Market Currents on December 17 2008 -- Seeking Alpha

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Market Currents (Wednesday, December 17, 2008)

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4:59 PM Nouriel Roubini: Welcome to the world of stag-deflation. Comment!
4:52 PM The real problem for newspapers isn’t the internet, James Surowiecki says, it’s us: "We want access to everything, we want it now, and we want it for free... Soon enough, we’re going to start getting what we pay for, and we may find out just how little that is." 2 Comments
4:47 PM With BCE (BCE) back on the desks of analysts following the death of its takeover plans, rival Telus (TU) suddenly looks less spiffy. Comment!
4:40 PM A warning to pessimistic retail investors: sell short with care. Comment!
4:30 PM The Fed's expansionary inflation policy will 'infect' other countries' stance, Simon Johnson writes at The Baseline Scenario. With global currencies gaining on the dollar, and exporters everywhere already clamoring for assistance, "central banks will be pressed hard to ease further." Comment!
4:21 PM Nike (NKE): FQ2 EPS of $0.80 beats by $0.02. Revenue of $4.6B (+6%) vs. $4.69B. "I see the current state of our industry and the world as an incredible opportunity for Nike to be a better and stronger leader, and we’re going to seize that opportunity." Shares +4.6%. (PR) Comment!
4:12 PM Take-Two Interactive Software (TTWO): Q4 EPS of $0.02 misses by $0.03. Revenue of $323M (+10.5%) vs. $326M. Sees Q1 EPS of ($0.70-0.85) vs. $0.22 and revenue of $175-225M vs. $318M. Shares -23.4%. (PR) 1 Comment
4:09 PM Herman Miller (MLHR): FQ2 EPS of $0.60 beats by $0.01. Revenue of $477M (-5.8%) vs. $487M. Gross margin 32.6% vs. 35.6% last year. (PR) Comment!
4:07 PM Paychex (PAYX): "Over the past six months, we experienced companies going out of business increasing 12%, new business starts declining 13%, checks per client decreasing 1.5%, and we saw lower levels of new hire reporting." (PR) Comment!
4:07 PM Paychex (PAYX): FQ2 EPS of $0.39 misses by $0.01. Revenue of $524M (+3.2%) vs. $533M. Shares -2.3%. (PR) Comment!
4:06 PM Another wretched day for the dollar. Euro leads gains, +3.08%. Yen +2.17%. $Cad +1.4%. Pound +0.29%. Comment!
4:05 PM Crude -3.6% to $45.03. Gold +3.1% to $869.10. Is the gold rally for real? Comment!
4:03 PM Long-end Treasurys post big gains, which were even bigger in the early going. 30-year +1.48%. 10-year +0.77%. 5-year -0.07%. 2-year -0.13%. Comment!
4:01 PM Markets manage a decent recovery from substantial lows early in the session, but finish the day on a down note. Dow -1.17% to 8,820.12. S&P -0.99% to 904.18. Nasdaq -0.67% to 1,579.31. Comment!
3:54 PM Rio Tinto (RTP) pulls out of a $10B Saudi aluminum project to preserve cash and reduce debt. Shares -1.2%. Comment!
3:52 PM Liquidity of U.S. equity REITs is showing signs of drying up, Fitch says in a special report (.pdf). "With commercial real estate debt markets stressed, and asset sale opportunities limited, REITs are now largely reliant on bank revolving lines of credit... which concerns Fitch as the banking system is significantly strained." Comment!
3:43 PM Grocery sales growth now outpace restaurant sales growth, with little tangible benefit to supermarket operators, Pali Research notes (.pdf). Possible benficiaries: discounters. Comment!
3:32 PM John Richards asks: Does quantitative easing work? Not for Japan. Comment!
3:21 PM The French competition council vetos Orange's (FTE) exclusive iPhone distribution contract with Apple (AAPL). FTE says it will appeal the "serious" decision. Comment!
3:15 PM Earnings previews for companies reporting after today's close: NKE Comment!
