Buzz Bits: Fed Hikes Rates Again, BA Lifts Dow
Just a little taste of the buzz...
Earnings Report - MV News
- Starbucks (SBUX) reported Q1 EPS of $0.22 (in-line) on revs of $1.90 bln vs $1.94 bln cons. Jan comps were +10% vs +7.3% exp.
Krazy Glue, official sponsor of the Kentucky Derby - "Just pick a horse and stick with it!" - Kevin Depew - 3:39 PM
- Minyan Richard asks if with all this movement anything has changed with the Oil Service HOLDRs (OIH)? As I noted last week, the OIH has met its long-term price objective. At a minimum that suggests a period of consolidation.
- FedEx (FDX) is off 1% today, but remains technically sound on a PnF basis as long as it is above 98.
- Caterpillar (CAT) has broken a double top today with the move above 68. the price objective remains 74.50, based on the January breakout.
- Another new buy signal for the iShares Biotech ETF (IBB). The third consecutive buy signal since last October.
- Whatever happened to Christian Baha? Of course, I would love for him to tell me more about Superfund, but I understand.
Flashback! - Bill Meehan - 3:30 PM
This day in market history...
- Closing levels 1 year ago:
- DJIA: 10,551.94
- S&P 500: 1189.41
- Naz: 2068.70
- Crude: 47.10
- Gold: 420.50
- GOOG: 191.90
This day in Minyanville history...
- Prof. Erlanger looked at the DJIA history in As January Goes... and Prof. Roney followed up with a February Stat Check.
In other news...
- In 2003, NASA's space shuttle Columbia exploded re-entering the Earth's atmosphere.
Glass Half Full - Sanjay Somaney - 2:38 PM
I just received a forwarded email from PTI management through a source in India.
I know the investors and sellsiders are looking at PTI like the glass is half empty. Let me try and clear up some issues that might be on investor's minds.
The slightly lower guidance for the March quarter is due to a scaling down of one client and typically March quarter seasonality. Looking under the hood, you will find that factoring out Q1 guidance, the company will actually grow by 8% the rest of the three quarters of 2006. That's QOQ and not YOY. The margin guidance for 2006 is also higher by 100 bips and that is a huge positive given disappointing margin performance in 2005.
Even with an inline December quarter on the revenue line, the company grew its EBIT margin by 190 bips QOQ however FX losses and higher taxes (one-time) led to a lower than expected EPS number.
The company has shown good progress on several fronts:
1) The offshore mix improved to 66.5% in Q4 versus 64.9% in Q3;
2) Utilization rates for Q4 were up 90 bips QOQ.
3) Net Staff adds were about 566 in the quarter
So after looking under the hood, things were a lot better in many key areas and the share price has recovered since this morning as you can see.
I think PTI is the cheapest emerging Tier 1 player in the Indian BPO/IT/Off-shoring space.
positions in PTI (in India as well)
"Here's a good idea, if you're going to tell a story, have a POINT! It makes it SO much more interesting for the listener!" --Neal Page, Planes, Trains & Automobiles - Todd Harrison - 1:36 PM
Hmm, let's see. We've talked about the Google gurgle. We've touched on the metal dynamic. We've noted the sloppy Homies. Crude is creeping back towards $60. S&P 1275 and NDX 1705 are trying to hold (despite some high profile pukes). Breadth is flat. Vols are low. Tensions are high. And we've got more excellent waterslides than anywhere else in the galaxy. What's left to say?
I'm sure of two things. First, whichever way the wind blows, the trade will look obvious with the benefit of hindsight. Second, whenever I've assumed risk for the sake of risk, it usually bites me in the arse. The bottom line is this: there are a lot of reasons for the tape to trade lower but the fact that it's not may be all we need to know.
As I respect (but don't defer) to price action, I'm sitting tight with a spate of gamma (calls and puts) and trying to practice the proactive patience that I so often preach. In the interest of full disclosure, I'll likely coin more on the downside (particularly in the piggies) but I've got some upside hedges on as well. Exciting? Nah, but it's honest.. Always honest.
As we slither down the back of the hump, my eyes are on Citi, JP Morgan, GE and the Brokers. I've been saying that these names hold the key to the vault and I continue to feel that way. They're trying to hit 'em now so please, Minyans, keep a close eye on 'em.
position in jpm
Say What? - Kevin Depew - 12:53 PM
A look at analysis, commentary and opinion from around the world:
- In today's Wall Street Jourrnal Steve Forbes notes, between backhanded compliments to Alan Greenspan, that "gold is the best barometer we have for monetary disturbances."
