Buzz Bits: Bernanke Part 2
What's on the Buzz & Banter?
Earnings Report - MV News
Dell (DELL) reported Q4 EPS of $0.43 vs $0.41 cons on revs of $15.18 bln vs $14.81 bln cons. Gross margin was 17.8% and the company said it plans to buyback at least $1.2 bln in stock during Q1.
Running Bulls - Sanjay Somaney - 3:39 PM
According to Nasscom, Indian IT exports will reach $60 billion by 2020 for a cagr of 27%. For FY06, Nasscom is estimating IT services and bpo exports to reach $23 billion, +33% y/y. Most importantly, despite what some have said, India has less than 10% of the addressable globally sources IT-BPO, which to me indicated massive room for growth. Nasscom says that the domestic Indian market for IT and BPO services will hit $12.4 bln, +17% y/y.
Another argument made by the bears (completely wrong IMHO) is the fact that there will be severe labor shortages for talent for BPO companies. Au contraire, my darksider friends. There will be no labor shortages until 2010, all things remaining constant. The BPO/IT services sector currently employs 900k people and is forecast to grow to 2.3 million by 2010. India churns out 440k technical grads every year and 2.3 million other grads annually and at current rates demand will meet supply in 2010. However, India is very focused on increasing educational centers across the country and by them they will be churning out 25% more graduates in both categories.
When the Fed Head speaketh... - Jason Roney - 3:18 PM
The Dow recorded a new one month (20 day) high on the day of the Fed Chairman's Humphrey Hawkins testimony. This happened 10 times before. The performance over the next few days was generally mixed, but the index was higher two weeks later 8 of 10.
If we isolate just the occurrences where the close was a new 20 day high (as was the case for the Feb '06 meeting), there were just 6 occurrences. Those dates are emboldened and the Dow was higher two weeks later every time.
Days after %change
testimony 10 days later
Flashback! - Bill meehan - 2:00 PM
This day in market history...
- Closing levels this day last year found
- DJIA: 10,834.88
- S&P 500: 1210.34
- Naz: 2087.43
- Crude: 47.30
- Gold: 425.20
This day in Minyanville history...
- Prof. Goepfert gave us his take on the Basic Materials
In other news...
- In 1962, The Beatles moved to the top of the British charts for the first time with Please, Please Me
Mini-Minyan Mailbag - John Succo - 1:09 PM
Any reasons for sharp increase in Boston Scientific (BSX) today and yesterday? is it due to Medtronic (MDT) problems, to Taxus getting French approval, or dynamic hedging of risk arbs in the Guidant (GDT) deal?
It is due primarily to the fact that the CFO of BSX bought 200,000 shares yesterday. That news has put confidence back in the market (psychology).
My opinion is that this is no news. There could be several reasons why he bought the stock, a few of them might not be what would be considered "good."
Who's Hot? - Jason Goepfert - 12:32 PM
Over the past few days, the DJIA has been making new yearly highs while the NDX has been around 5% below its own highs.
We're all told that good markets are those that are being led by technology, not stodgy blue-chips. Recently, that has indeed been the case - the last two times we've seen the Dow at new highs while the NDX was this far below its own high was in May 2001 and March 2005 - both times that lead to a leg lower in the broader market.
But going back 20 years and looking at other instances didn't lend any support to that argument. Not only was the market in general mostly higher after these kinds of divergences (about in line with random), there wasn't really even any consistent relationship between the Dow and NDX going forward.
The last two occurrences were notable in that the market turned down pretty much immediately once the Dow hit new highs. If we don't see that this time, it'll be a good clue that the prior two were perhaps just "one of those things" and not good precedents for what we're seeing now.
Bio-Test - David Miller - 12:27 PM
To my mind, the first real test of Onyx Pharma's (ONXX) Nexavar comes with the lung cancer trial announced this morning. Onyx and partner Bayer (BAY) will run 900 patients through a trial comparing carboplatin + paclitaxel + Nexavar to carboplatin + paclitaxel. This is a front-line trial in patients who have not received chemotherapy before. Overall survival is the primary endpoint. We presume, since the company secured a Special Protocol Assessment from the FDA, there is an interim analysis built in that would allow the company to expand their label if some of the secondary endpoints were hit.
