• EU casts shadow over Oracle's Sun. European antitrust authorities formally objected to Oracle's (ORCL) proposed $7.4B takeover of Sun Microsystems (JAVA), issuing a statement of objections that focuses on whether Oracle ownership of Sun's MySQL database software would reduce competition. The move doesn't necessarily mean the EU will reject the deal, but should delay the process. The U.S. Justice Department, which has already signed off on the combo, reiterated that the merger is "unlikely to be anticompetitive." Oracle, meanwhile, said the acquisition "does not threaten to reduce competition in the slightest," adding that the EC's concerns "reveal a profound misunderstanding of both database competition and open source dynamics."
• Lending standards loosen. A smaller percentage of banks tightened lending standards in Q3, according to the Fed's loan officer survey, but credit conditions remain far from a comfort zone. About 25% of banks tightened standards on good quality real estate loans, down from 75% in July 2008. Banks tightening standards for credit cards fell to 15% from 35% last quarter, the lowest percentage since April 2008. And 15% of banks tightened standards on commercial and industrial loans, down from 80% in October 2008. "We're back to just normally tight, not pathologically tight," says an economist.
• U.K. most at risk of AAA downgrade. The U.K. is most at risk among large developed economies of losing its AAA rating, Fitch said Tuesday, but the ratings service maintained its stable rating which it said "reflects our expectation that the U.K. government will articulate a stronger fiscal consolidation program next year." In response, U.K. Trade Minister Mervyn Davies insisted Britain's sovereign rating is "absolutely" safe, and said the government's "been very clear that over the next four years there's going to be a program to reduce the public debt level." In May, S&P put the U.K.'s AAA credit rating on negative outlook, saying it would make a decision after the government makes its intentions clear.
• Moody's sees AIG comeback. AIG (AIG) will be able to repay its $60B Fed credit line and "much or all" of the Treasury's $69.8B investment if financial markets stabilize, Moody's said Monday. In a vote of confidence for CEO Robert Benmosche's strategy of rebuilding some of the businesses AIG previously targeted for sale, Moody's said, "We believe that the slower approach to restructuring could help AIG to generate more favorable values from its business portfolio than would be the case under rushed asset sales."
• Employment trends turn corner. In perhaps the most bullish employment report since the onset of the recession, Conference Board reported its Employment Trends Index rose 0.7% to 89.3 in October from 88.7 last month. "The Employment Trends Index has likely turned a corner in September, and the historical relationship between the index and employment suggests that job losses will end in early 2010," the group said, adding, "While layoffs have certainly declined in recent months, we still expect to see employers adding hours to their existing workforce before hiring will strongly increase." The improvement was driven by positive contributions from measures of jobless claims, temporary hires, industrial production, and sales. Conversely, Gluskin Sheff's David Rosenberg said unemployment may hit a post-war high of 13% as growth stagnates. "This is going to be the mother of all jobless recoveries. At the beginning of the year, who was calling for unemployment to go up to 10%?"
• Hedge funds alive and well. Hedge fund assets may top the previous high of $2T by the end of 2010 as double-digit returns lure investors, Deutsche Bank says. "We fully expect to see material inflows into 2010 and beyond. The expected growth is reflective of continuing institutional demand for increased risk-adjusted returns in the face of low bond yields and disappointing passive equity performance." Global hedge funds have rebounded faster than expected, recovering to $1.53T in September from $1.33T in March, even as regulators turn up the pressure to increase scrutiny of the industry and amid some high-profile scandals.
• Barclays accused of huge Lehman heist. In a recent court filing, Lehman's creditors claim Barclays (BCS) received Lehman securities valued at $50B for just $45B in cash, accusing the U.K. bank of the "largest theft in banking history." Some Lehman executives who negotiated that deal, the complaint asserts, knew they would receive offers to work at Barclays, and received or were offered plump compensation deals. At the time, the deal was presented in bankruptcy court by Lehman's lawyers as a wash.
• Cadbury bitter at Kraft's bland offer. Kraft (KFT) took its offer for Cadbury (CBY) directly to shareholders, disappointing investors who had hoped Kraft would sweeten its original bid of 300p and 0.2589 new Kraft shares for each Cadbury share. Kraft said its proposal "offers the best immediate and long-term value for Cadbury's shareholders and for the company itself compared with any other option currently available, including Cadbury remaining independent." Cadbury, not surprisingly, recommended shareholders "emphatically" reject Kraft's (KFT) "derisory" offer, which it says "is worse than the proposal that the Board has previously rejected as fundamentally undervaluing Cadbury and its prospects," due to a drop in Kraft's share price. The cash and share offer originally valued Cadbury at £10.2B, but is now worth about £9.8B. Kraft now has 28 days to publish a prospectus on the offer for Cadbury shareholders, and 60 days to collect enough shares to clinch a deal.
• Google picks up mobile ad leader for $750M. In a push to expand its digital advertising empire to cellphones, Google (GOOG) agreed to acquire mobile advertising start-up AdMob for $750M in stock. AdMob is a leading seller of banner ads on iPhone apps and mobile-specific web pages; the acquisition could help establish Google as an early leader in the small but rapidly expanding mobile phone advertising business. Aggregate sales of mobile ads were just $160M last year.
• Madoff payback fund could swell. Settlement talks between Madoff trustee Irving Picard and lawyers for the estate of Madoff investor Jeffry Picower are making progress, with Picower's family lawyer saying discussions range between $2.4B (the amount Picower withdrew over the six-year recovery period allowed for the trustee’s claims under New York State law) and $7B (the total amount of his withdrawals over several decades). The estate is large enough to add at least several billion dollars to the $1.4B the trustee has gathered so far.