3:10 PM Notable earnings after Wednesday's close: MU, NKE, PAYX, TTWO Comment!
3:08 PM Economists say the Fed's moves Tuesday to cut interest rates and unfreeze frozen credit markets will translate into significantly lower interest rates for consumers. Or not. Comment!
3:00 PM Stock indices managed to post fresh highs before receding. Entering the final hour, they're down a bit, but near the top of today's range. Dow -0.4% to 8866. S&P -0.3% to 910. Nasdaq -0.2% to 1586. Comment!
2:53 PM Everyone and his uncle gangs up on Satyam (SAY) after yesterday's/today's debacle. Shares are up 44% to $8.18 after shedding 55% Tuesday - leaving shareholders with a 35% hole. Comment!
2:50 PM Any hopes of a soft landing for the hedge-fund industry have been effectively dashed by the Madoff scandal. Comment!
2:35 PM Macy's (M) is up 15.5% after renegotiating terms of its $2B credit agreement with JPMorgan (JPM) and Bank of America (BAC). The yet-untapped facility carries higher fees, but clears the air about Macy's ability to repay $950M in debt maturing next year. Comment!
2:32 PM Crude dives to new lows. Feb contract -4.3% to $44.70. Comment!
2:24 PM Morgan Stanley's (MS +10%) Q4 net loss of $2.3B includes a $729M proprietary trading loss, CFO Colm Kelleher reveals on the conference call (transcript later today). MS has selectively exited prop strategies, he adds. Comment!
2:13 PM Commercial real estate investment is at a virtual standstill, NAR notes in a new report, in part because commercial lending has vanished, even as residential lending heals. "Commercial defaults could deteriorate significantly without a properly structured stimulus that addresses liquidity for commercial mortgages," NAR's Lawrence Yun warns. Comment!
1:58 PM In an effort to preserve precious cash, GM (GM) puts the brakes on construction of a factory that will make engines for two of its most important new cars - Volt and Cruze. Comment!
1:47 PM In the spring of 2001, Erin Arvedlund, a Barron's reporter, was among the first to publicly question Bernie Madoff's record. Her story. Comment!
1:41 PM A copy (.pdf) of Chrysler's letter to its dealers. Comment!
1:39 PM Stocks have inched up to breakeven - meaning they've regained yesterday's close, almost 24 hours later. Dow +0.2% to 8943. S&P +0.35% to 916. Nasdaq +0.2% to 1593. Volume is light. Volatility is down; VIX -5.2% to 49.7. Comment!
1:30 PM A rough debut for Clearwater Paper (CLW -17%) after spinning off from Potlatch (PCH +8.7%) last night - allowing the latter to focus on its core timber REIT business, while Clearwater is left to wipe up the mess left by slackening demand for paper in an iWorld. Comment!
1:19 PM Jobs's absence from Macworld may just be a ploy to lower expectations, TechCrunch's Jason Kincaid says: "Apple probably isn't keen on releasing a big new product in the current economy... So keep your cool. Apple is still on track and Jobs is probably doing just fine. At least I hope he is." 1 Comment
1:17 PM Chrysler's financing arm has warned dealers it may have to temporarily stop loans dealers use to pay for stocking vehicles on their lots. (WSJ) Comment!
1:04 PM Even amid a housing meltdown, Toll (TOL) is buying up land - 84 undeveloped acres near Danbury, CT with prior approvals for 238 homes. Pali Research is not impressed. Comment!
12:53 PM The new buzzword for 2009: Relative optimism. Comment!
12:41 PM Goldman (GS) and Panasonic (PC) come to terms on a Sanyo (SANYY.PK) sale. Comment!
12:32 PM Turnaround specialist George Putnam thinks the time is ripe for Quest (Q) to be acquired, and says it could be a tasty snack for AT&T (T), Verizon (VZ), or a foreign company eager to establish a foothold in the U.S. telecom scene. Comment!
