Thursday, April 17, 2008

Thursday Watch

Late-Night Headlines
- Greg Salvaggio, vice president of capital markets at Tempus Consulting, says the US dollar is near a “bottom.” (video)

- Mark Mobius, executive chairman of Templeton Asset Management, said the global credit-market crisis that has caused billions of dollars in losses at banks and brokerages worldwide is “near the end.” “Most of the bad news is already in the market,” the 71-year-old fund manager, who overseas $47 billion in equities, said.
- LG Electronics, the best-performing stock among the world’s major mobile-phone makers, rose the most in almost three weeks in Seoul trading as record handset sales led to earnings that beat analysts’ estimates.

- Brazil’s central bank raised its benchmark interest rate more than expected to 11.75%, the first increase in three years, as quickening economic growth threatens to stock inflation.
- IBM(IBM) posted first-quarter profit that topped analysts’ estimates and said earnings this year will exceed its previous goals, pushing the stock up 2.4% in extended trading.
- General Electric(GE), less than a week after reporting an unexpected 12% drop in profit, sold $8.5 billion of bonds in the largest US corporate offering since 2002.
- JPMorgan(JPM), hours after saying the credit-market crisis is almost over, made plans to raise $6 billion in its biggest offering of perpetual preferred stock.

Wall Street Journal:
- Technology companies from eBay Inc.(EBAY) to EMC Corp.(EMC) are embracing cash more than ever amid fears of an economic downturn.
- Freddie Mac may announce an agreement tomorrow with Wells Fargo(WFC), JPMorgan(JPM) and Citigroup(C), citing Freddie officials.
- Democrats Meet in Feisty Debate. Clinton Attempts to Stir New Doubts About Obama.
- Hedge Fund Favorites: Corning(GLW).

NY Times:
- More Steps Urged on Interest Rates in China. Despite repeated denials from government economists, a variety of Western economic studies have suggested that the Chinese government smoothes its economic data – exaggerating performance in weak quarters and understating growth in booms to present an image of stability.
- Despite Downturn, Financing Exists for Small Companies.
- Wilbur L. Ross Jr., the billionaire financier known for buying companies cheaply, has compile a shopping list of small struggling banks that might prove to be good investments.
- Apple’s(AAPL) OS Edge Is a Threat to Microsoft(MSFT). A recent upgrade to the Mac operating system moves Apple closer to challenging Microsoft for overall computing dominance, even in the corporate market.

Automotive News:
- American Axle & Manufacturing(AXL) and the United Auto Workers may reach a tentative contract agreement by this weekend. The UAW today called off a protest rally in downtown Detroit because of progress in the talks. The strike has idled or partially closed 27 of General Motors’(GM) North American plants.

- Gas Manipulation Probe Marks Shift in Regulation. The Federal Energy Regulatory Commission did something unprecedented for an agency that used to take its marching orders from Enron. Using authority given to it by Congress in the wake of Enron’s failure and related revelations of widespread abuses in energy trading, it initiated proceedings against the Amaranth Advisors hedge fund and ETP, a Dallas-based gas pipeline operator, based on staff findings that Amaranth and ETP had engaged in market manipulation.

- 4-way battle among e-mail rivals heats up as Gmail makes gains.
- Entertainment and sports heroes had only a so-so year in 2007 if you look at traditional yardsticks such as sales of tickets and discs. But their appeal as pop culture icons was stronger than ever, judging by sales of clothing, book bags, games, toys, food packaging and other goods emblazoned with licensed names and likenesses.

National Real Estate Investor:
- Does CMBX Reflect Industry Fundamentals? Industry participants allege that the activities of hedge fund speculators are causing spreads to widen to new highs as these speculators bet that industry fundamentals will deteriorate. However, recent spread tightening in the CMBX may serve to ease some industry concerns about the impact of the index on the CMBS sector. A lot of nonprofessional real estate buyers came into the market and started shorting the CMBX. As a result, the CMBX began to reflect this short interest – rather than the fundamentals of the commercial mortgages backing the bonds – and spreads on the CMBX tranches went up to “irrational levels,” according to Ed Adler, co-head of Citigroup’s US CMBS and real estate finance group. Dottie Cunningham, CEO of the Commercial Mortgage Securities Assoc., expressed concern that “in a volatile market, this mark-to-market process becomes a self-fulfilling prophecy, driving prices down based on index trading activity rather than asset fundamentals.” As some market participants rely on “a distorted value,” it perpetuates a cycle of “no issuance, erroneous spread widening and additional mark-to-market writedowns.” (very good article)

- Fear recedes as corporate profits reassure investors.
- IBM(IBM) sees “solid opportunities” for acquisitions: CFO.