Earnings: Tue. Before Open

• HSBC (HBC): Q3 profit was "significantly ahead" of a year ago, in part due to the first drop in U.S. impairment charges in more than three years. "The more positive signals that we saw in the U.S. run-off portfolio in the first half have continued, with the result that our North American operations did not require any capital support from the group during the quarter. We should have further evidence by the year-end as to whether this is a sustainable trend." Shares +2.6% premarket. (PR, MW)
• JA Solar (JASO): Q3 EPS of $0.10 beats by $0.07. Revenue of $193M (+119.7%) vs. $136M. Shares +9% premarket. (PR)
• Tyco International (TYC): FQ4 EPS of $0.61 beats by $0.07. Revenue of $4.42B (-16.3%) vs. $4.32B. (PR)

Earnings: Mon. After Close

• Arena Pharmaceuticals (ARNA): Q3 EPS of -$0.38 misses by $0.04. Revenue of $1.7M (+20%) vs. $2.4M. (PR)
• Clear Channel Outdoor (CCO): Q3 EPS of -$0.10 misses by $0.02. Revenue of $661M (-19%) vs. $665M. Shares -0.1% AH. (PR)
• Electronic Arts (ERTS): FQ2 EPS of $0.06 misses by $0.01. Revenue of $1.15B (+2%) vs. $1.13B. Announces cost-reduction plan that will eliminate 1,500 jobs by the end of the first quarter (900 of them in development) saving $100M annually. Expects October is another down month. Shares -1.4% AH. (PR)
• Fluor (FLR): Q3 EPS of $0.89 misses by $0.01. Revenue of $5.4B (-4%) vs. $5.5B. Shares -6.2% AH. (PR)
• Hologic (HOLX): FQ4 EPS of $0.28 beats by $0.01. Revenue of $403M (-9%) vs. $400M. Sees Q1 EPS of $0.24-0.26 vs. $0.30 on revenue of $400M-405M vs. $414M, and full-year EPS of $1.15-1.19 vs. $1.24, on revenue of $1.625B-1.65B vs. $1.69B. Shares -4.4% AH. (PR)
• Lions Gate Entertainment (LGF): FQ2 EPS of $0.26 beats by $0.20. Revenue of $394M (+3%) vs. $375M. Shares +5.6% AH. (PR)
• Live Nation (LYV): Q3 EPS of $0.82 beats by $0.02. Revenue of $1.8B (+14%) vs. $1.6B. Expects Ticketmaster merger to close in Q1. Shares -1.3% AH. (PR)
• MBIA (MBI): Q3 EPS of -$3.50 misses by $2.45. Total consolidated revenue of $-620M, incorporating an $810M unrealized loss on insured credit derivatives. Shares -12.5% AH. (PR)
• McDermott International (MDR): Q3 EPS of $0.50. Revenue of $1.7B (+1%) vs. $1.5B. Shares +1.4% AH. (PR)
• Priceline.com (PCLN): Q3 EPS of $3.45 beats by $0.53. Revenue of $731M (+30%) vs. $694M. Sees Q4 EPS of $1.52-1.62 vs. $1.49 on sequential revenue gain of 24-28%. Shares +8.2% AH. (PR)
• Qiagen (QGEN): Q3 EPS of $0.26 beats by $0.03. Revenue of $260M (+13%) vs. $257M. Raises full-year EPS guidance to $0.88-0.90 vs. $0.85. Shares +3.8% AH. (PR)
• Rackspace (RAX): Q3 EPS of $0.06 misses by $0.01. Revenue of $162M (+17%) vs. $159M. Shares +0.4% AH. (PR)
• Sequenom (SQNM): Q3 EPS of -$0.24 beats by $0.04. Revenue of $9M (-21%) vs. $8.5M. Shares -4% AH. (PR)
• Silver Wheaton (SLW): Q3 EPS of $0.11 in-line. Revenue of $69.8M (+77%) vs. $76.4M. Shares +1.1% AH. (PR)

Today's Markets

Asian markets moved higher overnight following strong U.S. gains Monday. Europe markets are flat-to-slightly-higher at midday. Stock futures are slightly lower.

Q3 2009 Earnings Call

November 9, 2009 4:30 pm ET

In Q3 2009, life science and biotech stocks kept pace with market sectors that offer comparable risk and performance such as small-cap growth, science and technology, and midcap growth.

The Rayno Report (raynoreport), in conjunction with our contributing partner Raygent Associates (raygentassociates), tracks the biotech market and a model portfolio. The broadly diversified biotech ETF -- IBB -- was up 16%, moving from 70 to 81 in the three-month period. About 50% of the IBB holdings are large cap companies such as Amgen (AMGN), Celgene (CELG), Genzyme (GENZ), Gilead (GILD) and Teva (TEVA). The IBB was flat for the year as of July 1, so all the gains came in Q3.

Sentiment

Stocks are flat in a day of quiet trading Wednesday. The early earnings news was mixed. While Costco (COST) helped the retail sector with better-than-expected numbers, Yum Brands (YUM) and Monsanto (MON) suffered some post-earnings weakness. Investors now wait for Alcoa (AA) to unofficially kick off the earnings reporting season after the closing bell.

Meanwhile, the economic calendar remains light until weekly jobless claims and wholesale inventories Thursday morning. The next batch of meaningful data doesn't hit until retail sales next Wednesday. (However, same store sales from a number of retailers should grab some attention tomorrow morning.)

"While it was always unrealistic to expect continued uninterrupted improvement in economic indicators, in particular as the recovery in some series had broken previous records, the confluence of these negative releases comes at a sensitive time when markets have begun to question underpinnings of the six-month long equity rally and when the sustainability of the broader recovery remains in question," said Michael Hart, a currency strategist for Citigroup.

