dell.com/investor
POT (97.14): Potash guides f09 EPS to $3.25-3.75 vs prior $4.00-5.00 and Reuters $4.06: Potash inventories that can be measured in the retail chain - this excludes less easily identified inventories in China - have been largely eliminated and potash levels in soils around the world have been significantly reduced. This creates a progressively higher risk to crop yields as soil fertility is continually diminished. While the immediate impact has been masked by good weather and residual soil nutrient levels in markets with healthy long-term fertilization and agronomic practices, such as the US and Australia, yields for key crops in several other major growing regions are expected to be substantially below 2008 levels. A significant rebound is required to address this situation and POT expects 2010 global potash demand to be in the range of 50-55M tonnes.
BCRX (10.02): BioCryst Pharmaceuticals, Inc. today announced that it has received a request for proposal (RFP) from the U.S. Department of Health & Human Services (HHS) for the supply of intravenous (i.v) peramivir for the treatment of critically ill influenza patients under Emergency Use Authorization (EUA). The RFP indicates that the minimum and maximum order quantities to be ordered by the government are 1,000 and 40,000 courses of anti-viral treatment. The RFP specifies that BioCryst would also be required to maintain the ability to manufacture additional treatment courses dependent on the volume and size of anti-viral orders received from HHS for additional needs for either treatment or prophylaxis. The current RFP process may or may not result in a government order for peramivir and does not guarantee issuance of an EUA.
VVUS (10.94): Vivus still plans to present at UBS Global Life Sciences Conference today at 15:30 ET, we're told: Though the company is still expected to present at the conference, our sources have indicated that VVUS has cancelled 1-on-1 meetings and the breakout session. The reason for those cancellations is unclear.
ARNA (5.18): Arena Pharmaceuticals downgraded to market perform from outperform at Leerink Swann
BK (30.30): Bank of New York Mellon (BK) downgraded to neutral from buy at Goldman Sachs: Trust Bank sector is downgraded to neutral from attractive. The firm is positive on Northern Trust (NTRS), given its equity market leverage. The rating is buy; target $68.
MA (223.57); V (73.79): Transaction Processing sector downgraded to neutral from attractive at Goldman Sachs: The firm cites limited upside. Buy-rated stocks remain V, MA and WU. Note TSS was removed from the Conviction Sell List, as previously reported.
EMC (17.00): EMC downgraded to neutral from overweight at Piper Jaffray: The firm cites valuation and relatively high exposure to the European market for the downgrade of the shares.
WFC (28.49); RF (6.13); MI (8.10); CMA (30.65): Bernstein upgrades MI, RF, WFC; downgrades CMA: Upgrade: Marshall & Ilsley (MI) upgraded to outperform from market perform. Regions Financial (RF) upgraded to outperform from market perform. Wells Fargo (WFC) upgraded to outperform from market perform. Downgrade: Comerica (CMA) downgraded to market perform from outperform.
COST (47.55): Costco upgraded to outperform from market perform at William Blair - wires
POT (97.14); MOS (54.25): Soleil Securities downgrades MOS, POT: Mosaic (MOS) downgraded to hold from buy; target cut to $56 from $65. Potash (POT) downgraded to hold from buy; target cut to $88 from $105
New financial rules to be discussed at G20 summit in Pittsburgh will surely put the hurt on banks – WSJ: The plan is intended to make risk-taking by banks that are too big to fail so painful that they won't be inclined to take them. Such banks, as well as banks that engage in a lot of short-term borrowing or invest in hard-to-sell assets will need to keep larger capital cushions. Without details on things like exactly how much larger these capital cushions will need to be, their exact effect on banks' profits isn't known. But using some guesses, an analysis suggests profits could be reduced by 30% at large banks, or more at the largest ones.
