Posted by Optiondragon for myhappytrading.com, a social network created by traders and investors for traders and investors. Join us for free!
Periodicals Wrap-Up for Thursday, September 18th
WALL STREET JOURNAL: With the backing of the U.K. government, Lloyds TSB Group (LYG) announced plans to HBOS (HBOOY) in a rescue of the troubled mortgage lender, the Wall Street Journal reported. The deal values HBOS at $22.2B and HBOS shareholders will receive 0.83 Lloyds TSB shares for each one they own. HBOS holders will own 44% of the newly combined firm…FINANCIAL TIMES: Constellation Energy (CEG), being advised by UBS (UBS) and Morgan Stanley (MS), is considering whether to attempt an emergency capital infusion or takeover suitor. While Electricite de France, which owns a 9.51% stake, is discussing whether to bid for the company, Constellation has so far considered a capital injection, from EDF or another partner, to be the “most likely outcome”. Should Constellation be unable to secure a full or partial sale or additional capital, the Financial Times said that its ability to stay liquid might be limited…NEW YORK TIMES: The New York Times reported that Morgan Stanley is said to be considering a possible merger with Wachovia (WB) or another bank, people briefed on the discussions said…Sources close to the negotiations said that, in the event it cannot find another way to raise additional capital, Washington Mutual (WM) is exploring a sale of itself. The New York Times reported that the company is working with Goldman Sachs (GS) to “assess its options” and that JP Morgan (JPM), HSBC (HBC) and Wells Fargo (WFC) are among the banks that have expressed interest…JIJI PRESS: According to the Jiji Press, after SanDisk (SNDK) rejected a takeover offer from Samsung, Toshiba (TOSBF) is now considering making a bid for SanDisk. Additionally, Seagate Technology (STX) is reportedly interested in acquiring SanDisk…
Federal Reserve and other world banks coordinate measures to address markets
The Bank of Canada, the Bank of England, the European Central Bank, the Federal Reserve, the Bank of Japan, and the Swiss National Bank are announcing coordinated measures designed to address the continued elevated pressures in U.S. dollar short-term funding markets. These measures, together with other actions taken in the last few days by individual central banks, are designed to improve the liquidity conditions in global financial markets. The central banks continue to work together closely and will take appropriate steps to address the ongoing pressures. The Federal Open Market Committee has authorized a $180 billion expansion of its temporary reciprocal currency arrangements. This increased capacity will be available to provide dollar funding for both term and overnight liquidity operations by the other central banks. The FOMC has authorized increases in the existing swap lines with the ECB and the Swiss National Bank. These larger facilities will now support the provision of U.S. dollar liquidity in amounts of up to $110 billion by the ECB, an increase of $55 billion, and up to $27 billion by the Swiss National Bank, an increase of $15 billion. In addition, new swap facilities have been authorized with the Bank of Japan, the Bank of England, and the Bank of Canada. These facilities will support the provision of U.S. dollar liquidity in amounts of up to $60 billion by the Bank of Japan, $40 billion by the Bank of England, and $10 billion by the Bank of Canada. All of these reciprocal currency arrangements have been authorized through January 30, 2009.
Lehman’s fall may affect Asian hedge funds-WSJ
Some commercial banks in Taiwan, Australia and China have been hurt by the failure of Lehman Brothers Holdings (LEH), and now Asian hedge funds may also be affected , reports the Wall Street Journal. “For hedge funds, the Lehman bankruptcy is vastly more damaging [than AIG (AIG)],” says Steve Diggle with hedge fund Artradis Fund Management in Singapore.
Asian Markets Wrap-Up for Thursday, September 18
Asian stocks fell sharply as credit tightened further and investors worried that additional financial companies would have severe difficulties. JAPAN: The Nikkei 225 sank 2.22% to 11,489.30, its lowest level in more than three years. Brokerage firm Nomura Holdings (NMR) retreated 6.4%, and casualty insurer Nipponkoa (NPPKF) tumbled 10%. Sumitomo Mitsui Financial, a bank, dropped 6.6%. Sony (SNE) fell 8.7%, after Goldman Sachs downgraded the company to Neutral from Buy. Gold mining company Sumitomo Metal Mining (STMNF) jumped 7.2% following the surge in the price of gold. AUSTRALIA: The S&P/ASX 200 Index dropped 2.43% to 4,607.30. Macquarie Group (MQBKY), an investment bank, plummeted 22%. Infrastructure manager Babcock & Brown dove 17%. Insurance company Suncorp-Metway (SNMYF) sank 5.8%, reaching a three-year low. AROUND ASIA: China’s CSI 300 Index dropped 1.72%, while Taiwan’s Taiex Index fell 2.74% and South Korea’s KRX 100 lost 2.45%…India’s finance minister said the country’s banks will not be significantly hurt by the U.S. credit crisis.