The second quarter reporting period is fast approaching as we enter the month of October. Since the last earnings season ended with Wal-Mart's report on August 13th, the S&P 500 is up 4.73%. From our Interactive Earnings Report Database, we grabbed all stocks that reported last earnings season and calculated their performance since their last earnings report. This performance is calculated from the close on the first trading day following their earnings reports, so it does not include the big initial one-day moves.

As shown below, YRCW is up the most since its last earnings report with a gain of 231%. YRCW is followed by GCI (+161%), UAUA (+147%), BPOP (+146%), and ATPG (+136%). There aren't many big names on the list of winners, but the stocks that did make the list did something to grab investors' attentions. ARRY has done the worst since its last report with a decline of 43.5%.

After an independent board investigation, Sequenom (SQNM) has fired arguably the three most important people in a biotech outfit - its CEO, CFO, and head of Research & Development. At the bottom of this piece is a look at attempts to peg a fair value for these shares in the middle of a crisis - always a difficult endeavor considering the possibilites of legal action.

The review concluded that there was misconduct at multiple levels of the development of its prenatal diagnostic test Trisonomy 21, to be used for detection of Down syndrome:

Speaking of vaccines, forget what we said after Novavax, Inc. (NVAX) closed up 16% after the week's first session. The company, whose vaccines leverage its virus-like particle (VLP) platform technology, looked like it was attempting to rebound after a recent two week skid may have just been taking a breather. While it still looks like a solid long term play, shares have been sliding downward slowly since they announced that they were going to raise capital on September 16. Shares gave up half of their Monday gains and closed at $4.12 -0.29 (-6.58%).

4:19 PM, Sep 29, 2009 --

• NYSE down 12.9 (0.2%) to 6,926.82.
• DJIA down 47.16 (0.5%) to 9,742.
• S&P 500 down 2.4 (0.2%) to 1,061.
• Nasdaq down 6.7 (0.3%) to 2,124.

