Tuesday, January 12, 2010

Morning Note...

Futures -70bps this morning on a weaker than expected earnings season kickoff, foreshadowing of potential tightening out the People’s Bank of China, and a wider than expected US trade balance for November.  In corporate news, earnings season kicked off with a relative whimper last night, as AA reported lighter than expected earnings, despite beating revenue estimates.  Additionally, oil giant CVX warned that upcoming Q4 earnings will be below Q3 levels and video-game maker ERTS lowered guidance.  On the positive side, software company INFY reported better than expected and supermarket giant SVU beat earnings estimates by 11c but missed on revenues.  Luxury retailer TIF also announced higher than expected holiday sales.  Overseas, China raised lending requirements for banks by 50bps, which many see as the first step towards “pricking the China bubble” and ultimately winding down stimulus there.  Finally, the November trade balance was -$36.4B vs. -$34.6B expected.  In other news, the Obama Administration announced plans to raise as much as $120B from a tax on banks.  Details to follow (see quote section for release), but this is aimed at recapturing TARP outlays by the gov’t/taxpayers.  In geopolitical news, a leading Iranian nuclear physicist was killed by a remote-controlled bomb outside his home overnight, which has our own CIA or Israel’s Mosad written all over it.  Iran is actually accusing them both this morning, saber-rattling in an already tense political environment. 

Worth noting that high expectations are in place for Q4 earnings season, and AA’s release may have taken some of the shine off consensus outlooks.  However, one day does not an earnings season make…there is a long way to go before we can truly evaluate where the economy stands in earnings terms.  Yet, on the other hand, given the market’s current “frothiness,” there seems to be potential for a sell-off catalyst around every corner… Here’s some great data relative to this point from Barclay’s Capital (data relevant for past 13 quarters):

1) If AA trades down the day after reporting on either a miss or beat, the market is down about 70% of the time as well.
2)  Because there is a school of thought that earnings expectations are very high into this season, its important to note that 67% of the time AA misses, the S&P was down a month later.

Worth noting a story that crossed the tape regarding Superbowl ads:  while still the most expensive airtime on television, slot prices are down for only the second time in history.  Thirty-second slots are selling for between $2.5M and $2.8M, which is lower than last year’s $3M level.  It’s been reported that Pepsi won’t advertise for the first time in 23 years, joining FedEx and GM as Super Bowl “dropouts.” 

ANF initiated MP at WEFA.  UBSS raises FMX.  BMOC cuts AA.  BofAMLCO ups PG, X.  BCAP ups AFL, PFG, PRU.  CITI ups AMAG, DPZ.  DBAB ups ETR, FE.  AEC announces 4.5M share offering.  JPHQ ups CPT, PSA, UDR.  MSCO ups NBL.  BARD ups WGOV.  CSFB cuts CHS.  CRM announces $500M offering.  NEED ups CRUS.  JEFF cuts CRXL.  ELX higher on earnings.  GSCO cuts GPS, FDO, PSA, SKT; ups AEO.  HGG cut at JEFF.  HT announces 35M share offering.  INFY trading higher on earnings beat.  KBH lower on earnings.  LEAP cut at PIPR.  LFUS raised guidance.  LTM cut at CSFB.  GSCO ups MGM.  OPCO cuts MYGN.  NWY cuts at PIPE.  NYB cut at BofAMLCO.  OEH announces 10M share offering.  PVH raises guidance.  REXX announces 5.5M share offering.  CSFB cuts RGS.  RTP lower on China iron ore talks.  GSCO cuts WRI.  WDFC beats by 5c, misses revs, and announces $15M buyback.  BofAMLCO cuts CL, ADI, ALTR, XLNX, PMCS, SMTC.  DBAB cuts PEG.  CITI cuts MASI.  JPHQ cuts KIM.  MSCO cuts EOG. 

Asia mixed overnight.  Europe down over 1% on average.  Gold -50bps.  Oil -165bps.  USD +15bps.

Brightpoint News:  

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

S&P 500 PreMarket (last/% change prior close/volume): 
ELECTRONIC ARTS         16.68    -8.7 %  1514193
SUPERVALU INC             13.98    +8.2 %  384433
HARTFORD FINL SV        28.30    +8.14% 604465
ALCOA INC                    16.10    -7.74%  6382694
TITANIUM METALS         13.90    -5.18%  4100
MGIC INVT CORP            7.29      +4.29% 63842
QLOGIC CORP                19.67    +4.07% 1900
LINCOLN NATL CRP         28.40    +3.69% 18550
MANITOWOC CO            12.65    -3.66%  4750
COMERICA INC               33.30    +3.35% 600
GAP INC/THE                 19.96    -3.2 %  15143
FAMILY DOLLAR ST        29.60    -3.11%  16961

Today’s Trivia:  The movie Avatar easily surpassed the $1B revenue mark, and is rapidly approaching the all-time #1, Titanic.  There are now five movies to have broken the $1B threshold…so what are the other three?

Yesterday's Answer:   Brazil is the #1 orange grower in the world. 

Best Quotes:   Obama Plans to Raise as Much as $120 Billion From Bank Fees:  2010-01-12 11:59:04.661 GMT
By Hans Nichols
     Jan. 12 (Bloomberg) -- President Barack Obama plans to impose a fee on banks expected to raise about $120 billion in order to help recoup losses from the Troubled Asset Relief Program, according to an administration official.
     The White House hasn’t settled on the final structure of the fee and how to target the big banks that have returned to profitability, said the official, who request anonymity.
     The plan is to have revenue from the fee dedicated to deficit reduction and to cover the amount that the Treasury Department estimates it will lose from TARP, which is $120 billion. Details will be contained in the fiscal 2011 budget that Obama will submit to Congress next month, the official said.

--BBERG news

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