Periodicals Wrap-Up for Thursday, July 3rd
WALL STREET JOURNAL: According to people familiar with the situation, the Wall Street Journal reported that Yahoo! (YHOO) is again talking to Time Warner (TWX), this time about taking over AOL, with Time Warner taking a stake in the combined entity. News Corp. (NWS) has its eye on any Yahoo moves. Meanwhile, Microsoft (MSFT) is considering what its next move against Yahoo might be and is talking to News Corp…The Wall Street Journal also reported that, as part of the company’s plan to cut costs, Tribune Co’s Los Angeles Times newspaper may look to cut about 250 jobs, including about 17% of its news staff…FINANCIAL TIMES: The Financial Times reported that Chrysler, which has been searching for foreign partnerships, signed with China’s Great Wall Motor a memorandum of understanding to explore long-term business ties in areas that include technology, distribution and components…DALLAS NEWS: According to the Dallas News, AMR Corp’s (AMR) American Airlines informed its flight attendants’ union that is may lay off 900 flight attendants on August 31…YONHAP: Yonhap reported that LG Electronics will release “Dare,” a new touch-screen mobile phone in the U.S. that will compete with Apple’s (AAPL) latest iPhone models…
Judge says Google can’t be forced to turn over computer code-WSJ
A federal judge said Google (GOOG) cannot be forced to turn over the computer code central to their search functions, reports the Wall Street Journal. In a $1B copyright-infringement suit brought by Viacom (VIA), U.S. District Judge Louis L. Stanton, in a Manhattan court, allowed Google’s request for a protective order. The source code controls YouTube.com and Google.com’s Internet search tool, and Google says it’s a trade secret critical to its business success.
BHP, Chinese companies expected to agree on iron ore price increase today-FT
Mining company BHP Billiton (BHP) is expected to reach an agreement with its Chinese customers today on a record increase in iron ore prices. The agreement is expected to be in-line with a similar settlement negotiated last week by BHP’s rival, Rio Tinto (RTP), in which Rio hiked prices by 79%-96%.
NVDA: Believe company can recover within three quarters@AMTR
After Nvidia significantly lowered its guidance for its July quarter, Am Tech believes that the company can return to its previous rate of earnings and revenue growth within three quarters. The firm still remains buyers of the stock. NVDA down hard after disappointing guidance and earnings.
FSLR: Deal highlights important trends, reit Buy@AMTR
After a subsidiary of EDF Energies announced a 1.8MW PPA agreement in New Jersey using First Solar modules, Am Tech believes the deal will only provide First Solar with $4M in revenue. However, the firm thinks the deal illustrates the importance of state initiatives to increasing solar use, as well as the high value of PPA agreements in the event that the U.S. adopts a carbon cap and trade system.
Pre-Market Movers: Ahead of the Bell
Today’s session is a short one. We can expect a flurry of activity at the open that quickly dribbles until the 1PM close. Despite news (Crude, Jobs, Euro) there is surprisingly little movement. The knee-jerk on Jobs looks to be to open them higher. That looks futures-led and could well disappear as we move to the open. There is very little volume other than in the ETFs which are seeing triple-normal volume for this time of day. It is not a good environment to get anchored on prices in either direction. Of the volume movers, Nvidia (NVDA) is the leader, trading down (-26.2%) after warning of a much-weaker than expected quarter last night after the bell. There is a sharp-drop in volume to the next most active, Chesapeake (CHK), trading down (-1.58%) on no specific news. The shares hit fresh lifetime highs yesterday so this is likely profit taking. Yahoo (YHOO) is trading up +2.7% not on a Microsoft takeover rumor as was the case yesterday, but on a possible hookup with AOL. Traders seem reluctant to let go of a positive outcome for Yahoo after the spurning of Microsoft’s $33 offer. Apple (AAPL) is trading up +0.2% which is likely related to futures action. Rest up folks, Earnings Season begins next week.