GLOBAL SENTIMENT

• FDIC to tap banks for $36B. Sources say the FDIC will propose U.S. banks prepay three years of regular assessments to top off its shrunken deposit insurance fund at a meeting this morning to discuss proposals (see calendar below). The move would give the FDIC another $36B (3 times $12B), while banks would not be required to report the expense until the fee was actually due. Bankers have complained upfront fees could weaken banks just as their balance sheets are starting to recover. After the failure of 95 lenders, the fund now stands at about $10.4B. Some worry the FDIC's newfound creativity in fundraising raises red flags about the agency's viability.
• World Bank pres. trash talks dollar. The dollar's days as the unchallenged reserve currency are numbered as the euro and the Chinese renminbi assume bigger roles, World Bank president Robert Zoellick said Monday. Zoellick's speech was unusually provocative, arguing the U.S. and its cronies could no longer dominate the world economy. He also criticized President Obama’s plan to put the Fed in charge of monitoring and reducing systemic risk, arguing the Treasury, which reports to Congress, should be leading the charge: "It will be difficult to vest the independent and powerful technocrats at the Federal Reserve with more authority." (read Zoellick's full speech)
• CNOOC eyes large Nigeria stake. Sources say Chinese state-owned oil company CNOOC (CEO) is in talks with Nigeria to buy a large stake in some of Africa's richest oil blocks, at a possible value of $30B. A successful buy would put CNOOC in competition with western oil majors with a strong presence in the area (TOT, RDS.A, CVX, XOM). Industry sources say it's no secret China has an eye on Nigeria, but that the size reported is surprising.
• BofA sued for billions over Merrill. Five pension funds are leading a class-action suit seeking billions of dollars in damages from Bank of America (BAC) over the Merrill Lynch takeover, Ohio AG Richard Cordray said after filing a complaint in Manhattan federal court. The suit also goes personally after BofA CEO Kenneth Lewis, former Merrill chief John Thain, other executives and the board.
• iPhone trio. Vodafone (VOD) announced it will sell Apple's (AAPL) iPhone in the U.K. and Ireland starting early 2010. The announcement comes one day after France Télécom's (FTE) Orange got the go-ahead to sell the iPhone in the U.K., ending O2's (TEF) two-year exclusive contract.
• Flu fever. Amid rising concern about the threat of flu pandemics, three big drugmakers announced deals that give them rights to new flu vaccines, increasing their exposure to one of pharma's brightest, but riskiest, segments. The largest deal was Abbott Laboratories' (ABT) €4.5B acquisition of Belgian conglomerate Solvay's (SVYSY.PK) drug unit, which includes a vaccine-making business. Johnson & Johnson (JNJ) paid $441M for an 18% stake in Crucell NV (CRXL) in order to jointly develop vaccines, while Merck (MRK) said it obtained marketing rights to CSL's seasonal flu vaccine for an undisclosed sum. Investors responded warmly to Abbott's move, with shares up 2.6% Monday.