Morgan Stanley is weighing a merger with Wachovia-NY Times
Morgan Stanley (MS) is thinking of merging with Wachovia (WB) or another bank, inside sources said. Wachovia reportedly called Morgan Stanley CEO John Mack yesterday to express its interest in a merger. Other banks are also believed to be interested in Morgan Stanley, which is considering a range of options.
Senators seek JPMorgan documents to explore root of oil price increases-NY Times
A Senate subcommittee has asked JPMorgan (JPM) to immediately begin forwarding internal documents related to its opinion on speculation in the oil market. The subcommittee’s chairman made the request after an internal JPMorgan e-mail obtained by the subcommittee seemed to contradict congressional testimony from one of the bank’s executives. JPMorgan’s head of global commodity research told senators that high energy prices were primarily caused by supply and demand, but an e-mail by the bank’s chief investment officer attributed the high prices to speculation.
Morgan Stanley is negotiating with China’s CIC, not Citic-FT
Morgan Stanley (MS) is not in talks about receiving an investment from China’s Citic Securities, an inside source told the Financial Times. However, Chinese sovereign wealth fund CIC is holding high-level negotiations with Morgan Stanley. But it is unlikely that CIC would try to buy the U.S. investment bank on its own, the Financial Times adds.
Iran’s Ahmadinejad says US power in decline, Israel nearing its end-Bloomberg
Any “panic” over GE Capital is overdone-WSJ
Yes GE’s (GE) financial services isn’t in great shape. But GE Capital’s debt to equity is less than eight times, and its diverse asset base generally provides more protection, points out the Wall Street Journal’s “Heard on the Street”.
U.S. equity futures continue to point to a higher open
U.S. equity futures remain higher after the release of the jobless claims report for the week of September 13. The report showed there were 455,000 claims filed versus an expected 440,000. The continuing claims were generally in line with expectations at 3.47M. Investors will now be watching for the Philadelphia Fed manufacturing survey and the leading economic indicators report which are due out at 10:00 am, and the EIA Natural Gas Storage Change report due out at 10:30 am. :
These growth stocks may be bargains-WSJ
While the Wall Street Journal focuses on NN (NNBR), a machine tool and accessory maker, whose earnings and growth forecasts look promising, it also points out several other companies to look at for possible bargains. They are: Arch Coal (ACI), Central European Distribution (CEDC), CSX (CSX), Fossil (FOSL), Foster Wheeler FWLT), Genesco (GCO), and XTO Energy (XTO).
BofA official says company has saved homes from foreclosure-Charlotte Observer
In the two months following its purchase of Countrywide, Michael Gross, the managing director for mortgage loss mitigation at Bank of America (BAC) says the company has helped save 52,000 homes from foreclosure. At a hearing of the House Financial Services Committee to discuss the Hope for Homeowners Program, an effort to prevent people who have defaulted on their mortgages from losing their homes, Gross testified that the number of “home retention workouts” was up from 12,300 in the same period the prior year.
Russia suspends trading again-Washington Post
In an attempt to halt a severe stock market crash, Russia once again suspended stock trading and took other emergency measures. After falling sharply for a third consecutive day, trading was suspended at mid-day and the government later cut reserve requirements for banks, a move which feed up up to $12B. In addition to banks, oil producers in the country have suffered steep declines, falling faster than the “drop in oil prices should dictate.” Analysts believe that if the crisis is not contained, it may spread to other sectors.
HOC upgraded to Buy from Neutral@GSCO
Goldman upgraded HOC based on improved near-term outlook for refiners. Target to $45.
Morgan Stanley-MS: Dropping on Merger News
The stock has traded in a volatile range this morning and is now off (-12%) as there appears to be confirmation of merger discussions with Wachovia (WB). There has been chatter that the company may attempt to stay independent or was in conversation with China’s Citic. The shares have an “anything could happen” feel at this point as traders attempt to find some price that will stick. Resistance levels to watch as potential upside objectives are at $20.07, $20.48, $20.93, $21.27, $21.63, $22.00. Support levels to watch as potential downside objectives are at $19.23, $18.68, $18.39, $18.00, $17.35, $17.09, $16.54, $16.25.
Google-GOOG price target $660 from $700; maintain Outperform@BERN
Bernstein lowered GOOG price target based on recent macro economic developments. The firm views shares as oversold and believes it would take an unprecedented and unforeseeable event to push shares below $400. Shares are Outperform rated.
