Futures slightly lower (-5bps) this morning on European weakness stemming from news that
will have to tap its $61B IMF/EU bailout sooner rather than later. (The euro is weaker and Greek bond yields have blown out dramatically.) Stunning earnings from AAPL last night have not been enough – as yet – to turn the market positive. (Retailers like RSH and BBY may be strong on the back of Apple’s earnings, by the way…) Altera (ALTR; +3% premkt) beat by 10c, beat on revenues, and raised guidance. EMC also beat estimates by 2c and raised guidance. On the other hand, Yahoo (YHOO; -5%), Gilead Sciences (GILD; -5%), and Juniper (JNPR; -6.5%) are all trading lower post-earnings release. Financial giant Morgan Stanley reported 82c vs. the 57c estimate and is trading up 3% premkt. Regional bank earnings are mostly better-than-expected, as Huntington Bank (HBAN; +5.5%), KeyCorp (KEY; +4%), and SunTrust (STI; flat) reported. Telecom giant AT&T missed estimates, and looks set to open flat. Industrial giant Boeing (BA) reported slightly better-than-expected, and McDonald’s (MCD) is trading higher after beating estimates. In M&A news, Visa is buying CyberSource for $26/share. In other corporate news, MCD’s March same-store-sales were up 5.2% globally and TGT’s March credit card data was better-than-expected. And in a sign the apocalypse is upon us, Bloomberg reported that a recent survey indicates that men with iPhones are “more attractive” to women than their iPhone-less counterparts. Wow. Greece
If you are keeping score at home, roughly 10% of the S&P 500 has reported thus far, and 84% of those companies reporting have beaten estimates. Obama heads to NYC tomorrow to speak on financial regulation. Worth noting that the IMF raised 2010 global growth outlook this morning to +4.2% from +3.9% prior. At the same time, the IMF’s proposed tax levy on banks continues to make headlines. According to the Wall Street Journal and the BBC, the IMF is proposing that G-20 nations should adopt two banks taxes: one on balance sheet size, and another based on profits and compensation. According to CSFB,
IMF proposing new taxes on financial industry, we believe impact could be upwards of 20% of PBT for the European Banking Sector and should be taken seriously. This is to be discussed at the G20 Finance Ministers Meeting this wknd w/final decision at banking summit in
at the end of June. Across the pond, seeing sellers of financials yet most of which they believe is due to the high beta nature of the sector, not that the market is pricing in the severity of this legislation. Toronto
Regarding the Goldman Sachs soap opera, CNBC reported – at roughly 8:30am – that they have old SEC testimony from a Goldman official that clearly expresses Paulson & Co’s intent to short the CDO’s that ACA went long, and that ACA knew this… The implication is that the SEC squashed this evidence, which directly counters their claim that Goldman misled ACA. GS is up a couple dollars on that release, and the SEC has not – as yet – commented on it. At the same time, this morning’s WSJ reports that Goldman may lose several governments, including the
U.S. and the , as clients. U.K.
For those interested in the “big picture,” this Bloomberg editorial yesterday by Buffet biographer Caroline Baum is interesting:
Leading economic indicators are pointing up. Economists expect the economy grew 3 percent in the first quarter, according to a Bloomberg News survey. That’s not exactly the kind of rubber-band effect that follows long, deep recessions, but it’s nothing to sneeze at. Yet something doesn’t feel right about the current recovery, and it’s not just the lagging labor market. Economists like to talk about “organic growth,” the kind of growth that’s internally generated. An economy, left to its own devices and with the proper incentives, will grow. This recovery is all chemical additives and no organic compost. Benchmark interest rates have been at zero to 0.25 basis points for 16 months and are likely to remain there “for an extended period,” according to the Fed. The Dow Jones Wilshire 5000 Index is up 45 percent in the past year. Credit spreads have narrowed. Commodity indexes are close to their 2008 pre-crisis highs. Bank credit is contracting.