• Heads roll at Sequenom. Shares of Sequenom (SQNM) plunged 45% in after-hours trading after the company fired its CEO, Harry Stylli, and senior VP of R&D, Elizabeth Dragon, and also said it secured the resignation of CFO Paul Hawran, following its internal investigation into the mishandling of test data of its prenatal Down syndrome treatment. The company "failed to put in place adequate protocols and controls for the conduct of studies" Chairman Harry Hixson said. "This is a significant setback and the company will face challenges." Besides throwing the company into disarray, the abrupt upheaval is likely to push testing back to 2011.
• Warner Music, YouTube coming to terms. Sources say Warner Music Group (WMG) and YouTube (GOOG) are close to settling their licensing dispute, a deal that would return Warner's music videos to YouTube after a nine-month hiatus. The proposal would give Warner the right to sell ads that run next to its videos and receive the bulk of the revenue, a formula Google has used to resolve a number of recent disputes with content owners looking for greater monetization.
• UBS wants out of gov't scheme. UBS's (UBS) U.S. wealth management unit, Paine Webber, isn't a core part of the bank's operations, but UBS won't sell it at fire-sale prices, CEO Oswald Gruebel says. "We've had a lot of inquiries from potential buyers but it wouldn't make sense to sell at current valuations." UBS bought Paine Webber in 2000 for about $10B. Gruebel also told the FT he's looking to sever ties with the Swiss government by buying its way out of a 'bad bank' scheme, an about-face from a statement on Aug. 27, and that he hopes to return to health within a year. Separately, UBS said Fiat CEO Sergio Marchionne and Shell CEO Peter Voser will be leaving its board.
• Opel deal nowhere near done. GM's planned sale of Opel to a group led by Magna International (MGA) faces fresh uncertainty after Spain urged European regulators to investigate the agreement, and Germany's Free Democrats, consistent critics of the deal, are poised to clinch a powerful position in Germany's new government. The deal has run into steady fire from Magna customers and European governments alike. "Overall, this deal is not as near to completion as many people are trying to present," one auto analyst says.
• Midwest activity declines. The Chicago Fed's National Activity Index fell to -0.90 in August, from -0.56 in July. Three of the four categories of indicators made negative contributions, but production and income were positive for the second straight month. Meanwhile the Dallas Fed's factory outlook showed the first signs of bottoming, with a near zero reading. Shipments and new orders turned positive, while other components improved but remained negative.

Today's Markets

Hong Kong led Asia higher Tuesday, but Europe stocks are under some pressure and stock futures are showing modest losses.

The drama never ceases at Sequenom (SQNM); there appears to be a purging of upper management after investigations into what went wrong with the company's Down Syndrome's test. [Apr 29, 2009: Sequenom Bombshell] After *that* revelation (and stock plunge from $15 to $3s) speculators have returned to the name (along with many other $1-$2-$3 type of stocks in the healthcare field) [Jun 9, 2009: Sequenom Up 55% Since Noon] ... it's all fun and games until someone loses an eye. Or the stock drops 50% in after hours as it has done (again).