BAC (17.63): Bank of America directors to be briefed today on options should CEO Kenneth Lewis be charged with fraud – WSJ: A person familiar with the situation says the board backs Lewis and has not been surprised by any of the allegations leveled by New York Attorney General Andrew Cuomo, but the board has confirmed a just-in-case new succession plan. Sources say options include either choosing from internal candidates or bringing in an outsider
GOOG (491.46): LA Times looks at challenges facing Google in China: While Google's ongoing struggles with the Chinese government are well documented, a growing band of critics say the company's biggest problem is that China requires it to play a game it has never played before and market itself. While the company has largely grown by word of mouth elsewhere, most Chinese people can't even pronounce Google's name, which has undergone several iterations in the country as a result. Baidu (BIDU) ran an effective ad a few years ago sending the message to the Chinese net populace that it spoke their language and understood their needs, while Google was a foreign company that didn't. While in the west, "to Google" means "to search for something online," the verb in China is "to Baidu." Google has a couple of aces up its sleeve, however, in that China Mobile (941.HK) is introducing cellphones that use the Android operating system, and Google has a partnership with music labels to offer legal free downloads of songs.
Wednesday, September 16, 2009
September 16, 2009: Morning Call
September 16, 2009: Morning Call
Fair Value: SP500 – 1047.92; NDX: 1698.15; DOW: 9621.08
Technical Levels:
SPX: 875-880, 910, 953, 986 support/ 1044, 1110 resistance
Events:
Pre-market EPS: ZLC (-.72/363.4M)
05:00: Euro-zone CPI (August): 0.3% MoM; -0.2% YoY
07:00: Bloomberg Global Confidence Index
07:30: WFC presents at Barclay’s Financial Services Conference
08:15: DE presents at JP Morgan Diversified Industries Conference
08:30: US CPI (August): 0.3% MoM; Ex-Food/Energy: 0.1% MoM
08:30: US CPI (August): -1.7% MoM; Ex-Food/Energy: 1.4% YoY
08:30: US Current Account Balance (Q2): -91.0B
09:00: Net Long-term TIC Flows (July): estimate not available yet
09:15: US Industrial Production (August): 0.7%; Capacity Utilization: 69.1%
10:30: DOE Crude Oil and Gasoline Inventories
11:00: CMCSA presents at Goldman Sachs Communacopia Conference
12:00: V presents at Barclay’s Financial Services Conference
12:15: MTW presents at JP Morgan Diversified Industries Conference
13:00: NAHB Housing Market Index (September): 19
14:15: COF presents at Barclay’s Financial Services Conference
15:25: LH presents at Bank of America Healthcare Conference
17:00: ORCL earnings call
Post-market EPS: APOG (.24/187.0M); CKR (.21/340.8M); DBRN (.37/400.7M); ORCL (.30/5.2B)
Foreign Market Summary/Key Macro News/Commentary:
The S&P and NASDAQ futures are trading 3 points above fair value at 7:45am ET. Asian markets closed higher excluding Shanghai (Japan up 0.52%, Hong Kong up 2.57%, Australia up 2.42%, Shanghai down 1.34%, South Korea up 2.1%, India up 1.35%). News Corp (NWS.AU) rose on reports it would start charging for access to WSJ stories on mobile devices. Exporters and banks gained in South Korea. Gainers led losers in Taiwan almost 3-to-1. A halt in the yen’s rise vs. the US dollar helped exporters in Japan, but the market turned down late in the day when the incoming financial services minister said he would consider allowing small companies to postpone repaying bank loans for three years. Financials and steelmakers made China miss out on the region’s gains, dropping on overcapacity concerns. European markets are up 1.0% to 1.4% near the highs of the session. Basic materials and financials are leading the rally while healthcare and technology are lagging. SAP is trading down 1.0% in Germany.
Research Calls/Market Moving News:
AAPL (175.16): Cramer says he is raising his price target on Apple (AAPL) to $264 from $200, noting that if FASB rule changes allow the company to recognize revenue from some of its products immediately rather than over a 24-month period (as is now the case), earnings will surge from an estimated $9 a share in 2011 to $12 a share. Cramer says that the potential change, which is now being considered by FASB, is not reflected in consensus estimates. (Note: I am bullish on AAPL shares but am trying to take some off at the 178-179 level. I find it remarkable that Jim Cramer is once again moving stocks - especially large cap stocks - given that he bankrupted tens of thousands of his "viewers" in 2008.)
AAPL (175.16): Apple reiterated overweight at Barclays Capital: The firm says AAPL remains top pick due to its pipeline and the FCF outlook
LH (68.43): Laboratory Corp downgraded to neutral from outperform at Credit Suisse – Bloomberg: Target is $71. Credit Suisse removes LH from the US Focus List.
