Buzz Bits: Dow, Nasdaq Close in Green
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Alcoa (AA) reports 3Q EPS of $0.62 vs. $0.77 cons on revs of $7.63 bln vs. $7.68 bln cons.
Genentech (DNA) reports 3Q EPS of $0.55 vs. $0.47 cons on revs of $2.38 bln vs. $2.32 bln.
Bell Buzz - Todd Harrison - 3:45 PM
- Wouldn't you be laughing? Kinda puts $1,670,000,000 in perspective in a hurry, eh?
- Yes, I see metal equities shrugging off the stronger dollar and weaker gold. Trust me, I see it--I've been long and wrong some of these names. Until proven otherwise, however, it's one step forward and two step backs.
- When does that shift? Through XAU 130 would be a good first (second?) step forward.
- Would a dollar rally (through the five year DXY downtrend) be a headwind? As my buddy Jeff Saut at Raymond James likes to say, "You betcha!"
- Sideways action in the S&P? That's "churning" under support but above, say, 1340 on the S&P? Hands over eyes, that's called basing (overbought levels notwithstanding)
- Alcoa told me she was feeling lost. Lacking in some direction.
- Sharpen those deuces, Minyans, earnings season is about to begin. And you thought you were already tired?
- I had a doctors appointment this evening and the doctor just called to cancelled. My initial reaction was "are you kidding me? We circled this time months ago" before she told me her dad was dying. Perspective in a hurry and, needless to say, white light their way.
- Fare ye well into the bell and have a mindful night.
Position in metal equities
Boiler-room deals - Fil Zucchi - 1:47 PM
Last week I overheard CNBC's Rick Santelli suggest that a good deal of the credit for the tight spreads in the corporate bond markets lies at the feet of Credit Default Swaps (CDS). The CDS market is where the "big boys" place their bets on the default risk of corporate bonds. It is an unregulated, player-to-player market. To the extent that corporate bonds buyers can "insure" the credit risk with CDS, they are willing to take on oversized (i.e. leveraged) positions, and such demand drives the interest paid down. The corporate/CDS is the life-blood of mergers, LBO's, etc., and, by extension, of the run Hoofy is enjoying in equities.
I'm telling you this as a preface to this interesting piece from Bloomberg, suggesting that "insider traders of the bad kind" appear to have migrated their trade to the CDS market, which is almost completely unregulated and about as transparent as a sheet of lead. Should the feds decide to take a hard look at those activities it is highly likely that any cooling of activities in the CDS will spill over in corporate spreads and the equity markets.
Just for this very reason it is highly unlikely that the feds will do anything, but just add this tid bit to Hoofy's wall of worries.
Talking New River, Panera - Herb Greenberg - 12:25 PM
Too crispy?: I penned a piece regarding Panera (PNRA) on my blog at MarketWatch in the wake of the stock's rapid rise following strong same-store sales for last month. But as I detail, the stock's performance is crazy (crazy, I tell ya!) considering that the stock is higher on some lower and somewhat troubling numbers. It simply doesn't make sense. Then, again, in this market there's plenty that doesn't make sense. Could it be the company is opening too many new stores too close to one another? Starbucks (SBUX) this ain't.
New River's runaway stock: The only explanation for the spectacular rise in New River Pharmaceuticals (NRPH) shares, relates one drug company expert, is a short-squeeze. There is absolutely nothing in the FDA's decision to grant an approval letter for the company's ADHD drug. What's more, the company didnt get the Drug Enforcement Administration "schedule" that would have been considered preferable -- certainly not the one that had been pitched to investors. Reminds this source of "the crazy one-day move" in OSI Pharmaceuticals (OSIP) several years ago.
Oogle Google: Could Google's (GOOG) YouTube deal be yet another sign of a top, much like AOL's purchase of Time-Warner (TWX)? (Not today, according to the market.)
Finally: Taking nominations for Worst CEO of the Year. Email me with your pick. And after giving me the who, what, when and where, don't forget the why.
Stephanie Pomboy's Inventory Comments: - MV Respect - 11:21 AM
Okay, so it's not the sexiest of economic datapoints…but today's inventory report offers important insight into the near-term outlook for growth and, perhaps more importantly, Fed Funds.
Wholesale inventories are now up a stunning 9.7% y/y. The last three times we found ourselves in similar territory (spring of '95, summer of '98 and summer of '00) it marked the PEAK in Fed Funds. If the process of clearing the shelves has the same dampening effect on growth and inflation this time (and why shouldn't it???), the Fed will soon be huffing and puffing about deflation…not inflation. This will come as an unhappy awakening to those now rushing to position a more 'hawkish' Fed view. Stay tuned…this could get interesting…very interesting.
Homies... - John Succo - 9:35 AM
JPM analyst raised his call on Dr. Horton (DHI) and Standard Pacific (SPF) from neutral to overweight and Toll Brothers (TOL) to neutral as he believes fundamentals and inventories are stabilizing.
I think this is more of a trading call, but unfortunately for him he came out with his call before DHI released some disturbing numbers.
DHI 4Q home orders had an average selling price down 9.8% year over year, yet unit orders still fell 25%. It does not seem heavy discounting is bringing back demand as some bulls are "hoping."
This analyst had a buy on DHI at $40 and went neutral at $24.
The moment of truth... - Bennet Sedacca - 8:50 AM
My firm has begun re-initiating positions in 2 year and 10 year Treasuries and expect to finish that position today. Keep in mind these trades, as are all our trades, are very measured in terms of size and therefore, risk.
My firm's portfolios were 'short our bogey from an index perspective' - in other words, we were defensive and these positions simply put us back in line.
But today is a cycle low date and we will finish our buying despite doing so in the face of the hedging accounts, as discussed yesterday.
Bonds had become a bit overbought from a short-term perspective and my firm thinks this is the pause that refreshes. We are running directly into short-term trend lines and to be correct in this move, these lines must hold. See them here:
See the 2 year chart here.
See the 10 year chart here.
Positions in 2's and 10's
What you need to know... - Jon Doctor J Najarian - 8:11 AM
Call Them YouTugoole! – Here's a recipe for success; mix 3 employees from PayPal, toss in videos of cats dancing, stay lean and mean with just 67 employees and oh yeah, get financing from Sequoia, the same guys that underwrote Google (GOOG). That and 72 million world-wide users and you too can make $1.65 billion!
Northwest & Mechanics Reach Agreement – After 14 months both sides will tell you they got what they wanted. Mechanics on the job are making $18,000 less than they did before the pay cut the airline imposed last year.
Phelps Wins Nobel Prize for Economics - Edmund Phelps, 73, is the first solo winner of the $1.37 million prize since 1999. He is also the sixth citizen to win a Nobel this year. Phelps built on what is known as the Phillips Curve, which held that when unemployment fell, there was a one-time rise in the rate of inflation.
Harley's & Slim Jim, Sounds Like Rocket Fuel - Harley-Davidson (HOG) is selling a new source of fuel, one that goes into mouths instead of gas tanks! ConAgra (CAG), the maker of Slim Jim and Pemmican jerky strips will be branding its beef with All-American black and orange Harley logos!
Positions in HOG, GOOG
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