Tuesday, November 24, 2009

Morning Note...

Futures flat to slightly higher (+15bps) as the Q3 GDP revision was in-line with expectations.  The prior +3.5% reading was revised down to +2.8%.  Personal Consumption was revised down to +2.9% from +3.2%, and the GDP price index was lowered to +0.5% from +0.8%.  This last reading is significant in the sense that it conveys a lack of inflationary pressure.  In corporate news, HPQ reported in-line after the close last night, ADI beats by 10c and guides higher, AEO reported in-line and is trading higher (they beat the whisper number), DLTR beats by 10c, and HNZ beat by 6c and raised guidance.  In international news, Russia cut rates by 50bps to 9%.  Germany saw better-than-expected confidence data.  China was down the most in three months (-3.5%) on concerns the top banks there will need to raise capital.  According to the Wall Street Journal, US consumers are expected to spend an average of $390 on gifts during the holiday season, which would be a 7% decline from last year.   CaseSchiller Home Price data is due at 9am. 

Important data will be released later today, as Cosumer Confidence hits the tape at 10am and the FOMC minutes from the Nov 4th meeting are due at 2pm.  Good quote out of Gartman today, see quote section below.  Light volumes continue during this holiday week.  Remember, tomorrow is a full day, Thursday is a holiday, and Friday is a half day.  Given China’s weakness, financials are clearly in the news this morning.  Here’s a good summary from Morgan Stanley:

Bank capital levels globally are a major focus this morning and bank stocks are generally weaker around the world given capital-related newsflow and developments from all the major global banking sectors. Near-term implications for bank stocks are likely incrementally negative given how broad-based the regulatory focus seems to be on this issue and the supply/demand implications should we see a round of capital raises from banks across multiple markets, including Asia, Europe and perhaps the US.

Globally: A study by S&P has raised questions over the financial strength of some of the biggest banks ahead of new rules that could require them to raise more funds. The analysis by S&P showed that HSBC is the best capitalized bank in the world, while Switzerland's UBS, Citigroup of the US and several of Japan's biggest banks are among the weakest.
US: Media reports that the Fed asked nine of the U.S. banks that were part of the stress tests (including BAC, C, FITB, GMAC, KEY, PNC, RF) to submit plans for repaying TARP. The Fed asked the banks to give plans including a timetable, according to reports. The firms may have the option to repay TARP soon if they’ve been able to raise common equity and would continue to exceed capital buffers set in the stress tests.
Europe: Lloyds, the U.K.’s biggest mortgage lender, launched as expected a $22bn rights offering, selling shares at a 59.5 percent discount. The offering will close on Dec 14. While the Lloyd's offering was specifically intended to allow them to avoid having the government talk a large stake, questions will persist as to capital adequacy across the European banking sector
China: The bank regulator told banks they need to develop plans for replenishing capital and those with “relatively low” ratios will face restrictions. Credit risks are growing after lenders made a record 8.67 trillion yuan of loans in the first nine months to help finance a government stimulus package, the watchdog said in October.  Bank of China, the third-largest in China, is studying “various options” to replenish capital. The bank has no detailed plans to disclose yet, it said in a statement, a day after Reuters said the lender may need to raise about ($15bn) to meet a new guideline on financial buffers from the nation’s banking regulator.
Japan: Japanese banks are down about 3% today on concerns other banks will follow the lead of MUFJ, which announced a planned $11bn capital raise last week

DBAB ups ABG, EMN.  AMLN upped at BCAP.  BDX increases dividend.  CBRL beats by 16c.  DSW beats by 14c and raises guidance.  DY misses by 2c and misses on revs.  HRL beats by 9c.  MDT beats by 3c.  Cramer positive interview with NAT CEO.  CITI adds NSM to Top Picks.  WEFA ups PRU.  UBSS ups RS.  UBSS cuts UNP.  JPHQ ups BCH.  OPCO ups AYI.  BofAMLCO cuts ALV. 

Asia lower overnight.  Europe mixed to slightly lower.  USD -17bps.  Oil -23bps.  Gold +40bps.  Bond prices are higher. 

Brightpoint News

Brightpoint PreMarket (yest close/premkt/% change/volume):

S&P 500 PreMarket (last/% change prior close/volume): 
TELLABS INC                  6.00      +5.08% 22625
MEDTRONIC INC             42.25    +4.81% 318352
DEAN FOODS CO            16.85    +3.44% 1300
ANALOG DEVICES           28.75    +2.9 %  44900
TJX COS INC                  39.54    +2.20% 1950
NATL SEMICONDUCT      14.10    +2.1 %  2000
BECTON DICKINSON       76.80    +2.06% 1250

Today’s Trivia:  What does the “WC” stand for on some bathroom doors? 

Yesterday's Answer:  “Cut and run” was originally a nautical term that refers to ships making a hasty departure by the cutting off of the anchor rope and running before the wind. 

Best Quotes: “Finally… and we think somewhat ominously for we’ve heard rumblings of actions that might be taken which we rather openly fear are being debated including import fees and trade restrictions… President Obama yesterday assured everyone that increasing jobs was his Administration’s top priority and that that shall be his focus for the foreseeable future. However, the President put forth no specifics about how he and his Administration intended meet this goal other than hinting at further increased government spending. Later, the “White House” issued a public statement noting that all "sensible and reasonable measures" to increase jobs here in the US shall be considered but balanced by concerns over the record budget deficits. Hence either more and larger tax increases are being considered, or something more serious is. As the President said,
Our economy is growing again for the first time in more than a year [but]… we cannot be sit back and 
be  satisfied given the extraordinarily high unemployment levels that we have seen.
That sort of language always causes us concern when right-of-centre political figures make them; we are scared-to-death when left-of-centre political figures make them… especially left-of-centre political figures whose public support ratings are falling.”  --Gartman Letter

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