Warren Buffett sees some stability in housing prices, notably in mid-low price range activity – CNBC: The comment was made in response to a question during an interview
ADBE (35.62): Adobe (ADBE) to acquire Omniture (OMTR) for $21.50/sh in cash, Adobe Systems reports Q3 non-GAAP EPS $0.35 vs. Reuters $0.34, guides Q4 non-GAAP EPS to $0.33-0.39 vs. Reuters $0.39.
ADBE (35.62): Adobe Systems downgraded to hold from buy at Jefferies: The firm cites valuation, embedded CS expectations, and additional potential risk due to the OMTR acquisition. Jefferies says that the deal, while accretive, won't produce much synergy near term
WFC (28.58): Wells Fargo CEO says Fannie Mae (FNM) and Freddie Mac (FRE) should increase the size of the mortgages they buy – FT: The FT cites an interview with Wells Fargo CEO John Stumpf, who says that the government should allow Fannie and Freddie to increase the size of the mortgages that they buy. Stumpf believes that such a move would help reduce interest rates on jumbo mortgages and revive the market for higher-end housing that has been devastated by the credit crunch. Recall that Fannie and Freddie can currently buy or guarantee mortgages worth up to $417,000. The stimulus plan last year allowed the companies to raise their limits to $729,750 in certain high-cost areas until the end of 2009. Any extension of the higher limits will have to be approved Congress. The article goes on to highlight the paralysis in the securitization market, particularly for jumbo mortgages, which according to Bankrate.com are as much as 200 bp over conforming mortgage rates.
WFC (28.58): Wells Fargo says Wachovia deposit retention is better than forecast – Bloomberg: Regarding the Wachovia purchase, WFC says merger costs are lower than predicted. WFC expects non-performing assets to increase from the $18.3B reported in Q2. WFC expects consumer loan losses for the next 12 months. Other comments attributable to the wire, regarding the repayment of TARP and losses from the Wachovia acquisition are similar to those reported in interviews by the WSJ and FT.
C (4.12): More disclosure from management could help Citi shares – WSJ: In a "Heard on the Street" column, the Journal notes that when it comes to shares of Citi, investors may be too focused on how fast the government will sell down its 34% stake in the bank. The paper adds that a bigger question for Citi is whether to pay off the government's $27B of trust-preferred securities, which cost around $2B a year to service. In addition, the article notes that investors should be asking why the bank's management is not highlighting a more positive message: That it does not need to further dilute investors and believes it has the medium-term profitability to pay off the government trust preferreds with capital generated internally. The Journal, which highlights Citi's attractive relative valuation on a TCE per share basis, goes on to note note that management needs to explain more clearly where it expects the bank to generate its profits and focus its resources in the future.
AMZN (83.55): Amazon.com upgraded to buy from neutral at Bank of America Merrill Lynch: Price objective increased to $103 from $95
Fair Value: SP500 – 1047.92; NDX: 1698.15; DOW: 9621.08
Technical Levels:
SPX: 875-880, 910, 953, 986 support/ 1044, 1110 resistance
Events:
Pre-market EPS: ZLC (-.72/363.4M)
05:00: Euro-zone CPI (August): 0.3% MoM; -0.2% YoY
07:00: Bloomberg Global Confidence Index
07:30: WFC presents at Barclay’s Financial Services Conference
08:15: DE presents at JP Morgan Diversified Industries Conference
08:30: US CPI (August): 0.3% MoM; Ex-Food/Energy: 0.1% MoM
08:30: US CPI (August): -1.7% MoM; Ex-Food/Energy: 1.4% YoY
08:30: US Current Account Balance (Q2): -91.0B
09:00: Net Long-term TIC Flows (July): estimate not available yet
09:15: US Industrial Production (August): 0.7%; Capacity Utilization: 69.1%
10:30: DOE Crude Oil and Gasoline Inventories
11:00: CMCSA presents at Goldman Sachs Communacopia Conference
12:00: V presents at Barclay’s Financial Services Conference
12:15: MTW presents at JP Morgan Diversified Industries Conference
13:00: NAHB Housing Market Index (September): 19
14:15: COF presents at Barclay’s Financial Services Conference
15:25: LH presents at Bank of America Healthcare Conference
17:00: ORCL earnings call
Post-market EPS: APOG (.24/187.0M); CKR (.21/340.8M); DBRN (.37/400.7M); ORCL (.30/5.2B)
Foreign Market Summary/Key Macro News/Commentary:
The S&P and NASDAQ futures are trading 3 points above fair value at 7:45am ET. Asian markets closed higher excluding Shanghai (Japan up 0.52%, Hong Kong up 2.57%, Australia up 2.42%, Shanghai down 1.34%, South Korea up 2.1%, India up 1.35%). News Corp (NWS.AU) rose on reports it would start charging for access to WSJ stories on mobile devices. Exporters and banks gained in South Korea. Gainers led losers in Taiwan almost 3-to-1. A halt in the yen’s rise vs. the US dollar helped exporters in Japan, but the market turned down late in the day when the incoming financial services minister said he would consider allowing small companies to postpone repaying bank loans for three years. Financials and steelmakers made China miss out on the region’s gains, dropping on overcapacity concerns. European markets are up 1.0% to 1.4% near the highs of the session. Basic materials and financials are leading the rally while healthcare and technology are lagging. SAP is trading down 1.0% in Germany.
