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Periodicals Wrap-Up for Tuesday, November 18th
WALL STREET JOURNAL: Insurers bludgeoned by losses in their investment portfolios are maneuvering to remake themselves as savings and loan holding companies thereby qualifying for bailout loans from the government’s TARP program, the Wall Street Journal reported. Some deals in the works include Lincoln National Corp.’s (LNC) agreeing to buy a small savings-and-loan in Goodland, IN; Genworth Financial (GNW) buying a thrift in Maple Grove, MN; and Hartford Financial Services (HIG) purchasing Federal Trust Corp. of Sanford, FL…According to the Wall Street Journal, investors are still worried about Citigroup’s (C) capital, even after the bank announced plans to cut 50K employees. CEO Vikram Pandit told employees that the bank’s capital base is strong, and while job cuts will reduce Citigroup’s cost base, the bank’s balance sheet is still highly leveraged…BLOOMBERG: Bloomberg reported that BlackRock (BLK) will cut jobs for the first time in its 20-year history. The largest publicly-traded asset manager in the U.S. is feeling the effects from the slumping financial markets…Bloomberg also reported that Goldman Sachs (GS), Morgan Stanley (MS) and European investment banks are pushing exchange fees lower using the early success of new trading platforms they have backed…
Asian Markets Wrap-up for Tuesday, November 18
Stocks fell in a majority of Asian countries, with financial and technology companies spearheading the declines. JAPAN: The Nikkei 225 Stock Average sank 2.28%, to 8,328.41. Real estate companies led stocks downward, with developer Mitsubishi Estate dropping 8.3% and Mitsui Fudosan (MTSFF), another developer, losing 5.9%. Insurance companies also fell, after Sony Financial Holdings reported that its 1H08 earnings dropped more than 25%. Sony Financial declined 9.2%, while Sompo Japan Insurance (SJIIF) slid 8.9% and another insurer, Tokio Marine Holdings (TKOMY), slumped 8.8%. Companies that utilize oil to make their products advanced, with Oji Paper Co. (OJIPY) jumping 6.9% and Sumitomo Rubber Industries (SMTUF) advancing 4.2%. CHINA: The CSI 300 Index plummeted 7.42% to 1,839.82 on concerns about economic growth. Commodities companies led the decline. Baoshan Iron & Steel Co., Aluminum Corp. of China (ACH), Jiangxi Copper Co., and Zijin Mining (ZIJMF) all sank by the daily limit of 10%. Pudong Bank, Ping An Insurance (PNGAY), and China Shipping (CITAY) also dropped 10%. China Eastern Airlines (CEA) surged 10% after saying that it was completing an application for government aid. AROUND ASIA: South Korea’s KRX 100 declined 4.08%, while Indonesia’s Jakarta Composite lost 3.81% and Taiwan’s Taiex fell 3.03%… Hong Kong’s unemployment rate rose to 3.5% as of the end of October, versus 3.4% at the end of September.
Fed official says economy deteriorating faster than expected-PBS
In an exclusive interview with The Nightly Business Report, Thomas Hoenig, president of the Federal Reserve Bank of Kansas City said that the recession is more severe than anticipated and the U.S. economy is deteriorating faster than expected. However, he says that it isn’t yet the worst recession in the postwar period and “it doesn’t have to be”. Hoenig comments that the Fed “had done about as much as it can do,” and that the government’s financial rescue plan is still evolving, which causes confusion. He believes there is still a “struggle” ahead with the housing markets.
Baidu dealing with major setbacks-WSJ
The Wall Street Journal reports that Baidu.com (BIDU) has had a run-in with the CCTV since the company allowed unlicensed medical companies win keyword auctions while sidelining government licensed drug sellers. Furthermore, users of the site are having a hard time determining if links are paid-for ads or genuinely result based. Baidu.com could lose millions in revenue and a big blow to its credibility.
