Late-Night Headlines
Bloomberg:
- Apple Inc.(AAPL) surpassed analysts’ estimates for profit and sales last quarter, overcoming the worst U.S. holiday shopping season in at least four decades. The shares jumped as much as 12 percent in late trading. First-quarter net income climbed 1.5 percent to $1.61 billion, or $1.78 a share, Apple said today. Sales rose 5.8 percent to $10.2 billion in the period ended Dec. 27. Analysts surveyed by Bloomberg estimated profit of $1.39 and sales of $9.76 billion. Apple sold 4.36 million iPhones in the quarter, a record 22.7 million iPods and 2.52 million Macs. Analysts anticipated 5 million iPhones, 18.6 million iPods and 2.4 million Macs, said Piper Jaffray & Co.’s Gene Munster in Minneapolis. The lower-than-expected iPhone number isn’t cause for concern, said Andy Hargreaves, an analyst with Pacific Crest Securities in Portland, Oregon. “The iPhone is still in the early stages of the product cycle, with a lot of growth left.” The first-quarter gross margin, the percentage of sales left over after taking out production costs, was 34.7 percent. That topped an estimate of 31.5 percent from Goldman Sachs Group Inc. Apple said it’s investing some of its more than $28 billion in cash in engineering, marketing and customer- experience efforts, Oppenheimer said. The company will add 25 stores this year to its retail network, with half of those opening in international markets, he said. Cook, who filled in for Jobs during a monthlong leave in 2004, declined to say how Jobs was faring. Cook also wouldn’t say if he was prepared to succeed Jobs as CEO. “There is an extraordinary breadth and depth and tenure among the Apple executive team,” who lead more than 35,000 “wicked smart” employees, Cook said. “We believe we’re on the face of the earth to make great products, and that’s not changing.”
- JPMorgan Chase & Co.(JPM), the second- largest U.S. bank by assets, said Chief Executive Officer Jamie Dimon bought $11.5 million of stock last week after it plunged about 27 percent in the first 10 trading days of the year. The shares surged 25 percent today. Dimon, 52, purchased 500,000 shares in the New York-based lender for $22.93 apiece on Jan. 16, according to a regulatory filing. Heidi Miller, CEO of the treasury and securities services unit, bought $80,802 in stock the same day.
- Bank of America Corp.(BAC), the biggest U.S. lender by assets, gained 31 percent in New York trading after Chief Executive Officer Kenneth Lewis and five directors bought more than 500,000 shares for at least $3 million. Lewis bought 200,000 shares of the bank at prices ranging from $5.98 to $6.06 yesterday, while director Robert Tillman also bought 200,000 shares for $5.77 to $5.78, according to a filing today. Temple Sloan Jr., lead director of the Charlotte, North Carolina-based bank, bought 41,800 shares. Buyers also included William Barnet III, Jacquelyn Ward and John Collins.
- The Markit iTraxx Australia index fell 12 basis points to 325 as of 11:23 am in Sydney
- Iron ore contract prices may fall as much as 50 percent this year amid a slowdown in China, the world’s biggest consumer of the raw material, according to Australia’s richest woman and mining magnate Gina Rinehart. “We’re hearing 30 percent, 40 percent, 50 percent discounts to last year’s contract price,” Rinehart, who controls closely held Hancock Prospecting Pty, said in an interview with Bloomberg Television. That compares with the average forecast of a 30 percent cut in a Bloomberg survey of 11 analysts last week.
- U.S. regulators sued a used-car salesman from West Texas for touting a $45 million hedge fund that they said was actually a Ponzi scheme. Rod Cameron Stringer misappropriated millions of dollars from investors since 2001, the Securities and Exchange Commission said in a federal lawsuit filed in Lubbock, Texas. The resident of Lamesa, 60 miles south of Lubbock, said he generated annual profits as high as 61 percent, according to the suit. “Stringer’s claims regarding the hedge fund and the high rates of return are completely bogus,” the regulator said in the suit. Besides running the fund, the agency said the 43-year-old worked as a bail bondsman, a tow-truck driver and a crop-dusting pilot. Stringer, doing business as RCS Hedge Fund, managed money from 31 investors, many elderly, according to the SEC’s complaint. The location of the remaining investor money “is presently unknown,” the agency said. Some was spent for a pool at his office, a horse-racing partnership, a boat, and mortgages for at least two houses, it said.