Research Calls/Market Moving News:
AAPL (175.16): Cramer says he is raising his price target on Apple (AAPL) to $264 from $200, noting that if FASB rule changes allow the company to recognize revenue from some of its products immediately rather than over a 24-month period (as is now the case), earnings will surge from an estimated $9 a share in 2011 to $12 a share. Cramer says that the potential change, which is now being considered by FASB, is not reflected in consensus estimates. (Note: I am bullish on AAPL shares but am trying to take some off at the 178-179 level. I find it remarkable that Jim Cramer is once again moving stocks - especially large cap stocks - given that he bankrupted tens of thousands of his "viewers" in 2008.)
AAPL (175.16): Apple reiterated overweight at Barclays Capital: The firm says AAPL remains top pick due to its pipeline and the FCF outlook
LH (68.43): Laboratory Corp downgraded to neutral from outperform at Credit Suisse – Bloomberg: Target is $71. Credit Suisse removes LH from the US Focus List.
Warren Buffett sees some stability in housing prices, notably in mid-low price range activity – CNBC: The comment was made in response to a question during an interview
ADBE (35.62): Adobe (ADBE) to acquire Omniture (OMTR) for $21.50/sh in cash, Adobe Systems reports Q3 non-GAAP EPS $0.35 vs. Reuters $0.34, guides Q4 non-GAAP EPS to $0.33-0.39 vs. Reuters $0.39.
ADBE (35.62): Adobe Systems downgraded to hold from buy at Jefferies: The firm cites valuation, embedded CS expectations, and additional potential risk due to the OMTR acquisition. Jefferies says that the deal, while accretive, won't produce much synergy near term
WFC (28.58): Wells Fargo CEO says Fannie Mae (FNM) and Freddie Mac (FRE) should increase the size of the mortgages they buy – FT: The FT cites an interview with Wells Fargo CEO John Stumpf, who says that the government should allow Fannie and Freddie to increase the size of the mortgages that they buy. Stumpf believes that such a move would help reduce interest rates on jumbo mortgages and revive the market for higher-end housing that has been devastated by the credit crunch. Recall that Fannie and Freddie can currently buy or guarantee mortgages worth up to $417,000. The stimulus plan last year allowed the companies to raise their limits to $729,750 in certain high-cost areas until the end of 2009. Any extension of the higher limits will have to be approved Congress. The article goes on to highlight the paralysis in the securitization market, particularly for jumbo mortgages, which according to Bankrate.com are as much as 200 bp over conforming mortgage rates.
WFC (28.58): Wells Fargo says Wachovia deposit retention is better than forecast – Bloomberg: Regarding the Wachovia purchase, WFC says merger costs are lower than predicted. WFC expects non-performing assets to increase from the $18.3B reported in Q2. WFC expects consumer loan losses for the next 12 months. Other comments attributable to the wire, regarding the repayment of TARP and losses from the Wachovia acquisition are similar to those reported in interviews by the WSJ and FT.