Morgan Stanley-MS merger talks with Wachovia to begin imminently-CNBC
Morgan Stanley-MS talks with Wachovia are now ‘advanced,’ sources say-CNBC
Dendreon-DNDN November straddle at $4.40 into Data
DNDN closed at $5.75. DNDN expects the Independent Data Monitoring Committee (IDMC) to review in October 2008 the interim analysis of overall survival relating to the Company’s Phase 3 IMPACT (Immunotherapy for Prostate AdenoCarcinoma Treatment). DNDN November 5 straddle is priced at $4.40 according to Track Data, suggesting larger price fluctuations.
National Oilwell Varco-NOV upgraded to Buy from Hold@STFG
Stanford cited valuation for their upgrade. In addition, the firm, which set a target of $70, thinks most of the drop in commodity prices is now over.
US Banks: Bank of America, Wachovia most exposed to Lehman paper@SBSH
After the Reserve Fund money market dropped below $1.00 due to its Lehman exposure, Citigroup summarized the exposure to Lehman of the US banks. Citigroup points out that banks with Lehman commercial paper exposure in money market funds will likely step in and support their investors, unlike the Reserve Fund. The firm estimates Bank of America (BAC) has $400M of exposure, Wachovia (WB) $494M, Wells Fargo (WFC) $249M, SunTrust (STI) $70M, and New York Community (NYB) $37M.
Continental Resources-CLR upgraded to Buy from Neutral@MLCO
(Important note on how to use this upgrade/downgrade list with analyst comments and newsâ€¦.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 says fear, not facts or fundamentals, is what’s driving the market. He warned that while the selling might not be over, investors will lose some opportunities of a lifetime if they stay too negative. “Keep your powder dry and wait for the opportunities to emerge,” says Cramer. Cramer reminded viewers that after the crash of 1987, every stock on the most active list before the crash was higher a year later. Cramer said that the surprise bailout of American Int’l Group (AIG) is big news for the markets. Cramer also said the SEC’s announcement of new rules against relentless short selling is big news for the markets. He credited chairman Christopher Cox with making a good first step in undoing the damage caused by short selling and urged the commissioner to at least “try” reinstating the uptick rule. Cramer reiterated that Wednesday was not the bottom for stocks and said some companies like Ethan Allan (ETH), Sears Holdings (SHLD), Panera Bread (PNRA), and Bankrate (RATE) could rally as the market begins to stabilize and the new SEC rules take effect. Cramer spoke with Ken Powell, chair/CEO of General Mills (GIS), a stock which he owns for his charitable trust, about the company’s quarter and its future outlook. Powell dispelled rumors that consumers are “trading down” for generic brands. He said the only trend General Mills has seen is people making few trips to restaurants and more trips to the grocery store. Regarding international sales, Powell said General Mills is only in the third inning of its growth strategy. Powell characterized General Mills as a safe, resilient company that is enjoying broad-based success. LIGHTNING ROUND: (Bullish) BTU; JOYG; CLNE; PPC; TSN; ROSE. (Bearish) ACI; FLR; HMC.
Fast Money position recap- First moves: Guy likes JNJ, Pete likes long PALM. Macke Owns (WMT), (MSFT); Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Najarian Owns (AAPL) And (AAPL) Collar; Najarian Owns (MS) And (MS) Collar; Najarian Owns (TSO) Call Spread; Najarian Owns (WB) Put Spread; Najarian Owns (XLF) And (XLF) Collar; Finerman Owns Owns (GS), (JNJ), (MSFT), (SUN), (TSO); Finerman’s Firm Is Short (XLF), (IYR), (IJR), (MDY), (IWM), (SPY), (BBT), (COF).
The Central Bakers around the world are pumping liquidity into the global system and that could help support the market. The clear winner out of this is basic materials, energy plays, and gold plays. Technically most of those names in those 3 sectors look good and oil is jumping above $100 again. The Central Bankers had to do something, that drop at the end of the day yesterday was scary as the credit markets were freezing and staying cold. Much blame are put to short sellers but one has to remember that ost are taking the cues from the credit default swap trading and most are not able or sophisticated enough to trade those instruments. Scape goats need to be found. Do I think the worst is over? Not sure, but I do think a long term buying opportunity that lies ahead could be historic and a once in a lifetime kind of event due to some valuations. The problem is trying to time a bottom (let it build a bottom first). Remember one of my favorite quotes and that is, out of technicals, fundamentals and sentiment. Sentiment is the only one that can trump the other two. We need a decisive turn on sentiment. I’m looking for longs in those sectors above and not so much on the short side with puts unless I see some high probability plays. Keep nimble as things are very fluid….As Bruce Lee said, “Be like Water”…..Pick plays with a high probability of success, have focus and patience, run technicals through supply and demand. Great Luck and Happytrading.
Raised terraces in northern Congo suggest past cultivation.