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From Briefing.com
Periodicals Wrap-Up for Tuesday, October 7th
WALL STREET JOURNAL: The Wall Street Journal reported that there is a “bullish interpretation” to the fight for Wachovia (WB) by Citigroup (C) and Wells Fargo (WFC), in that, even in the current financial stress, the banks still believe they can profit from the acquisition. At the same time, the “Heard on the Street” column said that given Citigroup’s initial demand for government assistance, Wells Fargo may be the only bank in the U.S. capable of acquiring Wachovia without aid from the government…According to the Wall Street Journal’s “Heard on the Street,” eBay (EBAY) has taken some of the “usual steps” followed by companies facing challenges, including significant job cuts and risky acquisitions. However, eBay is not alone, as its peers in the Internet sector, including Yahoo! (YHOO), Google (GOOG) and Amazon (AMZN), have seen their stock fall as much or more as eBay’s this year…NEW YORK TIMES: According to officials familiar with the discussions, the Federal Reserve is considering a radical plan to buy large amounts of unsecured short-term debt. The New York Times reported that the plan would involve the Fed buying unsecured commercial paper in order to renew the flow of credit on which the economy depends…BLOOMBERG: In an effort to bolster capital depleted by losses related to mortgages, Bloomberg reported that the UK government may invest nearly $79B in banks that include Barclays (BCS) and Royal Bank of Scotland (RBS), two people familiar with the matter said…
Asian Markets Wrap-up for Tuesday, October 7
Asian stocks fell. However, shares recovered some of their losses after Australia’s central bank reduced the country’s interest rate, as investors speculated that more central banks would lower rates. JAPAN: Stocks declined, as investors worried that the credit crunch would reduce demand for Japanese exports. The Nikkei 225 sank 3.03% to 10,155.90. Toyota (TM) dropped 4.9%, while Sharp Corp. (SHCAY) tumbled 9.3%, after the company slashed its 2008 profit forecast by 43%. Mitsubishi Motors (MMTOF) declined 10% and Mazda (MZDAF) retreated 5.9%. Shipping company Mitsui O.S.K. (MITSY) sank 5.1%. CHINA: Commodities companies led a decline. The CSI 300 Index lost 1.23% to 2,102.45. Aluminum Corp. of China (ACH) fell 3.4%, after forecasting that its Q3 profit would drop more than 50% year-over-year. Jiangxi Copper declined 3.5% and coal producer China Shenhua Energy (CUAEF) retreated 6.3%. Brokerage Haitong Securities dove 10%. A number of real estate companies advanced on speculation that China’s central bank will substantially cut interest rates. China Vanke (CVKEF), a property developer, rose 4.8% and Poly Real Estate, another developer, surged 6.2%. China Southern Airlines (ZNH) gained 6.2%, after announcing that it would sell one-year debt. AROUND ASIA: Hong Kong’s Hang Seng Index dove 4.97%, while South Korea’s KRX 100 inched up 0.78% and Indonesia’s Jakarta Composite lost 1.76%…Australia’s central bank reduced its main interest rate by 1%.
Fed may be looking at buying companies’ debt-NY Times
The Fed is weighing the possibility of purchasing large amounts of companies’ short-term debt, officials involved in the matter told The New York Times. Businesses typically use this debt to finance their day-to-day activities.
Oligarchs suffering from Russia’s economic woes-WSJ
Some of Russia’s oligarchs are being forced to sell stakes in companies they’ve invested in to meet margin calls. That they too are having severe problems points to the troubles of the Russian market, and the mix of business and government ties, according to the Wall Street Journal’s “Heard on the Street”. A number of Russian companies took loans to expand that were secured against high-flying stocks. When the markets caved a downward spiral resulted. The bottom line: It’s not likely that Russia will move to a more balanced economy anytime soon.
Will the Bush Administration take more drastic economic measures?-WSJ
The government’s moves haven’t restored confidence. What’s next? asks the Wall Street Journal’s “Heard on the Street”. Perhaps temporarily guarantee more banking liabilities. Or, prop back up interbank lending with the Fed and other central banks acting as a clearing house for unsecured bank to bank loans. More importantly, solutions are needed to get at the heart of the problem of an over leveraged worldwide financial system.
CME, Citadel propose central platform for CDS moves-WSJ
CME Group (CME), parent of the Chicago Merc, and hedge fund Citadel Investment Group, are working on a plan to have an exchange-like platform to trade and clear credit default swaps, or CDS, reports the Wall Street Journal. The electronic platform is expected to launch in early November, and the plan has been discussed with regulators.