C (4.12): More disclosure from management could help Citi shares – WSJ: In a "Heard on the Street" column, the Journal notes that when it comes to shares of Citi, investors may be too focused on how fast the government will sell down its 34% stake in the bank. The paper adds that a bigger question for Citi is whether to pay off the government's $27B of trust-preferred securities, which cost around $2B a year to service. In addition, the article notes that investors should be asking why the bank's management is not highlighting a more positive message: That it does not need to further dilute investors and believes it has the medium-term profitability to pay off the government trust preferreds with capital generated internally. The Journal, which highlights Citi's attractive relative valuation on a TCE per share basis, goes on to note note that management needs to explain more clearly where it expects the bank to generate its profits and focus its resources in the future.
AMZN (83.55): Amazon.com upgraded to buy from neutral at Bank of America Merrill Lynch: Price objective increased to $103 from $95
Monday, September 14, 2009
September 14, 2009: Morning Call
September 14, 2009: Morning Call
Fair Value: SP500 – 1038.09; NDX: 1684.25; DOW: 9544
Technical Levels:
SPX: 875-880, 910, 953, 986 support/ 1044, 1110 resistance
Events:
05:00: Euro-zone Industrial Production (July): -0.4% MoM; -16.9% YoY
12:00: President Obama speech to Wall Street executives about financial regulation
12:30: Fed’s Lacker speaks on financial regulation
12:45: SPWRA presents at Deutsche Bank Technology Conference
13:55: CSIQ presents at Deutsche Bank Technology Conference
15:50: Fed’s Yellen speaks on economic outlook
Foreign Market Summary/Key Macro News/Commentary:
The S&P futures are trading 10 points below fair value and the NASDAQ futures are trading 15 points below fair value at 7:30am ET. Asian markets closed lower except for Shanghai, which rallied 1.2% (Japan down 2.32%, Hong Kong down 1.08%, Australia down 1.4%, South Korea down 1.0%, India down 0.31%). European markets are down 0.73% to 1.2% despite a better than expected Euro-zone Industrial production number (-15.9% YoY vs. –16.7% expected). Energy and mining co’s weaker, mirroring falls in their underlying commodities, with industrial metals under pressure as stockpiles grow, and speculation a possible dispute between the US and China on trade could escalate. Gold has pulled back 8 bucks, falling below 1000 as the dollar rebounds. Classic defensive sectors outperform with media, h/care, telco, food & bev all fairing better.
Research Calls/Market Moving News:
China starts "anti-dumping and anti-subsidy" probe into imports of some US car products and chicken meat – wires: The Ministry of Commerce announced the examination, which appears to be retaliatory against the US's decision to impose a 35% tariff on Chinese-made tires.
FSLR (136.75): Soleil Securities downgrades FSLR to sell from hold: * We are reducing our rating on First Solar from Hold to Sell; price target being reduced from $170 to $96 (17X our 2010 estimate of $5.65 per share - current consensus estimate is $7.40 per share). * We believe the environment in which First Solar massively beats expectations each (and every) quarter has come to an end. 1) Industry capacity is now too large (approaching 20 GW in mid-2010) for government subsidy programs to lead to supply shortages and higher prices; 2) Module pricing is now under intense downward pressure for all producers due to massive industry over-capacity; 3) First Solar has completed its capacity build-out and will no longer be starting up significant amounts of capacity each quarter helping to beat expectations.
S (3.77): Deutsche Telecom considering bid for Sprint Nextel reports the London Telegraph: The paper says the company has called in bankers and could submit a bid for Sprint within the next few weeks. The CEO of DT had promised to fix T-Mobile UK and T-Mobile US, with the deal for T-Mobile UK arranged, he is believed to be focusing on the U.S. unit. A combined company of T-Mobile U.S. and Sprint would challenge AT&T for the second place spot among wireless carriers in the U.S
BIDU (369.95): Baidu 6-month target increased to $455 from $376 at Goldman Sachs: The firm expects coverage ratios can improve and raises estimates. BIDU remains on Goldman's Conviction Buy List.
POT (89.80); MOS (52.26): Citi downgrades MOS, POT: Mosaic (MOS) downgraded to hold from buy. Potash (POT) downgraded to hold from buy Following checks, firm expects fall potash applications to be likely weaker. Citi adds that the Chinese contract delay creates price risk.