- Pete Kendall takes a closer look at "Celebrity Fed Chief" Alan Greenspan's tenure in socionomic terms.
Flat Breadth - David Miller - 12:44 PM
Breadth is flattish on the NBI, but the index is making more progress than normal because of the bid under Amgen (AMGN). Strong gap up right smack into resistance at 835. The IBB blew through resistance, the difference being the bigger weighting of Amgen in that ETF. The open print on IBB is the intraday high, so the daily pattern isn't the strongest you could see.
With a mini version of last October's sector-wide short bet recurring this last measurement period, it will be interesting to see if the players are more interested in defending their positions.
10's seem to be on their inevitable visit to double top at 4.63% - Bennet Sedacca - 11:56 AM
We have discussed this here many times. As soon as the bear flag formation was activated, it seemed like we were destined to head towards the double top in 10 year yields at 4.63% that 8000 hedge funds are looking at, not to mention mortgage originators.
Personally, I found the language less dovish than I thought it would be in the FOMC statement yesterday, and coupled with tons of supply just ahead (no one really knows how the world will bid the new 30 year-maybe everyone sits back to 'wait and see'), anything can happen. Commercials are now short as mentioned previously so they would likely buy a break thru 4.63% as the rest of the world gets stopped out.
In a finance-based (overleveraged) economy, higher rates eventually induce lower rates as the higher rates act as a retardant to economic growth, particularly as it relates to housing. So unless the dollar got whacked, we would likely extend maturities at that time - keeping in mind that seasonality is negative for a few more months.
Positions in various Treasury securities.
Buying The Safe Way - Adam Warner - 10:58 AM
One of the great misconceptions in option investing/trading is that a strategy that involves buying options is conservative and safe, while a strategy based on selling is insane. Unless of course selling is part of a buy-write strategy, in which case it is "income," but I digress.
Look no further than Google (GOOG) today to see what can happen when an option purchase goes bad. After a quick post-close rinse out last night, the stock returned to a level within the 14% range that Toddo noted. Volatility in the Feb options has declined about 25 points today, such that if you played this with a "safe" purchase of deep calls you may have lost even more than you would have owning the stock itself. And you lost way more than you would have naked selling any non-deep put on the board.
Now, I am in no way advocating a naked put selling strategy, in fact I mentioned yesterday that I would not do anything in GOOG pre-number without defined risk. What I am saying is that ostensibly safe strategies can be anything but.
position in GOOG
Fewer Jobs, Greater Joy - William Fleckenstein - 9:51 AM
I found the Fed statement completely unsurprising, as it was just what I was looking for. Now, the first bit of weak economic data is liable to have folks in a frenzy -- which makes Friday's employment report loom large. A disappointing number certainly wouldn't shock me, and it might precipitate some Fed-will-be-easy fireworks, unless of course that's already been discounted.
In any case, the Fed's present structure means that there will be lots of room for speculation and creative interpretation of economic data and Fed speeches over the course of the next couple months.
"Thank you sir, may I have another!?!?" - Fil Zucchi - 9:31 AM
BofA is taking another swipe at the homebuilders noting that the hottest markets - California and Florida - are cooling off rapidly. It names Toll Bros. (TOL), NVR (NVR), and others, all rated as sell.
A couple of points about this sell-side note:
- BofA was one of the most strident homies bulls until mid-last year, singling out NVR as a particular bargain at the time. Kudos to the analyst for calling it the way he sees it.
- If I could pick one public homebuilder to short on the fundies it would be NVR. They are mostly a low to mid-end builder with very high concentration in the greater Washington area. NVR's product is mostly the type of bee-hive development that has no distinguishing advantage. BUT the stock float is extremely thin, it is controlled by the insiders, and it trades by appointment. I've been in those kind of shorts before and they are inversely correlated with my hours of sleep.
Position in TOL
What's My Name? - MV Respect - 9:28 AM
"If it feels like there is more activity in the equity market over the past couple weeks, you are right. As of Tuesday's close, the 10-day moving average of volume on the NYSE remained over 1.7 billion shares for eleven straight days.
While volume has been trending higher over time, we found that there have only been 6 other instances where the 10-day average even reached 1.7 billion - and all but one was quickly followed by higher S&P 500 prices. After each initial occurrence of the 10-day average reaching 1.7 billion shares, the S&P 500 was up an average of 11.37% within 3 months. The average of the 3 occurrences since '03 is 7.07%. "
Snoop Tony Dwyer of FTN Midwest Securities
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