U.S. equity futures are quiet; Monthly jobs reports released
U.S. equity futures are relatively quiet after the release of the monthly jobs reports. The change in non-farm payrolls showed a decline of -62,000 versus an expected decline of -60,000. The change in manufacturing payrolls showed a decline of -33,000 versus an expected decline of -30,000. The unemployment rate is 5.5% The initial jobless claims showed 404,000 versus an expected 385,000. The numbers didn’t cause a knee-jerk reaction in the market, so it will be interesting to see how the data is interpreted after it’s fully digested.
RIG: Estimates raised on Marianas contract@RBCM RBC Capital raised RIG EPS estimates to reflect the new Transocean Marianas contract with Eni. The firm continues to view shares as undervalued. Shares are Outperform rated. Target $200.
MER estimates lowered on expectation of more writedowns@JPMS
JP Morgan expects MER to report additional write-downs in Q2 due to ABS/CDO and monoline exposure and believes the company will need to raise its credit reserves for its $7.8B gross exposure to monolines. JP Morgan maintains a Neutral rating on MER shares.
Arch Coal-ACI upgraded to Buy from Hold@SBSH
Citigroup upgraded shares on valuation following the recent weakness. Target raised to $86 from $63.
Peabody Energy-BTU upgraded to Buy from Hold@SBSH
Citigroup upgraded shares on valuation following the recent weakness. Target raised to $105 from $69.
YGE announces 10MW sales contract
Yingli Green Energy Holding Company Limited announced that it has entered into a sales contract with Enfinity Management, bvba, a global renewable energy project developer located in Ghent, Belgium. Under the terms of the agreement, Yingli Green Energy is expected to supply 10 MW of PV modules to Enfinity from July 2008 to December 2008.
UBS: Believe writedowns could reach $6.9B in Q2@SBSH
Citigroup believes UBS could writedown an additional $6.9B in Q2 due to the weak financial markets and notes the company still carries $83B of risk exposures that are likely to require further markdowns. Citigroup believes UBS may have to raise more capital. Shares remain Hold rated.
Nasdaq 100 Index-NDX: Pivot Points
The following are the pivot points for the Nasdaq 100 Index (NDX). Pivot High: 1845.490, Pivot Low: 1786.500. 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.
S&P 500-SPX: Pivot Points
The following are the pivot points for the S&P 500 (SPX). Pivot High: 1276.755, Pivot Low: 1246.285. 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.
Dow Jones Industrials Index-DJX: Pivot Points
The following are the pivot points for the Dow Jones Industrials Index (DJX). Pivot High: 11324.815, Pivot Low: 11105.065. 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.
Jim Cramer’s “Mad Money” from flyonthewall.com
In these tough times, Cramer said its time to start taking profits in the stocks that have gains and start hoarding cash to buy them back later at lower levels. He then returned to his theme for the week: non-economically sensitive stocks that will benefit from this year’s Medicare spending bill. Cramer recommended Pediatrix Medical (PDX) as the next in his series. Pediatrix manages the largest network of neonatal specialists and Neonatal Intensive Care Units (NICU) in the country. The stock is currently just 3 points of its 52-week low, but Cramer said that’s because Wall Street just doesn’t’ understand Pediatrix’s business. While Pediatrix itself will not receive any money from Medicare, Cramer noted it does rely on the Medicare pay rate set for physicians to determine the benchmark it will use to charge for theirs. Cramer also noted the company’s long-term growth prospects as the number of births in the U.S. that will require NICU services is expected to increase. Pediatrix has already had its sell-off, with shares falling from a high of $70 a share to just $48 a share today. Cramer gave Pediatrix a target of $62 a share, or a 28% gain of today’s levels. Next, Cramer warned that there will be more pain coming for his favorite sector, natural gas. He told investors that if they can’t handle a 5% to 10% sell-off in the group, they may want to scale back now and buy some back at lower levels. Cramer