Stiglitz Says Bank Problems Bigger Than Pre-Lehman: Joseph Stiglitz, the Nobel Prize-winning economist, said the U.S. has failed to fix the underlying problems of its banking system after the credit crunch and the collapse of Lehman Brothers Holdings Inc. “In the U.S. and many other countries, the too-big-to-fail banks have become even bigger,” Stiglitz said in an interview yesterday in Paris. “The problems are worse than they were in 2007 before the crisis.” Stiglitz’s views echo those of former Federal Reserve Chairman Paul Volcker, who has advised President Barack Obama’s administration to curtail the size of banks, and Bank of Israel Governor Stanley Fischer, who suggested last month that governments may want to discourage financial institutions from growing “excessively.”
YHOO (15.59): Yahoo! sells 57.5M Alibaba (1688.HK) shares for HK$19.80-20.30 ($2.54-2.60) each – Reuters: The wire cites a term sheet
Barron's Cover says the ad market looks to be bottoming but not for traditional media: Advertising dollars are starting to be spent once more but not on traditional media, they are going to cable TV and movie media. Notes the various indications from many of the large advertisers of a change in outlook or spending plans and the improving outlook from several advertising firms. However, things are not yet positive and some observers do not see any meaningful growth in total advertising until 2011. Investors should not confuse good year over year numbers with a strong rebound. In the environment of a shift into alternative forms of advertising, the winners will be companies like CRM, DISCA, CVC, TWX, VIA, DIS and GOOG. The Internet now holds a greater sway over advertising budgets than radio, and is on a path to overtake magazines this year. Highlights the show Mad Men where there was a sponsor for the first show of the new season, free iTunes downloads of the show at a retailer, a website, an iPhone application and a Facebook page. Annual ad revenues for cable should climb 7.1% on average through 2013 according to one analyst. 'Out of home media' (billboards, elevators, media video screens, etc.) could see growth of 4.9% annually while pure Internet could climb 10.6% a year. Broadcast television is expected to fall 2% a year, radio to drop by 3.6% and newspapers to fall 8.9%.
Moving out of business more difficult than US government imagined - NYTIn his speech from Wall Street today, President Obama will argue that government intrusions on business will be temporary, and yet he will finesse an argument that the financial system requires increased government oversight to protect consumers and prevent a repeat of the financial crisis. A senior official says that no government figure has pulled rank on American International Group (AIG) CEO Robert Benmosche, despite his abrasive comments, and the auto task force has not returned, making oversight of General Motors (MTLQQ) and Chrysler next-to-non-existent. But the government's ownership stakes will probably remain for years. Support programs for banks have largely been successfully downsized, but the government is propping up the entire mortgage market, and therefore, housing industry. Nobody knows how the government can step away from its role without upsetting the industry. And in any case, the moral hazard created by the government's having been willing to step in this time will remain for the foreseeable future.
Barron's summary (source: StreetAccount):
· Cover: The ad market looks to be bottoming but not for traditional media.
· Interview: David Rosenberg, chief economist and strategist at Gluskin Sheff & Associates.
· Lead Articles:
o Electric utilities are stable companies with cheap stocks and fat dividends.
o The longest serving member of the FOMC thinks the 'too big to fail' policy must be ended.
o Cablevision (CVC) divestments should unlock value.
o Positive on Nalco Holding (NLC) saying bulls see the stock in the $20s within a year.
o Other Voices argues that the TSA has spent too much money and has not made us safer.
o Editorial says President Obama's speech championed implausible health care reform principles.
· Columns:
o The Trader is negative on Winnebago Industries (WGO).
o Asia Trader is positive on BYD (1211.HK), one of Berkshire Hathaway's investments.
o Euro Trader says Barclays (BARC.LN) still has room to run.
o Current Yield says credit seems available to all except consumers.
o Commodities Corner says the outlook for wheat prices is weak even with a possible drought in Australia.
o The Striking Price notes the ebbing VIX and suggests out of the money calls and protective puts, an upside / downside strategy.
o Preview points to the ING Direct report predicting a bad holiday shopping season.