As for myself, I have no idea what Sequenom does or does not have at this point - no one does; not even the company.... the same view I held once the last drama unfolded.

It did not take us long to welcome the arrival of what many have expected from Sequenom (SQNM) and many have doubted. The expected has, indeed, begun to show, and the doubt that should disappear will stay as long as the skeptics of Wall street are ideologists whose ideology is cynicism. Nevertheless Sequenom has, indeed, launched its first laboratory test, SensiGene™ Cystic Fibrosis (CF) Carrier Screening test.

Sentiment

Stocks are sporting modest gains in a day of relatively quiet trading on "quadruple witch" options expiration Friday. The day was off to a relatively slow start as the economic calender held no new numbers and the earnings news was light as well.

The tech-heavy NASDAQ slipped in morning trading after Palm (PALM) reported a quarterly loss of 10 cents per share, which was better than the 25-cent analyst estimate, but then also lowered its 2nd quarter revenue outlook. PALM is down 59 cents to $13.85.

This is the second quarter 2009 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out our series preface on hedge fund 13F filings.

Next up in our series is Bret Barakett's Tremblant Capital Group. Barakett, a former portfolio manager for Louis Bacon's Moore Capital, now runs his own hedge fund in New York and manages over $3 billion. Taken from their site, Tremblant Capital Group's objective is "to achieve superior risk adjust returns for our investors through our focused and disciplined investment process." Barakett's name will ring a bell for some as he is the brother of Timothy Barakett of Atticus Capital. We just got word recently that Atticus would be shutting down its main fund as Timothy steps away from the hedge fund game. Hopefully Bret doesn't get that same itch.

Bullish Calls

XTO Energy (XTO): "I don't want to own the minors when it comes to natural gas...stick to the majors like XTO."

Sentiment

The first trading day of September is a rocky one for the US equity market. The major averages came under pressure in morning trading despite a round of mostly positive economic numbers. For example, the latest ISM Index moved to 52.9 in August, which was up from 48.9 in July and better than economist estimates of 50.5. While July construction spending numbers fell short of expectations (-.3 percent vs. 0 percent consensus), July pending home sales improved (up 3.2 percent vs. 1.5 percent consensus).

Yet, in a sign that a lot of the good economic news might have been baked into the cake during months past, the major averages faltered shortly after the data hit the newswires. The financials are leading the market slide. BofA (BAC), Amex (AXP), and GE (GE) are the biggest losers in the Dow Jones Industrial Average.

Shares for the biopharmaceutical company, which focuses on pioneering novel cancer therapies with a focus primarily in the areas of hematology-oncology and urology, are under a heavy accumulation which is related to Spectrum’s dealings with the FDA, seeking approval for ZEVALIN in treating non-Hodgkin´s lymphoma (NHL).

Sentiment

Stocks struggled despite a round of mostly upbeat economic data Wednesday. A report released before the opening bell showed orders for durable goods increasing by 4.9 percent in July, which was better than the -1.3 percent in June and also ahead of economist estimates of 3.2 percent.

Later, thirty minutes into the trading session, a separate report showed new homes sales improving to an annualized rate of 433K in July, up from 384K in June and better than the 395K average economist forecast.

Sentiment

Stocks opened lower on weakness in overseas markets along with cautious earnings guidance from HP (HPQ) and Deere (DE), but the major averages have erased early losses and are trading higher late Wednesday. With no economic data scheduled for today, the focus was on overseas markets Wednesday morning. Shanghai's Composite Index lost 4.3 percent and is down roughly 20 percent since August 4 amid concerns officials in Beijing aren't doing enough the help the credit markets and the economy.

Markets were broadly lower across the Asia/Pacific and in Europe before the exchanges opened in New York. Meanwhile, Dow component HPQ was under pressure on cautious earnings guidance. Deere (DE) fell on earnings news as well.