- Company debt defaults may increase from Russia to Brazil and India as the global recession curbs export revenue, pushes down local currencies and makes banks reluctant to refinance, according to Standard Chartered Plc. “Corporate debt is going to be one of the biggest issues in emerging markets in the next two years,” said Mohammed “Mo” Grimeh, New York-based head of trading for Standard Chartered, which gets 90 percent of its revenue from developing nations. “Some corporates have issued more debt than they can support.” Businesses across emerging markets have more than $218 billion of bonds and syndicated loans coming due in 2009, according to data compiled by Commerzbank AG. Russian companies need to repay $54 billion of debt, followed by Mexican issuers with $29 billion coming due and Brazilian firms with more than $24 billion. Currencies from all three nations have dropped more than 20 percent against the dollar in the past year, increasing the cost of servicing foreign-currency obligations. The “extremely high” level of corporate debt sales over the past several years and approaching maturities are “a source of concern,” Grimeh, 42, said in a Jan. 20 interview at the U.K. bank’s New York office. Emerging-market companies sold $119 billion of debt in 2006, $95 billion in 2007 and $38 billion last year, according to Commerzbank. So far this year, debt sales have totaled $4.6 billion.
- South Korea’s economy shrank a larger-than-expected 5.6 percent last quarter, the biggest decline since the Asian financial crisis a decade ago as exports, business investment and consumer spending plunged. The contraction followed growth of 0.5 percent in the third quarter and was more than twice the 2.1 percent drop forecast in a Bloomberg News survey of 10 economists. The economy shrank 3.4 percent from a year ago, the central bank said in Seoul today.
- China’s economy expanded 6.8 percent in the fourth quarter, the slowest pace in seven years, dragging down growth across Asia and increasing pressure for more stimulus measures as exports plunge. “It’s an astonishingly steep slowdown,” said Paul Cavey, an economist with Macquarie Securities in Hong Kong. “We haven’t yet seen all of the pain.” The economy’s “implosion” poses a threat to the Communist Party’s rule and increases the likelihood that the government will devalue the yuan, prompting a trade war, according to Albert Edwards, a London-based global strategist for Societe Generale SA. Exports will decline 6 percent this year, down from a 17.2 percent gain in 2008, according to Fitch Ratings. Taiwan’s exports to China plunged 44 percent in December, Korea’s dropped 30 percent, and those from Australia declined 25 percent, Chinese figures show. Japan reported today that its shipments to China plummeted 35.5 percent. “Localized unrest” may rise sharply this year, said Wang Tao, China economist at UBS AG in Beijing, adding that as many as 10 million people may lose their jobs in export industries, along with another 5 million in construction. A sagging property market makes a quick economic rebound less likely. House prices across 70 cities dropped for the first time on record in December and construction will contract 30 percent this year, according to Hong Kong-based Macquarie Securities property analyst Eva Lee. Economic growth may weaken to 2 percent in 2009, the slowest pace in at least 30 years, according to Ryan Atkinson, chief market analyst at New York-based hedge-fund manager Balestra Capital Ltd. “There’s an extraordinary amount of excess capacity and there’s no way the world can absorb the amount of goods they are set up to produce,” said Atkinson.
- Container-shipping lines are about to receive a surge of new vessels just as world trade heads for its first decline since 1982. Ships with a combined capacity of 3.9 million cargo-boxes are due for delivery by the end of 2010, a third more than in the past two years, according to AXS-Alphaliner data. Meanwhile, AP Moeller-Maersk A/S, Neptune Orient Lines Ltd. and other shippers are cutting trips and slashing rates on waning demand. The glut stems from optimism in 2007, when record global trade and booming Chinese exports sparked orders for ships, which typically take two or three years to be delivered.