· Follow Up is cautious on Starbucks (SBUX) and positive on Consol Energy (CNX)
o Up and Down Wall Street questions what lies behind the market's strength.
o Streetwise is negative on Realty Income (O) pointing to speculation that many of its larger tenants have big debt and / or a tough operating environment which could place stress on the dividend.
o D.C. Current says accountants have yet to share in the blame for their part in the financial troubles.
o Economic Beat notes the upbeat tone of the Blue Chip Economic Indicators forecast based on a polling of 50 economists.
o Technology Trader says the new products released last week from Palm (PALM), Apple (AAPL) and Motorola (MOT) were all disappointing in some manner.
o Plugged In says Motorola (MOT) is back on the right track, though far from back.
Fair Value: SP500 – 1038.09; NDX: 1684.25; DOW: 9544
Technical Levels:
SPX: 875-880, 910, 953, 986 support/ 1044, 1110 resistance
Events:
05:00: Euro-zone Industrial Production (July): -0.4% MoM; -16.9% YoY
12:00: President Obama speech to Wall Street executives about financial regulation
12:30: Fed’s Lacker speaks on financial regulation
12:45: SPWRA presents at Deutsche Bank Technology Conference
13:55: CSIQ presents at Deutsche Bank Technology Conference
15:50: Fed’s Yellen speaks on economic outlook
Foreign Market Summary/Key Macro News/Commentary:
The S&P futures are trading 10 points below fair value and the NASDAQ futures are trading 15 points below fair value at 7:30am ET. Asian markets closed lower except for Shanghai, which rallied 1.2% (Japan down 2.32%, Hong Kong down 1.08%, Australia down 1.4%, South Korea down 1.0%, India down 0.31%). European markets are down 0.73% to 1.2% despite a better than expected Euro-zone Industrial production number (-15.9% YoY vs. –16.7% expected). Energy and mining co’s weaker, mirroring falls in their underlying commodities, with industrial metals under pressure as stockpiles grow, and speculation a possible dispute between the US and China on trade could escalate. Gold has pulled back 8 bucks, falling below 1000 as the dollar rebounds. Classic defensive sectors outperform with media, h/care, telco, food & bev all fairing better.
Research Calls/Market Moving News:
China starts "anti-dumping and anti-subsidy" probe into imports of some US car products and chicken meat – wires: The Ministry of Commerce announced the examination, which appears to be retaliatory against the US's decision to impose a 35% tariff on Chinese-made tires.
FSLR (136.75): Soleil Securities downgrades FSLR to sell from hold: * We are reducing our rating on First Solar from Hold to Sell; price target being reduced from $170 to $96 (17X our 2010 estimate of $5.65 per share - current consensus estimate is $7.40 per share). * We believe the environment in which First Solar massively beats expectations each (and every) quarter has come to an end. 1) Industry capacity is now too large (approaching 20 GW in mid-2010) for government subsidy programs to lead to supply shortages and higher prices; 2) Module pricing is now under intense downward pressure for all producers due to massive industry over-capacity; 3) First Solar has completed its capacity build-out and will no longer be starting up significant amounts of capacity each quarter helping to beat expectations.
S (3.77): Deutsche Telecom considering bid for Sprint Nextel reports the London Telegraph: The paper says the company has called in bankers and could submit a bid for Sprint within the next few weeks. The CEO of DT had promised to fix T-Mobile UK and T-Mobile US, with the deal for T-Mobile UK arranged, he is believed to be focusing on the U.S. unit. A combined company of T-Mobile U.S. and Sprint would challenge AT&T for the second place spot among wireless carriers in the U.S
BIDU (369.95): Baidu 6-month target increased to $455 from $376 at Goldman Sachs: The firm expects coverage ratios can improve and raises estimates. BIDU remains on Goldman's Conviction Buy List.
POT (89.80); MOS (52.26): Citi downgrades MOS, POT: Mosaic (MOS) downgraded to hold from buy. Potash (POT) downgraded to hold from buy Following checks, firm expects fall potash applications to be likely weaker. Citi adds that the Chinese contract delay creates price risk.
Stiglitz Says Bank Problems Bigger Than Pre-Lehman: Joseph Stiglitz, the Nobel Prize-winning economist, said the U.S. has failed to fix the underlying problems of its banking system after the credit crunch and the collapse of Lehman Brothers Holdings Inc. “In the U.S. and many other countries, the too-big-to-fail banks have become even bigger,” Stiglitz said in an interview yesterday in Paris. “The problems are worse than they were in 2007 before the crisis.” Stiglitz’s views echo those of former Federal Reserve Chairman Paul Volcker, who has advised President Barack Obama’s administration to curtail the size of banks, and Bank of Israel Governor Stanley Fischer, who suggested last month that governments may want to discourage financial institutions from growing “excessively.”