12:20 PM Detroit Free Press and Detroit News clip their print editions. Meanwhile the American Society of Newspaper Editors mulls a name change: American Society of News Editors. Comment!
12:09 PM The Madoff affair has highlighted several things, brought some corrupt practices to light, but we haven't really learned anything new, Paul Wilmott says. "Nothing that I have ever seen in investment banking and fund management has impressed me as a disincentive to crooked behaviour, absolutely nothing." 1 Comment
11:57 AM U.S. oil consumption will virtually stagnate between now and 2030, due to increases in energy efficiency, greater use of renewable fuels and an expected rebound in oil prices, EIA says. Comment!
11:48 AM AG Mukasey recuses himself from the Madoff probe - because his son represents Madoff. (WSJ) 1 Comment
11:46 AM Feb. crude now down 3.2% to $45.20, notwithstanding OPEC's 2.2M barrel/day production cut. 1 Comment
11:45 AM The prospect of Yahoo (YHOO) trying to erode Microsoft's (MSFT) lead in applications for the desktop is a lot less far-fetched than either company beating Google (GOOG) in the search/advertising market, Tulane professor Victor Cook says. The key: a merger with Adobe (ADBE). Comment!
11:32 AM The big question about Goldman Sachs (GS), WSJ's Heard on the Street says, is can it regain a premium multiple? Yesterday's $2.12B Q4 loss made the Wall Street icon look downright ordinary. Looking ahead, a 10x multiple would boost shares 16%. More than that? Not likely. 2 Comments
11:21 AM GMAC (owned by GM and Cerberus) edges closer to raising enough capital to become bank holding company, and stave off its demise. Comment!
11:12 AM There's a 70% chance the government's 'rescue' of GM (GM) and Chrysler will mean a prepackaged bankruptcy, Moody's Bruce Clark says. He gives 25% odds a bailout will head off bankruptcy filings alltogether - and a 5% chance of no government aid and a freefall bankruptcy. 3 Comments
10:59 AM Oil refiners are cutting back, selling assets and putting expansion on hold as they battle with the industry's biggest challenges in decades. Understandable and perhaps critical moves, they could create bottlenecks and drive prices higher once consumption recovers. Comment!
10:50 AM Webcast of the OPEC press conference. Comment!
10:48 AM OPEC chops its oil output by 2.2 million barrels a day. (WSJ) 1 Comment
10:48 AM Crude bounces back after knee-jerking down on the in-line inventory data. +2.5% to $47.85. Comment!
10:42 AM Terminating its deal with MidAmerican (BRK.A) will not be cheap for Constellation Energy Group (CEG). $175M cash; a $1B note at 14% maturing at the end of 2009; 10% of CEG's shares; and another $418M. Whoa. Comment!
10:40 AM It's official: EDF to acquire 50% of Constellation Energy Group's (CEG) nuclear business for $4.5B, including $1B in cash. CEG still halted. Comment!
10:36 AM Petroleum inventories: Crude +0.525M vs. +0.6M. Gasoline +1.295M vs. +1.275M. Distillate +2.9M vs. +1.5M. Estimates were pretty much on the mark. Feb. crude futures -0.2% to $46.60. Comment!
10:34 AM Auto bailout Friday? 1 Comment
10:28 AM Petroleum inventories at 10:35. Consensus: Crude +0.6M. Gasoline +1.275M. Distillate +1.5M. Feb. crude futures +2.1% to $47.66. Comment!
10:26 AM French utility giant EDF has reached a deal to acquire 50% of Constellation Energy Group's (CEG) nuclear operations, which now hinges on EDF's bank signing off. A deal would quash MidAmerican Energy's (BRK.A) earlier bid for the entire company. For now, shares of CEG are halted, pending news. Comment!
10:22 AM Sector ETF weakness: Semis– SMH -2.9%, Tech– XLK -2.8%, Base Metals– DBB -2.7%, Utilities– XLU -2.0%, Financials– XLF -1.9%. Comment!