U.S. equity futures continue to point to a higher open
The futures continue to point to a higher open after reports that the government is looking at different ways to unclog the credit markets. Aside from reports the government may buy commercial paper from companies there is continued talk of a coordinated rate cut by central banks around the world. Australia cut its interest rates overnight by the largest amount since 1992 and that has reignited hope that others, including the Federal Reserve and the European Central Bank, might follow. There is little economic news scheduled for release today but at 2:00 pm the minutes of the FOMC rate meeting from September 16 will be released.
Federal Reserve announces schedules for term and forward auctions
Central banks recently announced coordinated actions to expand the provision of U.S. dollar liquidity. Today, the central banks are announcing schedules for term and forward auctions of U.S. dollar liquidity conducted during the fourth quarter of this year. These schedules include dates of any 28-day and 84-day term auctions and two preliminary dates for any forward auctions of U.S. dollar liquidity over the year-end. Scheduling of the forward auctions is still tentative and may be adjusted in response to financial market conditions.
Blood test helps identify Down syndrome-NY Times
Genetic techniques using a blood sample from a pregnant women can test for Down syndrome and could replace amniocentesis which can cause miscarriages. Biotech firm Sequenom (SQNM) will begin sales of its test product in June 2009. Information about a different test, developed at Stanford, was discussed in a paper published online in The Proceedings of the National Academy of Sciences. However, there are reasons to be cautious as both tests have used limited sampling. Yet, neither has shown any false negatives or false positives. “This is quite simply a major step forward, if it works at all like we expect it might,” says Jacob A. Canick, a professor of pathology at Brown, about the Sequenom test.
Fed to purchase U.S. commercial paper through new special unit-Bloomberg
The U.S. Treasury will make deposit with Fed to help set up unit.
Google-GOOG estimates and target lowered, maintain Buy@STFL
Stifel lowered GOOG estimates based on a more cautious global economic outlook. Target to $525 from $600.
Yahoo-YHOO estimates lowered; maintain Buy@STFL
Stifel lowered YHOO estimates to reflect a more cautious global economic outlook. Target $26.
SPWRA downgraded to Sell from Buy@GSCO
Goldman downgraded FSLR and SPWRA to Sell from Buy citing increased supplies of modules and less generous demand subsidies. SPWRA price target to $43 from $100.
FSLR downgraded to Sell from Buy@GSCO
Goldman downgraded FSLR and SPWRA to Sell from Buy citing increased supplies of modules and less generous demand subsidies. FSLR price target to $103 from $365.
Alexion Pharma-ALXN: Marketing with CFO reaffirms positive thesis@CSTI
Collins Stewart traveled with ALXN’s CFO in Europe and believes the recent weakness in shares provides an attractive entry point ahead of potentially solid Q3 earnings on Oct. 23. Collins reiterated their Buy rating on ALXN
Energy Conversion-ENER initiated with a Buy, target $62@WEDB
Wedbush believes significant margin expansion remains.
Analysts Initiation Summary for Tuesday, October 7th
MOST NOTEWORTHY: Dusa Pharmaceuticals (DUSA), Lakeland Bancorp (LBAI) and International Coal (ICO) were today’s noteworthy initiations: Rodman & Renshaw believes Dusa Pharmaceuticals is positioned for robust sales growth of its Levulan-PDT therapy for precancerous skin lesions. Shares were initiated with an Outperform rating and $6 target. Keefe Bruyette started Lakeland Bancorp with a Market Perform rating and $11 target and sees the potential for further deterioration in the company’s national-brokered commercial leasing portfolio. Jefferies believes International Coal will continue investing in organic projects to improve operations and expects increasing realized coal prices to support earnings growth. The firm assumed coverage with a Buy rating and $8 target…OTHER INITIATIONS: Nokia (NOK) and Alcatel-Lucent (ALU) were initiated at Morgan Stanley with Overweight ratings. Seattle Genetics (SGEN) was assumed with a Hold rating at Stanford. RBC Capital initiated Cypress Bioscience (CYPB) with an Outperform rating and $13 target.
Analysts Downgrade Summary for Tuesday, October 7th
MOST NOTEWORTHY: Disney (DIS), IBM Corp (IBM) and Salesforce.com (CRM) were today’s noteworthy downgrades: Merrill downgraded Disney to Underperform from Neutral and cut its target to $27 from $34 citing the impact from the current economic climate on earnings. Barclays downgraded IBM to Equal Weight from Overweight citing the impact from the weakening economy and the company’s large exposure to the financial services industry. IBM’s target was cut to $108 from $130. Jefferies downgraded Salesforce.com to Underperform from Buy on increased risks of deteriorating payment terms and price pressure on renewals. The company’s target was lowered to $36 from $75…OTHER DOWNGRADES: Goldman downgraded First Solar (FSLR) and added shares to the Conviction Sell List. United Community Banks (UCBI) was lowered to Neutral from Buy at Suntrust. G&K Services (GKSR) was cut to Hold from Buy at Citigroup.