U.S. equity futures continue to point to a lower open
Stock futures continue to point to a lower open but they’re off their worst levels of the morning, and ahead of the automakers testimony before the Senate Banking Committee. The big three automakers and representatives of the UAW will request funds for an industry bailout. Investors received positive news from Hewlett-Packard (HPQ) which said earnings will be better than forecast. Investors also received data on producer prices which showed that prices fell -2.8% versus an expected drop of -1.9%. If the volatile components of food and energy are removed from the number it came in at an increase of 0.4% versus an expected increase of 0.1%.
Analysts Upgrade Summary for Tuesday, November 18th
MOST NOTEWORTHY: Aaron Rents (RNT), MedCath (MDTH) and AeroVironment (AVAV) were today’s noteworthy upgrades: Cowen upgraded Aaron Rents to Outperform from Neutral and believes the company’s business model is gaining momentum despite the difficult environment. The firm views valuation as attractive. Citigroup upgraded shares of MedCath to Hold from Sell on valuation following the recent sell-off. The company’s target was lowered to $9 from $19. Stanford upgraded AeroVironment to Buy from Hold based on valuation and because they believe its visibility over the next year has improved…OTHER UPGRADES: Chiquita Brands (CQB) was lifted to Buy from Hold at BB&T. Chico’s FAS (CHS) was upgraded to Neutral from Sell at UBS. FCStone (FCSX) was raised to Strong Buy from Outperform at Raymond James.
Analysts Downgrade Summary for Tuesday, November 18th
MOST NOTEWORTHY: Southern Peru (PCU), Albermarle (ALB) and Clearwire (CLWR) were today’s noteworthy downgrades: Morgan Stanley downgraded Southern Peru to Underweight from Equal Weight citing lower molybdenum prices and higher operating costs. Oppenheimer believes Albermarle’s end markets could remain under pressure into 2009. Shares were downgraded to Underperform from Perform. RBC Capital downgraded Clearwire to Sector Perform from Outperform based on reduced valuation parameters and lack of catalysts. The company’s target was lowered to $9 from $15…OTHER DOWNGRADES: Kellogg (K) and Coca-Cola (KO) were cut to Neutral from Buy at UBS. Evergreen Solar (ESLR) was downgraded at JP Morgan to Underweight from Neutral. Deutsche Telekom (DT) was downgraded to Neutral from Buy at Goldman and to Hold from Buy at Deutsche Bank.
Analysts Initiation Summary for Tuesday, November 18th
MOST NOTEWORTHY: New Oriental Education (EDU), China Green (CGAG) and Nabors Industries (NBR) were today’s noteworthy initiations: Baird initiated New Oriental Education with a Neutral rating and $64 target citing concerns of high 2Q09 expectations and the economic slowdown. Roth Capital believes China Green is well positioned for strong top and bottom line growth given expansion of manufacturing capacity and R&D facility, market share gains, new product development, and increased demand for organic fertilizer. Shares were started with a Buy rating and $5 target Jesup & Lamont assumed coverage of Nabors Industries with a Hold rating. The firm cited near-term uncertainty in the commodity market and demand destruction…OTHER INITIATIONS: First Solar (FSLR) was initiated at JP Morgan with an Overweight rating. Schnitzer Steel (SCHN) and Commercial Metals (CMC) were initiated with Equal Weight ratings at Morgan Stanley.
The case for a bankruptcy reorganization for automakers-BusinessWeek
Writing in BusinessWeek, Jack Welch, former GE (GE) CEO and his wife Suzy, argue that the automakers, specifically GM (GM) and Chrysler, go into bankruptcy to better reorganize themselves and then merge. It is, they say, the most “viable future for the industry.” A government bailout, or life support solution, won’t help to keep the industry alive.
Pre-Market Top 5 Losers for November 18 2008
The following stocks were the top percentage losers before the open on solid volume of at least 50K shares, trading at over $10. MDT (-6.04%). Only one stock met the criteria this morning
Pre-Market Top 5 Gainers for November 18 2008
The following stocks were the top percentage gainers before the open on solid volume of at least 50K shares, trading at over $10. HPQ +13.81%, YHOO +12.6%, DELL +4.56%, HD +3.5%, BIDU +2.9%
Freeport McMoRan-FCX estimates lowered at Morgan Stanley
Morgan Stanley lowered FCX estimates due to lower molybdenum prices and new production guidance. Shares are Overweight rated
S&P 500-SPX: Pivot Points
The following are the pivot points for the SPX. Pivot High: 866.520, Pivot Low: 833.210. 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.
