Posted by optiondragon for myhappytrading.com
From Briefing.com
Periodicals Wrap-Up for Thursday, November 6th
WALL STREET JOURNAL: With the Democrats soon to be fully in control of the federal government, health insurers foresee policy changes adding to their business, the Wall Street Journal reported. Included are expected to be more federal programs to cover low income children and adults, as well as growth for individual insurers…When Blackstone Group (BX) reports its third quarter earnings today they will show the effects of mark-to-market accounting which CEO Stephen Schwarzman would like to see abolished. But accounting rules have forced the firm–and others–to mark their holdings to what they would be worth if sold today, according to the Wall Street Journal’s “Ahead of the Tape”…Will it be BP (BP) who emerges as the suitor of Chesapeake Energy (CHK)? Whoever it is, option traders are running full speed to take positions in Chesapeake, the Wall Street Journal reported…
Asian Markets Wrap-up for Thursday, November 6
Stocks in a majority of Asian countries fell, after earnings outlooks by Isuzu Motors (ISUZY) and Toyota (TM) disappointed investors. JAPAN: The Nikkei 225 tumbled 6.53% to 8,899.14. Isuzu sank 21% and Toyota retreated 10% after the company reported that its 1H net income fell almost 50%. Sony (SNE) dove 11% and Canon (CAJ) retreated 13%. Energy company Inpex (IPXHY) dropped 11%. INDIA: The Sensex declined 3.81%, to 9,734.22. State Bank of India dropped 4.4%, while ICICI Bank (IBN) declined 3.9%. Tata Motors (TTM) sank 14% and Reliance Industries lost 7.8%. Housing Development Finance Corp. dropped 5.3%. AROUND ASIA: China’s CSI 300 fell 2.46%, while Taiwan’s Taiex slumped 5.71% and South Korea’s KRX 100 dove 7.28%…Credit Suisse predicted that China’s demand for construction machinery will decline in 2009.
Rumors of a Chesapeake Energy takeover spur activity-WSJ
Will it be BP (BP) who emerges as the suitor of Chesapeake Energy (CHK)? Whoever it is, option traders are running full speed to take positions in Chesapeake, reports the Wall Street Journal. According to Track Data, trading in the company soared to three times the normal level. Investors picked up 179,000 calls that allow them to purchase Chesapeake’s stock, and 43,000 puts that allow them to sell it. Neither company is talking.
FDA facing overhaul-WSJ
Drug makers are on full alert as new leadership will soon take over at the FDA. It is expected to be a lot tougher on drug makers, from approval of drugs to how they are advertised to the public, reports the Wall Street Journal.
Treasury aside, investors want to know who’ll run the SEC-WSJ
In the long run whoever is picked to head the SEC may be just as important as to who runs the Treasury Department, points out the Wall Street Journal’s “Heard on the Street”. That person will be counted on to promote investor’s interests. But a cloud hangs over the agency which could be absorbed under a “super-regulator”. That’s why a strong leader is needed to champion the SEC.
Bank of England reduces bank rate by 1.5 percentage points to 3%
The Bank of England’s Monetary Policy Committee voted to reduce the official Bank Rate paid on commercial bank reserves by 1.5 percentage points to 3%. The Bank said, “The past two months have seen a substantial downward shift in the prospects for inflation in the United Kingdom. There has been a very marked deterioration in the outlook for economic activity at home and abroad. Moreover, commodity prices have fallen sharply.
U.S. equity futures continue to point to a lower open
U.S. equity futures continue to point to a lower open. The futures were lifted off their lows for a brief time when the Bank of England lowered their key interest rate by 150 basis points and the ECB lowered their rate by 50 basis points. Tech bellwether Cisco Systems (CSCO) reported quarterly earnings last night but gave poor guidance going forward. Their statements about business spending over the next year caused the futures to trade lower overnight adding to yesterday’s poor close in the market averages. But the futures rallied after the BOE lowered their rates and hinted there were more rate cuts to come.
Analysts Upgrade Summary for Thursday, November 6th
MOST NOTEWORTHY: Sovereign Bancorp (SOV), Whole Foods (WFMI) and Max Capital (MXGL) were today’s noteworthy upgrades: Citigroup upgraded shares of Sovereign Bancorp to Buy from Hold on their belief Sovereign will merge with Banco Santander (STD) according to the terms on their October 13 agreement. Jefferies upgraded Whole Foods to Hold from Underperform on valuation as they believe the capital infusion from Leonard Green limits downside risk. The company’s target was raised to $11 from $9.50. Banc of America upgraded Max Capital to Buy from Neutral on valuation, the company’s strategic changes to lower earnings volatility and their belief it is well positioned to benefit from an improved P&C marketplace…OTHER UPGRADES: Qimonda (QI) was upgraded to Neutral from Underperform at Cowen. Health Net (HNT) was raised to Neutral from Sell at Goldman. Parkway Properties (PKY) was lifted to Market Perform from Underperform at Wachovia.
Analysts Downgrade Summary for Thursday, November 6th
MOST NOTEWORTHY: News Corp (NWS.A), EnerSys (ENS) and Syniverse (SVR) were today’s noteworthy downgrades: JP Morgan does not expect News Corp to outperform its peers due to its asset mix, which makes it more vulnerable to macroeconomic pressures. Shares were cut to Neutral from Overweight. Jefferies downgraded shares of EnerSys to Hold from Buy as they believe the company’s lower than expected Q3 guidance suggests that rapid demand deterioration could continue near-term. The firm lowered their target to $11 from $35. Baird downgraded Syniverse to Neutral from Outperform citing Sprint (S) and Alltel’s decision to in-source mobile data roaming, which will impact 2009 revenue by $28M, and worse than expected Verizon (VZ) contract renewal pricing. The company’s target was lowered to $16 from $21…OTHER DOWNGRADES: Liberty International (LBYIY) was downgraded to Underweight from Equal Weight at Morgan Stanley. General Growth Properties (GGP) was lowered to Neutral from Buy at UBS. Capital Source (CSE) was downgraded at JMP Securities to Market Perform from Outperform.