Why do I say "first real test?" Because Nexavar was approved in kidney cancer because it did better than a sugar pill, not an active drug. Sure, the data compared favorably with historical data, but there is nothing like comparing a drug to an active control arm to find out if it really works.
The Owl is Not As it Appears - Adam Warner - 11:51 AM
I speculated a couple of weeks back that the early 2006 strength in the VXN may have been less than it appeared. Possibly just some earnings jitters specifically tied to a certain highflying internet search engine that will remain nameless to protect the innocent.
Well, lo and behold persistent January strength in the VXN has morphed into persistent February weakness such that we are now officially in oversold territory at over 10% below the 10-Day SMA.
It highlights a couple of points I like to make about these volatility indices. You can use all the objective analysis you want on these volatility stats, but at the end of the day, you really need to step back and think about them subjectively. Was it so unusual that the VXN reflected earnings anticipation a month ago and held strong? Or is it odd now that it looks awful as it glances ahead to the post-expiration blahs with earnings season behind us and "warnings" season over a month away?
And don't forget we have a strong market and holiday break weighing on options as well. Strength in the Volatility Sisters would be the noteworthy event right now.
Build 'em and they will come - Fil Zucchi - 11:32 AM
Minyans can find the the gory details of this morning housing data here. Notable items of interest:
- Condo developments "permitted but not started" continue the slide that began in January of last year. My read: developers see the window has closed and are passing on "soft costs" for projects that are not likely to come out of the ground in this cycle.
- Condo units "started," up 24.5%. My read: Joe developer sayz "it's too late for us to backtrack; get these damn projects up "yesterday," and when you are not working construction go to your local place of worship and pray that someone will buy them; or I am really screwed."
Actually, I've never put too much weight in this data. The margins of error are rather large, and it says little-to-nothing about buyers' appetite, or pricing.
In retrospect, claiming to have been Pope "for a couple years in the 80's" was an over-reach - Jeff Macke - 10:57 AM
As an old pal of mine is fond of saying, "Run, don't walk" to read Floyd Norris' column about RadioShack (RSH) CEO David Edmondson in today's NY Times. Mr. Edmondson is under fire for claiming to have degrees in Theology and Psychology from Pacific Coast Baptist College. As it turns out, Mr. Edmondson never actually graduated from the school.
Mr. Edmondson, if that is his real name, is leading RadioShack's investor meeting today and tomorrow, when the company will release earnings. While he regrets any confusion he may have created by "carrying erroneous information on (his) resume and mishandling (his) explanation of it" he intends to stay on at RadioShack (unless and until the BOD pulls its collective head out of its collective backside).
In addition to having an outmoded business model it may be presumed that RadioShack has now incurred the wrath of God, which is going to be hard to offset with a stock buyback.
Let me first state that I am not a housing analyst or specialist... - Bennet Sedacca - 9:45 AM
But I do understand the laws of supply and demand. If Toll Bros (TOL) and KB Home (KBH) are telling us that sales are slowing, and housing starts are rapidly increasing, does this not create a serious supply/demand imbalance and ultimate slowing?
Like I said, I am not an expert in this field, but I did complete many boring Economics classes that covered the laws of supply and demand.
Tapes R' Us! - Todd Harrison - 9:13 AM
The Minx sucked up the first (and intuitive) post-Bernanke probe as the financials stuck out with a sticky green gleam. They offered a steady hand (while some jittery midday supply made the rounds) and underscored a decent showing for the Matador Crowd. While Hoofy has to be happy, he's equally aware that S&P 1280ish (there now) is the '06 downtrend line. That's task #1 for the bovine in our midst.
Over in Rotation Station, I'll once again be eyeing energy and metals (in the context of the CRB trendline), the homies (HGX 260), Pharma (DRG 320) and the semis (on the heels of Applied Materials). In individual equityland, I'm keeping an eye cast towards looming resistance in GE ($35), IBM ($81ish) and Citi ($48). And I'll be watching the clock, as the Queen and I ready to head to Rubyville tomorrow night and see the Maven. Noice!
Good luck Today.
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