10:21 AM Sector ETF strength: Solar– KWT +6.4%, Gold Miners– GDX +2.8%, Silver– SLV +2.7%, Gold– GLD +1.7%, Solar– TAN +1.6%. Comment!
10:20 AM Obama eyes TARP changes, including more aid for homeowners, asset purchases and more capital injections for banks. A pretty ambitious plan, considering there's only $365B of TARP funds left. Comment!
10:16 AM GigaOm's Katie Fehrenbacher is charged up over the thought of Intel (INTC) forging into the electric vehicle battery market. "While the move would be risky, it could have a monumental effect on the slow-moving electric vehicle battery industry." Comment!
10:08 AM Dow laggards: BA -3.1%, C -2.9%, GE -2.4%, INTC -2.4%, AXP -2.3%. Comment!
10:07 AM Dow leaders: GM +2.9%, AA +1.6%, WMT +0.9%. Comment!
10:07 AM ConAgra Foods (CAG): FQ2 EPS of $0.43 beats by $0.06. Revenue of $3.26B vs. $3.16B. Sees full-year EPS of $1.50 vs. $1.43. Shares +8.9%. (PR) Comment!
10:01 AM Markets are marginally higher after 1/2 hour of trading. Dow -0.7% to 8865. S&P -0.7% to 907. Nasdaq -0.7% to 1578. Crude is all over the place, what with OPEC meetings and inventories hovering, +1.3% to $47.30. Gold +3.4% to $871.50. Comment!
9:59 AM A technical glitch has halted trading at the Toronto Stock Exchange. Comment!
9:58 AM Brace yourself. A new poll shows 63% of respondents think the U.S. is in a 'long-term economic decline,' up from 49% 10 months ago. 63% have been hurt financially by this recession. Just 46% believe they'll have enough money to retire. (more) Comment!
9:49 AM Clearwire (CLWRD) hopes to beat rivals by at least two years with its 4G WiMax network. But despite a recent $3.2B infusion from Intel (INTC) Google (GOOG) and company, it may still need another $3B to $5B. Comment!
9:45 AM Nexen (NXY) buys an additional 15% stake in Canada's Long Lake oil sands project from OPTI Canada for $735M. The deal boosts Nexen's stake in the venture to 65%. Comment!
9:33 AM Motorola (MOT) permanently freezes its U.S. pension plan in order to eliminate future accruals. Stops 401(k) matches. Essentially freezes salary hikes. Shares -5.2%. (PR) Comment!
9:31 AM Dow opens down 1.1% to 8820. S&P -1.3% to 901. Nasdaq -1.2% to 1571. Feb. crude +0.4% to $46.85. Gold +3.1% to $869. Comment!
9:27 AM Dell (DELL) tries to be designer-chic... with bamboo. Comment!
9:26 AM With all eyes on banks kicking off the Q4 earnings season, Satyajit Das's primer on voodoo banking - how we got where we are - is a must read. Comment!
9:25 AM Adobe (ADBE) is up 9% premarket after stronger than expected earnings last night, despite admitting weak demand for its CS4 suite. Meanwhile Microsoft (MSFT), with its deep pockets, continues to turn up the pressure on Adobe's dominance of Web design software. Comment!
9:22 AM UBS launches coverage of Amazon (AMZN) with a $52 price target and a Neutral rating. "While we are believers in the long-term value creation story at AMZN," global uncertainty makes it "difficult to recommend the shares at this time."
Comment!
9:22 AM Just before the open, Dow futures (-1.03% to 8800) point to weakness. Overnight volume was heavy and volatile. It may take a while for the dust to settle after the Fed's 0-0.25% range yesterday surprised basically everyone. Comment!
9:15 AM CIT Group (CIT) sinks 15% premarket after launching a $250M share offer. (PR) Comment!
9:14 AM Western Digital (WDC) to slash 2,500 jobs - 5% of its workforce - and shut down factories for two weeks amid weak demand and steeper than expected competitive pricing. It now sees FQ2 revenue of $1.7-1.8B vs. $1.97B consensus. Comment!