Wall Street Journal:
- Troubled OneUnited Bank in Boston didn't look much like a candidate for aid from the Treasury Department's bank bailout fund last fall. The Treasury had said it would give money only to healthy banks, to jump-start lending. But OneUnited had seen most of its capital evaporate. Moreover, it was under attack from its regulators for allegations of poor lending practices and executive-pay abuses, including owning a Porsche for its executives' use. Nonetheless, in December OneUnited got a $12 million injection from the Treasury's Troubled Asset Relief Program, or TARP. One apparent factor: the intercession of Rep. Barney Frank, the powerful head of the House Financial Services Committee. Mr. Frank, by his own account, wrote into the TARP bill a provision specifically aimed at helping this particular home-state bank. And later, he acknowledges, he spoke to regulators urging that OneUnited be considered for a cash injection.
- The government of the United Arab Emirates is tightening its media laws amid a slew of negative headlines about the country's economy and corporate scandals in Dubai. The Persian Gulf state's Federal National Council passed the draft of a new media law on Tuesday, replacing the 28-year-old Publications Law, said Ibrahim Al Abed, director general of the National Media Council.
- The Senate overwhelmingly voted Wednesday to confirm Hillary Clinton as secretary of state, setting aside concerns from some Republicans that she had done too little to distance herself from her husband's fund-raising activities.
- Raymond James Financial Inc.'s (RJF) fiscal first-quarter net income rose 8.6% as the company reported a drop in interest expenses, offsetting falling revenue and commissions. Shares surged 17.5% to $19 in after-hours trading as results came in above analysts' estimates.
- The U.S. Export-Import Bank, hoping to alleviate the effects of the credit crunch, plans to boost its guarantees for Boeing Co.(BA) jetliner sales by almost 50%, to as much as $9 billion this year.
CNBC.com: The big banks are akin to the House That Jerks Built. First they loaded up on arcane and obtuse securitizations of millions of mortgages infected with a sliver of subprime risk. Then they profited on fear by selling credit default swaps that promise a payoff if a company goes belly-up on its bonds--even if you never held the bonds in the first place. Now they pay the price of frightfulness. Credit swaps on the banks' own bonds are wildly inflated, raising their cost of selling debt. News headlines tell us the defaults are spreading from home loans to other kinds of debt: commercial real estate, credit cards, car loans, college loans and on and on. But it is difficult to distinguish between justifiable alarm and overdone, outright panic. If rising defaults are killing the banks’ business and cutting off their cash flow, that is a true financial crisis. Yet if, instead, the defaults really aren’t that high and it is merely investors’ fear of further writeoffs, that is an accounting crisis. (The vast majority of the huge charges have been non-cash items reflecting the dire outlook for on-the-books valuations, not an actual hemorrhaging of real cash.) So how bad is it really?
NY Times:
- The global economic slump is spreading across Asia, where countries depend on manufacturing for a far greater share of economic output than Western countries do.
- Amid the din of naysayers who insist that newspapers are on the verge of death, a new company wants to start dozens of new ones — with a twist. The Printed Blog, a Chicago start-up, plans to reprint blog posts on regular paper, surrounded by local ads, and distribute the publications free in big cities.
BusinessWeek:
- The Best Cities for Tech Jobs.
- The end of oil will be met with some resistance. There are many vested interests that would like to see our dependence continue. However, that resistance will be no match for the economic and strategic pressure aligned against it.
CNNMoney.com: In tough times, for-profit school businesses such as Apollo Group(APOL), DeVry(DV), ITT Educational Services(ESI) and Strayer Education(STRA) have traditionally fared well, as more workers, including the newly unemployed, look to enroll in classes to upgrade their skills.
Forbes:
- 10 Things We’re Still Buying.
Politico:
- 10 Dems Obama should watch out for
All Things Digital:
- Google (GOOG) has expanded its YouTube eCommerce program, which lets users “click-to-buy” products related to the video they’re watching on YouTube, by extending the offers to viewers in Germany, Spain and the Netherlands; they had previously been limited to U.S. and U.K. users. And instead of just adding an affiliate link to Apple’s (AAPL) iTunes or to Amazon (AMZN) at the bottom of the video, YouTube is now featuring the links on transparent overlays that pop up early in the clip.
