Wednesday, May 07, 2008

Wednesday Watch

Late-Night Headlines
Bloomberg:
- Deutsche Bank AG CEO Josef Ackermann said the financial crisis stemming from the collapse of the US subprime market may be nearing an end.
- Federal Reserve Bank of Kansas City President Thomas Hoenig said today “serious” inflation pressures may compel the central bank to raise interest rates. “The current accommodation stance should be sufficient to cushion the economy from a deeper slowdown,” he said. “As the economy recovers and credit conditions improve, however, it will be necessary for the Federal Reserve to remove the policy accommodation in a timely manner,” Hoenig said.
- The Bush administration signaled it will veto foreclosure-prevention legislation being advanced by House Democrats that would offer states $15 billion in grants and loans to buy and refurbish abandoned homes. ``The principal beneficiaries of this type of plan would be private lenders -- who are now the owners of the vacant and foreclosed properties -- instead of struggling homeowners who are working hard to stay in their homes,'' the White House said in a statement released today in Washington. House Democrats plan to advance the measure tomorrow.
- Cisco Systems(CSCO), the world’s largest maker of networking equipment, reported a 5.4 percent drop in profit because of acquisition expenses and predicted sales that met analysts’ estimates. The stock rose .36 to $26.69 in extended trading.
- AC Transit and UTC Power Announce Largest Ever US Order of Fuel Cell Systems to Power Next-Generation Zero-Emission Transit Buses.
- Walt Disney(DIS), reported second-quarter profit that exceeded analysts’ estimates as the early Easter spurred resort visitors and the film “National Treasure 2” scored wins. Disney rose as much as .92, or 2.7%, to $34.65 in after-hours trading.

Wall Street Journal:
- Daimler AG says it plans to open an office in Baghdad after a nearly 20-year absence. The plan is significant because it involves a big Western company interested in the country for reasons other than its big oil reserves.
- Barack Obama triumphed in North Carolina’s Democratic presidential primary, and did better than expected against the favored Hillary Clinton in Indiana, which was too close to call late Tuesday evening.

MarketWatch.com:
- Sprint(S), Clearwire(CLWR) to announce $12 billion deal.
- Apple Inc.(AAPL) shares climbed to their highest point in four months Tuesday after British wireless giant Vodafone Group said it reached a deal to sell the iPhone in 10 new international markets.

USA Today.com:
- Microsoft(MSFT) has signed a worldwide deal with automakers Hyundai and Kia to use its in-car software that allows people to use voice commands to control personal music players and telephones.

Real Estate Alert:
- Goldman Sachs Group(GS) is seeking to raise $2.5 billion for a new fund that will invest in loans and other debt securities. The fund, called Goldman Sachs Real Estate Mezzanine Partners will borrow money, giving it total investing power of more than $8 billion. Adam Brooks, Goldman’s head of real estate mezzanine lending, will run the fund, which will buy mezzanine loans, high-yield senior loans, real estate corporate debt, commercial mortgage-backed securities and loan portfolios. The fund is charging a 1.5% annual management fee and 80% of any additional profits above an 8% preferred return for investors. Once Goldman gets to 20% of cumulative distributions, it will take 20% of any additional profit.

Reuters:
- Hedge funds press for right to advertise. “Advertising will come, but it is a long way away and will come only after a more comprehensive review of the industry and more rule-making for the industry,” said Timothy Mungovan, a partner who works with hedge funds at law firm Nixon Peabody.
- The Chicago Board Options Exchange said on Tuesday that it is partnering with S&P to license the methodology on its popular volatility index, known as the VIX., to exchanges worldwide.
- US Treasury Secretary Henry Paulson said US financial markets are emerging from the credit crunch that many economists believe has pushed the country to the brink of recession.
- A new co-branded store by Nike Inc.(NKE) and Finish Line(FINL), the No. 2 US athletic shoe retailer, opens on Wednesday, aimed at gaining a foothold in the niche market of runners and athletes in training.
- Short interest on the NYSE edged up another .02% the last two weeks of April to 15,629,000,000 shares. Short interest in shares of National City(NCC) soared 67%. Short interest jumped 53% in shares of Ambac Financial(ABK). Short interest rose 38% in Airtran(AAI), 29% in Delta(DAL) and 14% in shares of Southwest(LUV). Short interest rose nearly 32% in shares of CIT Group(CIT) and 20% in shares of Sprint(S).

Telegraph:
- Citi(C) chairman Sir Win Bischoff has joined a growing chorus of Wall Street executives in believing that the worst of the crisis that has gripped financial markets since last summer is over.

International Herald Tribune:
- EU defends support for biofuels, says the crops unfairly blamed for soaring food prices. The European Union’s senior agriculture official defended the bloc’s push for biofuels Tuesday. She said bigger factors were at work, namely increased demand for meat and dairy products, particularly in China and India, which has reduced farmland for growing food crops. She also noted that bad weather in 2006 in North America, Russia, the 27-nation EU and in Australia last year led to less production. Also — but harder to quantify — grain and other food commodity speculators have pushed up prices, she said. She said investments in commodity indexes that totaled US$10 billion in 1998 reached US$142 billion by 2007. In February alone, 140 commodity-based financial products were launched for investors, according to EU data. That is double the number issued each month in 2006 and 2007.

The Australian:
- While the Chicken Littles of the world economy, led by British Prime Minister Gordon Brown, George Soros and Warren Buffett, may still repeat mechanically the IMF’s surprising judgement that the world – especially the US – faces its worst financial crisis since the 1930s, their hearts are no longer in it.

Late Buy/Sell Recommendations
Citigroup:

- Reiterated Buy on (COV), raised estimates, boosted target to $58.

Merrill Lynch:
- Raised target on (CRM) to $85 from $68.

Night Trading
Asian Indices are -1.25% to +.50% on average.
S&P 500 futures -.23%.
NASDAQ 100 futures -.25%.

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
Upgrades/Downgrades
Rasmussen Business/Economy Polling
CNBC Guest Schedule

Earnings of Note
Company/EPS Estimate
- (RIG)/3.32
- (FWLT)/.73
- (AGN)/.52
- (STE)/.50
- (OC)/.03
- (TDS)/.60
- (LAMR)/-.07
- (NCR)/.17
- (CKP)/.14
- (DTV)/.31
- (CTSH)/.33
- (DVN)/2.33
- (MMC)/.46
- (PWR)/.14
- (CROX)/.10
- (NWS/A)/.32
- (DNB)/1.12
- (HANS)/.36
- (FTO)/.19
- (WCG)/1.62

Upcoming Splits
- None of note

Economic Releases
8:30 am EST

- Preliminary 1Q Non-farm Productivity is estimated to rise 1.5% versus a 1.9% gain in 4Q.
- Preliminary 1Q Unit Labor Costs are estimated to rise 2.6% versus a 2.6% gain in 4Q.

10:00 am EST
- Pending Home Sales for March are estimated to fall -1.0% versus a -1.9% decline in February.

3:00 pm EST
- Consumer Credit for March is estimated to rise to $6.0 billion versus $5.2 billion in February.

Other Potential Market Movers
- The (ELN) company day, (MFE) investor day, (AMX) analyst meeting, (KND) investor meeting, (GENZ) analyst day, (HUM) investor meeting, weekly MBA Mortgage Applications report, Deutsche Bank Health Care Conference, DA Davidson Financial Services Conference, Merrill Lynch Global Industries Conference, Bank of America Basics/Industrials Conference and Merrill Lynch Technology Conference could also impact trading today.

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

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