9:10 AM Commercial Metals Company (CMC): FQ1 EPS of $0.49 vs. $0.34 consensus. Revenue of $2.37B (+12.1%) vs. $2.16B. Shares -2.9%. (PR) Comment!
9:10 AM AIG (AIG) could face another $30B in writedowns not covered by its government rescue. Shares -2.8% premarket. Comment!
9:01 AM Premarket losers: CIT -15%. ROCK -14%. DB -10%. BCS -9%. HBC -8%. ITU -6%. RIO -6%. TKC -6%. TCL -6%. EWZ -5%. TS -5%. PBR -5%. GFI -5%. HMY -4%. RTP -4%. IBN -4%. MS -4%. AAPL -4%. UBS -4%. Comment!
9:01 AM Premarket gainers: SAY +38.5%. ADBE +10.2%. PAY +10%. NM +9%. CDNS +9%. JOYG +6%. DCM +4%. SYT +4%. HUN +4%. Comment!
8:58 AM Satyam says I'm sorry: "In deference to the views expressed by many investors," which sent shares reeling -55% yesterday, Satyam (SAY) backs off its $1.6B deal to invest in two construction firms it once owned. Still, the rash move has some questioning management's competency. Shares +38.5% premarket. Comment!
8:50 AM Euro area construction (.pdf) increased by 0.1% in October. U.K. led the pack, +8.2%, while German construction fell by 3%. Comment!
8:49 AM Merrill analyst Francisco Blanch, whose forecast of $150/barrel oil came pretty close to the summer's high of $147.27/barrel, thinks oil could hit $25 in 2009 but be back near $150 in the next 2-3 years as economic growth picks up. Comment!
8:47 AM Euro area consumer price inflation (.pdf) dived to 2.1% in November, from October's 3.2%. After peaking at 4% in June/July, weak demand and falling commodity prices are driving the downturn. Comment!
8:41 AM U.S. travel and tourism spending turned down sharply in Q3. The 8.1% decline is the largest since 2001. Air transportation led the way, -20.4% after falling 18.7% in Q2. Accomodations spending -3%. Retail shopping by travellers -6.9%. Comment!
8:39 AM Bristol-Myers (BMY) will slash another 10% of its workforce, in addition to a 10% cut already under way. BMY now plans 8,000 job cuts by 2010 as part of its efforts to reduce costs by $2.5B over the next three years. Shares -1.2% premarket. Comment!
8:38 AM The U.S. Current Account Deficit narrowed to $174.1B in Q3, better than the $179B expected by economists. The deficit on goods decreased to $214.7B, while the surplus on services increased to $38.2B. Comment!
8:36 AM News Corp. (NWS) will switch to Nasdaq from NYSE. "Nasdaq made News Corp. an offer it couldn't refuse: quite a lot of money to switch its listing..." said a NYSE spokesman. Nasdaq and NWS said they don't discuss their business arrangements. Comment!
8:27 AM Honda (HMC) cuts its forecast for annual operating profit to ¥180B from the ¥550B forecast in October. This is its third profit warning in five months amid sinking demand and profit-pinching currency fluctuations. Comment!
8:25 AM Anglo American (AAUK) cuts planned 2009 capital expenditure to $4.5B from $10B. Miners worldwide are feeling Anglo's pain as metal prices post record declines. Comment!
8:23 AM Wow, harsh words for Apple (AAPL) from Oppenheimer: "It's past time for Apple to either disclose the state of his health or elaborate a viable plan for eventually transferring power." Until such time, they can no longer continue to recommend Apple as a long-term investment. Comment!
8:21 AM Regulators tighten oversight of Citigroup (C), indicating continued concerns about Citi's financial health and management. Sources say the Fed and others are getting involved in strategic discussions and discouraging execs from certain acquisitions. Comment!