Financial Times:
- Banking regulators moved to tighten the screw on the industry on Wednesday with rules aimed at preventing a repeat of the crisis that has rocked the financial system.
- Jack Welch, the former head of General Electric(GE), delivered a blunt rebuke to his handpicked successor on Wednesday, saying the failure of the conglomerate’s earnings to meet market expectations last week was a “screw up” that left Jeffrey Immelt with a “credibility issue”.

- Ebay(EBAY) beats expectations with 24% surge in revenues.

Daily Telegraph:
- American hedge fund billionaire John Paulson was his industry’s biggest earner in 2007 thanks to a bet against sub-prime mortgages that netted him $3.7 billion in personal profit. Number two on the list – 77-year-old George Soros also owes his $2.9 billion payday to his bets against the US sub-prime mortgage markets.

The Guardian:
- US recession? It’s hedge fund heaven.

China Daily:
- China will probably spend more on rural development and adopt tax policies designed to narrow the gap between rich and poor, citing Ding Xuedong, the country’s vice-minister of finance. China will increase support for charity and actively encourage “fair” social wealth distribution.
- Spokesman Liu Jianchao said a statement issued by CNN on Tuesday failed to apologize for Jack Cafferty’s remarks, which “maliciously attacked the Chinese people and seriously violated the professional ethics of journalism.” “CNN’s ulterior motive in targeting the Chinese government, continuing to mislead public opinion as well as deceiving the Chinese people will never succeed”, Liu said.

Late Buy/Sell Recommendations

- Reiterated Buy on (GILD), raised estimates and boosted target to $60.
- According to IDC’s preliminary report global PC units grew a healthy 14.6% yoy in 1Q08 modestly above our 14% estimate. This largely confirms our checks with Asian ODMs and motherboards mftrs back in early March that suggested normal seasonality in 1CQ.
- We are raising our 2008 global entertainment software industry(ex-hardware) growth estimates to +18% yoy(from +11% prior) and reiterating our positive stance on the entertainment software stocks.
- Reiterated Buy on (ALTR), raised estimates and boosted target to $25.
- Reiterated Buy on (IBM), raised target to $157.

Night Trading
Asian Indices are +.50% to +1.75% on average.
S&P 500 futures -.08%.
NASDAQ 100 futures +.11%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Pre-market Stock Quote/Chart
Before the Bell CNBC Video(bottom right)
Global Commentary
WSJ Intl Markets Performance
Commodity Movers
Top 25 Stories

Top 20 Business Stories
Today in IBD
In Play
Bond Ticker
Economic Preview/Calendar
Daily Stock Events
Rasmussen Business/Economy Polling
CNBC Guest Schedule

Earnings of Note
Company/EPS Estimate
- (MER)/-2.06
- (CAL)/-.91
- (PNC)/1.15
- (CMA)/.81
- (NUE)/1.32
- (PFE)/.66
- (MAR)/.33
- (AMTD)/.31
- (CHKP)/.41
- (PPG)/1.10
- (BAX)/.72
- (UTX)/1.00
- (SPWR)/.35
- (BK)/.73
- (KEY)/.36
- (GPC)/.75
- (IGT)/.34
- (HOG)/.77
- (RS)/1.38
- (GOOG)/4.52
- (SYK)/.69
- (COF)/1.44
- (AMD)/-.49
- (ISRG)/.98
- (MHK)/.91
- (SHW)/.60
- (LUV)/.00
- (SNDK)/.25
- (DOX)/.58

Upcoming Splits
- None of note

Economic Releases
8:30 am EST

- Initial Jobless Claims for this week are estimated to rise to 375K versus 357K the prior week.
- Continuing Claims are estimated to rise to 2950K versus 2940K prior.

10:00 am EST
- Leading Indicators for March are estimated to rise .1% versus a -.3% decline in February.
- The Philly Fed for April is estimated to rise to -15.0 versus -17.4 in March.

Other Potential Market Movers
- The Fed’s Lacker speaking, Fed’s Fisher speaking, Fed’s Kohn speaking, EIA weekly natural gas inventory data, (WMT) analyst field trip and Morgan Stanley Commodities & Shipping Conference could also impact trading today.

BOTTOM LINE: Asian indices are higher, boosted by technology and financial stocks in the region. I expect US equities to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.

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