Analysts Upgrade Summary for Tuesday, October 7th
MOST NOTEWORTHY: Shire Plc (SHPGY), Jefferies Group (JEF) and ADC Telecomm were today’s noteworthy upgrades: JP Morgan upgraded Shire Plc to overweight from Neutral to reflect Vyvanse share gains and valuation. Wachovia upgraded Jefferies to Market Perform from Underperform because they believe that the recent collapse of the large cap bank sector, Jefferies’ cash equity business, and the company’s partial privatization as a result of its Leucadia investment will shield shares. ADC Telecomm was upgraded to Buy from Hold at Kaufman Bros. on valuation following the recent weakness…OTHER UPGRADES: STEC Inc (STEC) and Popular (BPOP) were raised to Buy from Neutral at B. Riley. Ericsson (ERIC) was upgraded to Add from Hold at WestLB. Canaccord upgraded Amylin Pharma (AMLN) to Hold from Sell.
(Important note on how to use this upgrade/downgrade list with analyst comments and news….you must parse out the factual data (Factual data is the most important) from the opinionated data and always take all analyst comments with a grain of salt. Do not follow blindly with their recommendations. Remember that technicals are the most powerful force in short term direction for stock prices due to the law of supply and demand.)
Jim Cramer’s “Mad Money”
Cramer told viewers that it might be time to take some money out of stocks and put it into plain old saving accounts. A FDIC insured savings account is the way to guarantee your money will be safe if you need cash in the next five years, says Cramer. Cramer outlined his plan for what he government should do next: 1) the FDIC should stop bank seizures; 2) government should put the $700B relief program to work by buying individual home loans, and immediately end foreclosures and take the toxic assets off the balance sheets of banks; 3) the government should buy the credit default obligations (CDO’s), but only after it has exhausted the individual loan options. Cramer reiterated to viewers that they should sell at least 20% of their portfolios and move that money into safe, FDIC insured savings accounts. Cramer again reminded viewers that they can’t buy even defensive stocks without first taking profits and selling stocks to build a strong cash position. He again advised investors to have enough cash on hand and not rely on the markets to be there for them. Cramer says the risk of a worldwide slowdown, and continued energy problems still looming, the possibility of further declines in the markets are very real. The only stocks Cramer said he will even go near are the food, drug, and packaged goods makers, along with high dividend paying stocks. Cramer spoke with Zan Guerry, chairman and CEO of personal products maker Chattem (CHTT). Guerry essentially said the company’s products are recession proof and necessary and that the company is in a strong position, with a solid balance sheet and $5 a share of free cash flow. Guerry said that Chattem is being conservative and is investing in advertising and building its brands. However, Guerry also noted that if an acquisition opportunity arises, the company will certainly seize that opportunity. Cramer said Chattem has strong brands, declining raw costs, a recent price hike going in its favor. Cramer called Chattem one of the ultimate safety stocks. LIGHTNING ROUND: (Bullish) RIMM; AAPL; V; DEO. (Bearish) HEK; AXP; AMED.
Fast Money position recap- First oves: Jeff likes long MCD, Guy likes JEF, Karen likes long DEO, Pete likes BIIB long.
Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Macke Owns (UUP), (MSFT), (WMT), (MCD), (BNI); Pete Najarian Owns (AAPL) And (AAPL) Puts; Pete Najarian Owns (IYR) Put Spread; Pete Najarian Owns (MS) And (MS) Puts; Pete Najarian Owns (RF) And Is Short (RF) Calls; Pete Najarian Owns (GS) Call Spread, (RIMM) Call Spread, (WB) Call Spread, (XLF) Call Spread, (NCC) Call Spread; Pete Najarian Owns (BIIB) Calls; Finerman Owns (GS); Finerman’s Firm Owns (MDY), (SPY), (IWM), (MO), (JNJ), (MSFT), (DEO); Finerman’s Firm Is Short (BBT), (COF), (IYR), (IJR), (USO), (SPG)
Whta a day yesterday! Fed moving in and pulling more levers this morning. It will be interesting to see how the market reacts to this commercial paper news, Fed auction increase, and expected rate cuts going forward. Could yesterday have been a capitulation day? Art Cashin doesn’t think so and would have loved to see down 800-1000 yesterday and then down 500 premarket in order to have a big pendulum swing to the upside….the jury is still out and I am starting to look around for signs of life and staying nimble. See you in the trading room at myhappytrading.com for trade ideas and collective intelligence gathering on the market.
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