8:15 AM SEC's Chris Cox faults his agency for doing nothing about Madoff despite nearly ten years of 'credible and specific allegations.' An internal probe will investigate 'deeply troubling' SEC shortcomings. Comment!
8:15 AM Obama weighs a TARP overhaul. Comment!
8:13 AM Morgan Stanley (MS): Investment losses were $2.5B for the year. Says it's targeting another $2B in cost savings - including previously announced layoffs. (PR) Comment!
8:08 AM Morgan Stanley (MS): Q4 EPS of -$2.24 (-$2.29B) vs. consensus of -$0.34. Revenue of $1.8B vs. $3.78B. Reports $5.2B of non-interest expenses. Leverage ratio of 11.4x vs. 32.6x a year ago. Shares +7.8%. (PR) Comment!
7:58 AM That Steve Jobs (AAPL) won't deliver this year's Macworld keynote is hardly a surprise to anyone, Jim Goldman notes. Insiders say the decision has more to do with politics (his desire to move away from Macworld?) than his pancreas. Shares are down 3% premarket. Comment!
7:53 AM Citigroup (C) will merge its investment and corporate banking operations, perhaps even this week, sources say. The idea is to get as much as possible under one roof, enabling the struggling bank to cross-sell a broader range of services. Comment!
7:48 AM Yahoo (YHOO) slashes the amount of time that it retains data about its users' online behavior to three months from 13 months, and expands the range of data it anonymizes. In September, Google (GOOG) halved the time it stores identifiable data to nine months. Comment!
7:35 AM Russian Deputy Premier Igor Sechin and Azeri Energy Minister Natik Aliev have already indicated they're ready to slash output by a combined 650,000 barrels/day. Demand for oil is so slack that many traders and oil firms are stashing supply in supertankers. Comment!
7:27 AM "What we will probably do today is agree, as OPEC, on a production cut of two million barrels a day from what we are doing today," Saudi Oil Minister Ali Naimi says. "We also hope that other producers will chip in," he added, referring to non-OPEC nations. Feb. crude -0.6% to $46.44. Comment!
7:19 AM Joy Global (JOYG): Q4 EPS of $1.11 beats by $0.03. Revenue of $1.0B (+40.2%) in-line. (PR) Comment!
7:18 AM General Mills (GIS): FQ2 EPS of $1.36 beats by $0.13. Revenue of $4.0B (+8.3%) in-line. (PR) Comment!
7:13 AM Mortgage Applications increased by 2.9% from a week ago, MBA reports, with refinances up 6.5%. Refinances now count for 76.9% of total applications, up from 74.3% last week. The average rate for 30-year mortgages plunged to 5.18% from 5.44%. Comment!
7:01 AM Treasurys continued their upward march overnight. 30-year +1.49%. 10-year +0.62%. 5-year +0.25%. 2-year -0.09%. Comment!
7:01 AM U.S. stock futures have drifted lower overnight, giving back much of yesterday's post FOMC rally. Dow -1.4% to 8770. S&P -1.4% to 899.50. Nasdaq -1%. Crude +1.6% to $47.47. Gold +1.5% to $855. Comment!
7:01 AM In Europe, London's up 0.4% at midday. Paris -0.6% and Frankfurt -0.5%. Comment!
7:00 AM India had a rough day, snapping a 5-day winning streak to drop 2.62% to 9,715. Elsewhere in Asia markets rose. Nikkei +0.52% to 8,613. Hang Seng +2.18% to 15,461. Shanghai +0.09% to 1,977. Comment!
3:59 AM Yale endowment loses 25% of its value. Comment!
12:10 AM Notable earnings after Wednesday's close: MU, NKE, PAYX, TTWO Comment!
12:05 AM Notable earnings before Wednesday's open: CAG, CMC, GIS, JOYG, MS Comment!
12:00 AM Wednesday's economic calendar:
7:00 MBA Mortgage Applications
8:30 Current Account
10:00 OPEC Press Conference
10:35 EIA Petroleum Status Comment!