Analysts Initiation Summary for Thursday, November 6th
MOST NOTEWORTHY: Gilead Sciences (GILD), Adobe (ADBE) and NuStar Energy (NS) were today’s noteworthy initiations: Gilead Sciences was assumed with an Outperform rating at Wachovia. Adobe was initiated at Thomas Weisel with an Overweight rating and $34 target. Morgan Stanley started NuStar Energy with an Equal Weight rating and $49 target…OTHER INITIATIONS: Optimer Prime (OPTR) was initiated at Rodman & Renshaw with an Outperform rating. Deutsche Bank initiated H&E Equipment (HEES) with a Hold rating and $9 target. Merchant Bancshares (MBVT) was assumed with a Market Perform rating and $23 target at Keefe Bruyette.
China considering major stimulus package-Nikkei
China’s state council has sent a report to the government urging it to boost the country’s economy with a major stimulus package. No figures were available.
S&P 500-SPX: Pivot Points
The following are the pivot points for the SPX. Pivot High: 977.305, Pivot Low: 925.325. These were calculated using the DeMark method. It is generally believed to be bullish when price breaks out above the pivot high or bearish when price breaks down below the pivot low. :
AMBAC Fin’l-ABK responds to Moody’s rating action
Ambac Financial Group commented on Moody’s announcement that is has downgraded the rating of Ambac Assurance Corporation (AAC) from Aa3 to Baa1, developing outlook. David W. Wallis, President and Chief Executive Officer commented, “It appears that this rating action has been precipitated by our earnings announcement. It is disappointing that Moody’s has come to a ratings conclusion without the benefit of completing its own analysis of our portfolio.”
Yahoo’s Yang open to new deal with Microsoft-UK Times
With its ad deal with Google (GOOG) in shambles, Yahoo (YHOO) CEO Jerry Yang says he now is open to a new bid from Microsoft (MSFT). Yang told the Web 2.0 conference: “To this day, I would say that the best thing for Microsoft to do would be to buy Yahoo.. Did we want to do the deal? Yes.”
Goldman Sachs-GS estimates and target lowered at Morgan Stanley
Morgan Stanley expects GS to report a Q4 loss due to the severe decline in global equity indexes which will result in writedowns in its principal investment portfolio. The analyst lowered its Q4 EPS estimate to ($1.09) from $3.21, FY09 EPS estimate to $9.40 from $14.19, and 2010 to $13.17 from $17. Shares are Overweight rated. Price target to $152 from $185.
Jim Cramer’s “Mad Money”
Wednesday’s “Mad Money” show had Cramer outlining a plan for President-elect Barack Obama to fix the struggling economy. Cramer said the first steps to turn the economy around are unfortunately beyond our control. Ahead of what is sure to be a awful unemployment number on Friday, Cramer said the European and Asian central banks must cut interest rates. Cramer said Obama’s first step should be to fix the ailing auto industry. He said a major federal bailout, similar to that of AIG (AIG), will be needed. Cramer says, the government should buy huge chunks of both common and preferred shares in General Motors (GM), Ford (F) and Chrysler (DCX) to stabilize their stock prices and secure the companies’ corporate debt until structural changes can be made. Second, Obama needs to solve the country’s energy independence problem, by mandating the U.S. automakers to make natural gas vehicles and encourage the oil industry to use tax credits to open natural gas fueling stations. Finally, Cramer said the country must fix the housing crisis. Cramer says the remaining $400B in the TARP program should be used to buy 1.3M homes in the hardest hit areas of the country. The government then can offer these homes to Americans for low down payments and fixed 5% mortgages. With these steps, Cramer said any president could easily fix the country’s problems in his first 100 days. Next, Cramer talked with David Novak, president, chair/CEO of Yum Brands (YUM). Despite reporting better earnings and same-store sales growth on Oct. 8, concerns over declining margins in China have sent the stock lower. Novak said Yum! Brands has well established brands that are well positioned for this troubled economy. He emphasized the opportunities in China are still staggering, despite the declining margins due to unprecedented food inflation. Novak was also upbeat regarding several new products and initiatives for all of the company’s chains. Cramer said he’s still a fan of Yum! Brands, but recommended waiting for the company’s dividend yield to hit 3% before buying. Cramer also checked in with Jim Rogers, CEO of Duke Energy (DUK). Rogers said Duke is already the country’s third largest generator of electricity using nuclear power, and the company is making sizable investments in both wind and solar energy. He said the recent earnings shortfall was mainly due to storm-related costs from Hurricane Ike and increased mark-to-market costs associated with the company’s hedging and not from operations. Cramer called Duke a smart company and a good play in the energy patch. LIGHTNING ROUND: (Bullish) JNJ; KCI; CAT. (Bearish) NOK; TMO; HIG; ACM.
The market is down hard from yesterday and is pricing in a bad employment report tomorrow so be nimble today and protect longs and look for shorts. The Vix is the indicator to watch. see you in the trading room for a look at some short prospects.
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