YHOO (15.59): Yahoo! sells 57.5M Alibaba (1688.HK) shares for HK$19.80-20.30 ($2.54-2.60) each – Reuters: The wire cites a term sheet
Barron's Cover says the ad market looks to be bottoming but not for traditional media: Advertising dollars are starting to be spent once more but not on traditional media, they are going to cable TV and movie media. Notes the various indications from many of the large advertisers of a change in outlook or spending plans and the improving outlook from several advertising firms. However, things are not yet positive and some observers do not see any meaningful growth in total advertising until 2011. Investors should not confuse good year over year numbers with a strong rebound. In the environment of a shift into alternative forms of advertising, the winners will be companies like CRM, DISCA, CVC, TWX, VIA, DIS and GOOG. The Internet now holds a greater sway over advertising budgets than radio, and is on a path to overtake magazines this year. Highlights the show Mad Men where there was a sponsor for the first show of the new season, free iTunes downloads of the show at a retailer, a website, an iPhone application and a Facebook page. Annual ad revenues for cable should climb 7.1% on average through 2013 according to one analyst. 'Out of home media' (billboards, elevators, media video screens, etc.) could see growth of 4.9% annually while pure Internet could climb 10.6% a year. Broadcast television is expected to fall 2% a year, radio to drop by 3.6% and newspapers to fall 8.9%.
Moving out of business more difficult than US government imagined - NYTIn his speech from Wall Street today, President Obama will argue that government intrusions on business will be temporary, and yet he will finesse an argument that the financial system requires increased government oversight to protect consumers and prevent a repeat of the financial crisis. A senior official says that no government figure has pulled rank on American International Group (AIG) CEO Robert Benmosche, despite his abrasive comments, and the auto task force has not returned, making oversight of General Motors (MTLQQ) and Chrysler next-to-non-existent. But the government's ownership stakes will probably remain for years. Support programs for banks have largely been successfully downsized, but the government is propping up the entire mortgage market, and therefore, housing industry. Nobody knows how the government can step away from its role without upsetting the industry. And in any case, the moral hazard created by the government's having been willing to step in this time will remain for the foreseeable future.
Barron's summary (source: StreetAccount):
· Cover: The ad market looks to be bottoming but not for traditional media.
· Interview: David Rosenberg, chief economist and strategist at Gluskin Sheff & Associates.
· Lead Articles:
o Electric utilities are stable companies with cheap stocks and fat dividends.
o The longest serving member of the FOMC thinks the 'too big to fail' policy must be ended.
o Cablevision (CVC) divestments should unlock value.
o Positive on Nalco Holding (NLC) saying bulls see the stock in the $20s within a year.
o Other Voices argues that the TSA has spent too much money and has not made us safer.
o Editorial says President Obama's speech championed implausible health care reform principles.
· Columns:
o The Trader is negative on Winnebago Industries (WGO).
o Asia Trader is positive on BYD (1211.HK), one of Berkshire Hathaway's investments.
o Euro Trader says Barclays (BARC.LN) still has room to run.
o Current Yield says credit seems available to all except consumers.
o Commodities Corner says the outlook for wheat prices is weak even with a possible drought in Australia.
o The Striking Price notes the ebbing VIX and suggests out of the money calls and protective puts, an upside / downside strategy.
o Preview points to the ING Direct report predicting a bad holiday shopping season.
· Follow Up is cautious on Starbucks (SBUX) and positive on Consol Energy (CNX)
o Up and Down Wall Street questions what lies behind the market's strength.
o Streetwise is negative on Realty Income (O) pointing to speculation that many of its larger tenants have big debt and / or a tough operating environment which could place stress on the dividend.
o D.C. Current says accountants have yet to share in the blame for their part in the financial troubles.
o Economic Beat notes the upbeat tone of the Blue Chip Economic Indicators forecast based on a polling of 50 economists.
o Technology Trader says the new products released last week from Palm (PALM), Apple (AAPL) and Motorola (MOT) were all disappointing in some manner.
o Plugged In says Motorola (MOT) is back on the right track, though far from back.
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