Reuters:
- A proposal issued in the final days of the Bush administration to expand offshore drilling in previously banned areas will move forward under the administration of U.S. President Barack Obama, an Interior Department spokesman told Reuters on Wednesday. Hugh Vickery, a department spokesman, said the department has been notified by the White House that it will be able to proceed with a proposed draft of a five-year plan to lease areas in the Atlantic and Pacific waters for oil and natural gas drilling. The preliminary plan would authorize 31 energy exploration lease sales between 2010 and 2015 for tracts along the east coast and off the coasts of Alaska and California. The Interior Department estimates that the Outer Continental Shelf holds 86 billion barrels of oil and 420 trillion cubic feet of natural gas that have yet to be discovered. It is possible U.S. offshore areas, which have not been explored in 25 years, could contain more oil and gas. Separately, Vickery said the department's plan to develop oil shale fields in the western United States would also continue.
- General Motors Corp (GM) said on Wednesday it had received a delayed payment of $5.4 billion under the emergency funding provided by the U.S. government to keep it in business.
- Network-equipment maker F5 Networks Inc (FFIV) reported first-quarter earnings that met market estimates, and its second-quarter outlook was largely above expectations, sending its shares up 9.1% percent in extended trading.
Financial Times: Dick Parsons, former chief executive of Time Warner, was last night named to replace Sir Win Bischoff as chairman of Citigroup (C), after the US bank’s fortunes failed to recover despite a $300bn government bail-out in November. Mr Parsons, who was Citi’s lead director and has been on the board since 1996, immediately urged the Obama administration not to nationalize the country’s ailing banks and called for the creation of a government- controlled “bad bank” to buy toxic assets. He told the Financial Times the new administration should replicate the Resolution Trust Corporation, the “bad bank” charged with buying assets from failed savings and loans companies in the 1980s and 1990s. “I lived through the first crisis,” said Mr Parsons, who ran Dime Bank, a small lender, between 1991 and 1995. “I remember one of the keys to bottoming out of the crisis was the presence of the RTC…We now need something along those lines.” Mr Parsons, who is close to Barack Obama, suggested that banks that sold assets to the new entity – an “aggregator bank” – should be required to use some of the proceeds for loans to companies and individuals. But he argued that the nationalization of troubled financial institutions would be misguided.
Late Buy/Sell Recommendations
RBC Capital:
- Rated (ELN) Underperform, target $4.
Night Trading
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 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
Earnings of Note
Company/EPS Estimate
- (UNP)/1.24
- (BBT)/.51
- (BAX)/.89
- (CMA)/.30
- (SHW)/.53
- (ED)/.69
- (LMT)/1.91
- (UNH)/.78
- (KEY)/.04
- (IGT)/.27
- (MTB)/1.16
- (ESI)/1.42
- (STI)/.03
- (ABC)/.69
- (EXC)/1.03
- (FITB)/.00
- (IBKR)/.53
- (COF)/.29
- (AMD)/-.55
- (WFR)/.61
- (FII)/.50
- (GOOG)/4.96
- (ISRG)/1.27
- (MSFT)/.49
- (AVT)/.66
- (EAT)/.19
- (MSCC)/.35
Economic Releases
8:30 am EST
- Housing Starts for December are estimated to fall to 605K versus 625K in November.
- Building Permits for December are estimated to fall to 600K versus 615K in November.
- Initial Jobless Claims for last week are estimated to rise to 543K versus 524K the prior week.
10:00 am EST
- The House Price Index for November is estimated to fall 1.2% versus a 1.1% decline in October.
11:00 am EST
- Bloomberg consensus estimates call for a weekly crude oil inventory build of +1,400,000 barrels versus a +1,144,000 barrel build the prior week. Gasoline supplies are expected to rise by +1,800,000 barrels versus a +2,068,000 barrel gain the prior week. Distillate supplies are estimated to rise by +500,000 barrels versus a +6,346,000 barrel increase the prior week. Finally, Refinery Utilization is estimated to fall by -.5% versus a .66% rise the prior week.
Upcoming Splits
Other Potential Market Movers
BOTTOM LINE: Asian indices are higher, boosted by financial and technology stocks in the region. I expect US equities to open modestly higher and to strengthen into the afternoon, finishing higher. The Portfolio is 100% net long heading into the day.
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