Tinder Dry Conditions for a Reversal Day?
The surprise pre-announcement to the upside by Hewlett-Packard (HPQ) has turned the futures around completely. Tuesdays already have a reputation for being strong reversal days. As we were heading down to the lows of last week it seemed there was no good news to be had; HPQ has changed all that. We can expect a strong rally in technology at least at the front of the day. Whether that holds is going to tell us a lot about conditions. If this gets sold, we have non-fundamental issues still driving the tape. Levels to watch now in the QQQQ are as follows. Resistance levels to watch as potential upside objectives are at $28.79, $29.26, $29.93, $30.61, $31.47. Support is at $27.52.
Baidu.com-BIDU weakness provides good entry point, says JP Morgan
JP Morgan believes concerns regarding Baidu’s inappropriate practices are overdone and remains positive on the stock. The firm maintains an Overweight rating.
Capital One-COF sells $3.56B in preferred stock to Treasury
Jim Cramer’s “Mad Money”
Cramer said every time the DJIA bounces off its lows of 8,200, he really wants to be a bull. But then, reality returns and he realizes the bad news is still getting worse, not better. Cramer said the federal bailouts still haven’t addressed the real problem of home price deflation, nor have they created a single new job. He said the dismal retail sales numbers prove that the consumer is still not spending. And the fate of General Motors (GM) still lingers over the economy like a huge black cloud. Cramer said the only things that would change his mind on the markets are interest rate cuts in China and Europe, or a resolution to the GM crisis. With the collapse in crude oil prices, Cramer took a hard look at his basket of green stocks: First Solar (FSLR), Foster Wheeler (FWLT), Shaw Group (SGR), MEMC Technologies (WFR), BorgWarner (BWA), TetraTech (TTEK), OM Group (OMG) and Fuel-Tech (FTEK). Since Cramer first highlighted the green stocks on April 16, 2007, the stocks have enjoyed a 65% gain on average between then and Nov. 6, 2008. However, as oil and natural gas prices have plummeted of late, so have their green alternatives. The green basket is now down 37% from April 2007 to today. Cramer blamed Monday’s fall in green stocks on lower oil prices, as well as forced selling by ailing hedge fund investors. Cramer said that with President-elect Barrack Obama clearly in the ethanol camp, he sees little chance for a resurgence for the natural gas alternative or in any of the wind or solar plays anytime soon. Next, Cramer talked with Jim Hackett, chairman and CEO of Anadarko Petroleum (APC). Hackett said he still sees natural gas as the fuel for the future and one that’s right for the economy and for the environment. Hackett said Anadarko has largely protected itself from the downturn by hedging 95% of its production for 2008 and 2009 and 70% of its production for 2010. He said the acquisitions made by the company in 2007 are still economically viable. Hackett said he sees the natural gas market as now being oversold. He predicted the stocks will trade ahead of the coming recovery and represent a great value to shareholders. Anadarko remains committed to its stock repurchase program. Cramer said, Anadarko’s stock does represent a lot of value, but he fell short of offering his full endorsement. LIGHTNING ROUND: (Bullish) WY; NAT; DUK; TAP; CPB; GIS. (Bearish) AET; MER; FRO; CBI; AEE; CAG.
Fast Money position recap- Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Pete Najarian Owns (ETFC); Pete Najarian Owns (MOS) And Is Short (MOS) Calls; Pete Najarian Owns (SCHW) And Is Short (SCHW) Calls; Pete Najarian Owns (CVX) Put Spread; Pete Najarian Owns (ADM) Call Spread; Finerman’s Firm Owns (MSFT); Finerman’s Firm Owns (OIH) Puts; Finerman’s Firm Owns (ROH) Calls; Finerman’s Firm Is Short (IYR), (IJR), (MDY), (SPY), (IWM), (RTH), (USO), (BBT), (COF), (VNO); Seymour Owns (AAPL), (BAC), (ETFC), (F), (INTC), (MER); Seymour Is Short (TM)