It may be costless for banks to borrow, but holding rates at zero won’t be costless for the Fed or the economy. Extended periods of negative real interest rates don’t end well. The same goes for fiscal policy. Massive government spending may show up in today’s GDP, but it will be at the expense of private investment tomorrow. Fed policy makers have made it clear they believe a still- fragile economy needs low interest rates to nurse it back to health. Housing is far from healthy, even with the Fed’s $1.25 trillion purchase of agency mortgage-backed securities, tax credits for first-time buyers and a slew of government mortgage- modification programs that are seeing high re-default rates. Using low interest rates to stabilize housing is apt to destabilize some other sector of the economy or sow the seeds of future inflation. Of course, the Fed has yet to concede the housing bubble was in any way, shape or form the result of its ultra-low interest rates from 2003 to 2005. This seems absurd, and it is. If policy makers can’t understand how we got here, no wonder the rest of us are lost when it comes to figuring out where we are.
BofAMLCO ups VMW. BCAP ups CECO. PIPR ups ASTE, ABFS. BARD ups HST. UBSS ups PH. WEFA ups GET. BCAP cuts STRA. JEFF cuts CSA, VITC. OPCO cuts FRX. CREE beats by 3c. CYBS to be acquired by V for $26/share. DRYS announces $150M convertible sr notes offering. IGTE files secondary. MANH beats by 15c. NUVA reports in-line. PLCS beats by 2c. STJ beats by 7c. STX beats by 9c and reports in-line revs. TPX beats by 13c and guides higher. Barron’s positive VOD. CIEN cut at Soleil. RAJA ups HOG; cuts MICC, SNV, USB, FDEF. PVH announces secondary.
S&P 500 PreMarket 8:30am (last/% change prior close/volume):
JUNIPER NETWORKS 29.50 -6.53% 208095
APPLE INC 259.43 +6.07% 588164
YAHOO! INC 17.52 -4.68% 2222730
PEPCO HOLDINGS 16.95 +4.31% 207278
ALTERA CORP 27.78 +3.85% 44637
CH ROBINSON 56.80 -3.57% 65700
MOODY'S CORP 26.24 -3.24% 3204
KEYCORP 8.85 +3.15% 341351
MORGAN STANLEY 31.34 +2.92% 906784
JDS UNIPHASE 13.73 +2.62% 11194
BROADCOM CORP-A 36.49 +2.44% 25200
ST JUDE MEDICAL 42.00 +2.44% 86300
SANDISK CORP 38.25 +2.33% 17062
EMC CORP/MASS 19.83 +2.16% 811545
Today’s Trivia: Today happens to be “San Jacinto Day” in
Yesterday's Answer: Apparently a herring becomes a sardine the moment it is canned.
Best Quotes: “Asia mostly higher, Europe lower across the board as
has "officially" began talks on how to tap the the $61B emergency aid package. Greece
No one really has the energy or interest to keep talking about
, but that's clearly what's dragging SPX futures lower; premiums over German bonds have blown out to new highs in the last few minutes (now 500 bps over bunds) in a clear signal the European issue isn't going away any time soon. Greece
All the talk last night and this morning is AAPL centric, and rightly so given the magnitude of the beat. Clearly the NASDAQ will be skewed to the upside given AAPL accounts for almost 17% of the index, and the stock is looking up 15-ish. Not one publically traded company's management has yet said consumer spending has "normalized", so it makes you wonder what kind of number AAPL can post in a stable consumer environment.
Ex AAPL, earnings have been OK but not great. IBM, YHOO and Coke were underwhelming last night. But trumping that is the broader "collective exhale" coming after all the larger banks/brokers have reported very solid results. Almost no one believes we can have a sustained recovery without health in the financial space, specifically as it relates to balance sheet health and lending. So despite the atmosphere of bank bashing, they still likely remain the most critical sector to the recovery.
No macro reports today, the home sale data tomorrow will likely be skewed up by the impending expiration of the home buyer tax credit.”
--RBC Morning Note