Monday, December 22, 2008

Tuesday Watch

Late-Night Headlines

- Red Hat Inc.’s(RHT) quarterly profit and forecast beat analysts’ estimates after the company’s Linux software attracted budget-conscious buyers, sending the shares up 6.5 percent in late trading.

- HFA Holdings Ltd., an Australian hedge-fund manager with $5.8 billion in assets, plunged by a record in Sydney trading after the company halted redemptions from three of its funds. HFA shares tumbled 5 cents, or 49 percent, to 5 cents at 11:25 a.m. on the Australian stock exchange, their biggest decline since listing in April 2006. The stock has dropped 97 percent this year, cutting its market value to A$22 million ($15 million).

- Japanese crude-oil imports tumbled 17 percent to 3.71 million barrels a day last month, the country’s finance ministry said yesterday. South Korea’s oil demand declined 12 percent in November from a year earlier, Korea National Oil Corp. said. “We just had the Korean and Japanese figures come out and those just put another nail on the oil coffin,” said Mark Pervan at Australia & New Zealand Banking Group Ltd. in Melbourne.

- General Motors Corp. and Ford Motor Co., the two largest U.S. automakers, had their debt cut further below investment status by Standard & Poor’s and Moody’s Investors Service. GM’s unsecured debt was trimmed one level to C, or 11 grades below investment quality, by S&P. Moody’s lowered its rating on $26 billion in Ford debt by two grades to Caa3, or nine below investment quality.

- Senator Edward M. Kennedy, battling a deadly brain tumor, is pushing ahead on a plan to overhaul the U.S. health-care system, ordering meetings with interest groups and negotiating with colleagues to ready a proposal that Barack Obama can act on after taking office. Kennedy, 76, had surgery for his cancer in June, and has since been treated with chemotherapy and radiation. While the type of tumor Kennedy has can sometimes be fatal within 18 months, the Massachusetts Democratic and his staff are pushing ahead in their efforts to secure approval of an idea championed by Kennedy for 46 years: medical insurance for all Americans. “This has been the cause of Kennedy’s life, and it’s clear he sees this as a great opportunity,” said Adam Clymer, the author of a Kennedy biography, in a telephone interview.

- The risk of bankruptcy remains high for U.S. automakers even with the almost $21 billion in emergency loans announced by the U.S. and Canadian governments, Standard & Poor’s said in a release.

- Tremont Group Holdings Inc., a hedge-fund firm owned by Massachusetts Mutual Life Insurance Co., was sued for investing with money manager Bernard Madoff who confessed to a $50 billion Ponzi scheme. Investors Arthur E. Lange and Arthur C. Lange sued Tremont, its parent and its units for investing with Madoff and ignoring numerous “red flags.” The Langes, in a complaint filed today in federal court in Manhattan, seek class-action, or group, status on behalf of other investors whom they say lost $3.1 billion. Tremont “did not act as a reasonably prudent investor would have,” according to the complaint, which cites the fund’s decision to put “all of the class’s eggs in one basket.”

- China’s stocks fell to the lowest in three weeks, led by financial companies, on concern an interest- rate cut wasn’t deep enough to keep the world’s fourth-largest economy from weakening.

Wall Street Journal:

- Accounting watchdogs are fast-tracking an effort to provide a small dose of "mark-to-market" relief for financial firms, as banks and life insurers continue grappling with deteriorating investment holdings. The Financial Accounting Standards Board last week began steps to loosen a rule regarding when financial firms must book losses on a narrowly defined subset of lower-rated mortgage-backed securities, commercial-backed securities and certain other structured securities. Late Friday, FASB asked for public comment on the proposal, a sign that it is under serious consideration.

- Credit Suisse Group (CS) is winding down its U.S. power and emissions trading operations as part of the company's strategy of exiting volatile businesses, a person close to the matter said.

- CME Group Inc. (CME) is in advanced discussions with six dealers to take equity stakes in its credit-default swap trading and clearing platform, as it lines up against a rival backed by nine of the market's largest participants.

- Colorado's Oil and Gas Conservation Commission is asserting control over the state's booming energy industry with its approval of the most far-reaching drilling restrictions in the nation. Regulations laid out this month in a 177-page document immediately drew fire from the industry and from some lawmakers, who say the restrictions will drive energy companies out of the state at a time when Colorado needs more high-paying oil and gas jobs.

Fox News:

- The White House is pushing back hard against a New York Times article that essentially blamed President Bush for the sub-prime mortgage mess and the Wall Street collapse by linking those crises to a policy goal he stated more than six years ago. That goal? "We want more people owning their own home," as Bush said in December 2003.


- OPEC’s Dysfunctional Message Fed the Oil-Price Plunge. BW’s Stanley Reed says the cartel doesn’t know how much oil Venezuela and Iran are producing – and thus how much production should be cut.

- Marcial: L-3(LLL), a Stellar Pick in Security Tech.

- As sales plunge, Indian auto plants are slashing production, cutting shifts, and putting joint ventures on hold.

- Venture Capital’s Favorite Startups.

- After the forced selling spree of the last several months, there are now trillions upon trillions of dollars in cash, or cash equivalents, on the sidelines. Two forces will converge to push this money into green-tech investments like solar power, biofuels and hydrogen filling stations. Lots of people are going to make a killing on mortgage-backed securities, including the "toxic" subprime variety. There are entire generations of consumers without the habit of saving. They will spend again; they simply don't know how not to. After bottoming in the first quarter of 2009, US equities will be in for a broad rally. Expect a bull market by the third quarter of 2009. Now is the time to get ready for it.


- ChangeWave: Apple(AAPL) iPhone’s ‘very satisfied’ rating more than double that of RIM’s BlackBerry Storm.


- The U.S. Navy is expected to award a $14 billion contract to General Dynamics Corp (GD) and Northrop Grumman Corp (NOC) on Monday for eight Virginia-class submarines.

- Mobile teleconsulting is a feasible way to evaluate remotely located patients who have just had a stroke, according to a report in the current issue of the journal Stroke. Although researchers found that hospital-based, land-line systems still provide better quality communication.

Late Buy/Sell Recommendations
- Reiterated Buy on (MAN), target $40.

- Reiterated Buy on (RATE), target $43.

- Reiterated Buy on (PCLN), target $83.

Night Trading
Asian Indices are -2.75% to -.50% on average.
S&P 500 futures -.11%.
NASDAQ 100 futures -.21%.

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

Earnings of Note
Company/EPS Estimate
- (MU)/-.44

- (AM)/.52

Economic Releases
8:30 am EST

- Final 3Q GDP is estimated at -.5% versus prior estimates of a -.5% decline.

- Final 3Q Personal Consumption is estimated at -3.7% versus prior estimates of a -3.7% decline.

- Final 3Q GDP Price Index is estimated at 4.2% versus prior estimates of a 4.2% gain.

10:00 am EST

- Final December Univ. of Mich. Consumer Confidence is estimated to fall to 58.8 versus a prior estimate of 59.1.

- New Home Sales for November are estimated to fall to 415K versus 433K in October.

- Existing Home Sales for November are estimated to fall to 4.93M versus 4.98M in October.

Upcoming Splits
- None of note

Other Potential Market Movers
- The weekly retail sales reports, house price index report, Richmond Fed Manufacturing report, (GW) special shareholders meeting, (PNC) special shareholders meeting and (WTBA) shareholders meeting could also impact trading today.

BOTTOM LINE: Asian indices are lower, weighed down by automaker and commodity stocks in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.

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