warned that there will be more pain coming for his favorite sector, natural gas. He told investors that if they can’t handle a 5% to 10% sell-off in the group, they may want to scale back now and buy some back at lower levels. Cramer recommended Spectra Energy (SE) as a smaller natural gas play they may not be as volatile as some of the bigger stocks he’s recommended previously. Spectra is a natural gas transmission company that helps get natural gas where it needs to go. With over $3B worth of projects in the works, Spectra is in a strong position. “Coal is so out of favor due to its emissions,” he said, “and natural gas is the logical alternative.” Spectra sports a $600M stock buyback program and a 3.5% dividend yield. He pegged the stock at $32.84 a share for a 17% gain, if its P/E multiple comes up to the industry average. “Wall of Shame” list of the worst CEOs: (Removed) James Keyes, CEO of Blockbuster (BBI) as he is “doing the right thing for his shareholders” by walking away from the bid to acquire Circuit City (CC), says Cramer. (Added) Founder and CEO of Yahoo! (YHOO), Jerry Yang. “This man has treated this company as his own,” he said, calling Yang “truly shameful.” SUDDEN DEATH: (Bullish) SCHW; FRO. (Bearish) SFL. LIGHTNING ROUND: (Bullish) HSC; VVC; SFG; ENI; CPL. (Bearish) RIO; GR; SWKS; VLO; HS.
Fast Money position recap- First Moves: Guy recommends long CELG, Tim likes TTM, Pete likes ZRAN, Karen likes PM. Adami Owns (AGU), (BTU), (C), (GS), (ITNC), (MSFT), (NUE); Finerman Owns (GS); Finerman’s Firm Owns (SUN), (TSO), (VLO), (MSFT), (PM); Finerman’s Firm Owns SPX Index Puts; Finerman’s Firm And Finerman Own (C) And (C) Leaps; Finerman’s Firm Owns (GE) And (GE) Puts; Finerman’s Firm Is Short (XME) And Owns (XME) Puts; Finerman’s Firm Is Short (IYR), (IJR), (MDY), (SPY), (IWM); Najarian Owns (AAPL), (CHK), (HPQ), (TSO), (XLF); Najarian Owns (MER) Puts; Najarian Owns (SLB) Calls, (WM) Calls, (YHOO) Calls, (ZRAN) Calls ;Seymour Owns (AAPL), (F), (MER), (MSFT), (TSO); Seygem Asset Management Owns (EEM), (TTM).
Yesterday there was a massive rotation out of the strongest sectors in the market namely coal, steel, miners. There was a mass exodus for the exits as bearish news of lower coal prices and possible lower demand metrics coming out of the shippers, China, and US Utilities caused an across the board drop in these names. The technical damage was severe and could mark a temp top for these names as they consolidate and possibly trail lower and technically follow the same path as the fertilizer plays. Just like the fertilizer plays the fundamentals are still sound but the appetite for risk has been dampened and all equity exposure is being lowered. These types of events happen where any strength in the market is a reason to take profits and lower exposure. These names are also widely owned by momentum funds and traders and volatility should be expected. We were in a bear market that had strong sectors overly outperforming the market, now we are getting a convergence of that trade and we could be in a bear market without or with even a smaller pool of strong sectors outperforming going forward. Time will tell. Until we see some market stabilization and a second rally wave with strong volume, the momentum is still to the downside and the higher probability plays will be to short rallies until a true bottom is formed. What is going on with the market right now is the story of thin illiquid trading that accentuates market moves, it just happens to be in a negative environment. The problem lies in not having any buyers to counterbalance the waves of selling. The waves of selling is mostly from the rebalancing of portfolios from all investors, hedge fund redemptions and risk aversion to equities due to the weak macro environment. The market is looking 6 months out and it does not like what it foresees. The Paulson comments made it very nervous and darkened its outlook as the dark cloud above it keeps following it like Charlie Brown. Have focus, have patience, pick plays with a high probability of success. Plan the trade and trade the plan. Great Luck and Great trading. Enjoy your 4th of July celebrations!
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