Good luck today!
Editor's note: For those Minyans not on the Buzz & Banter we offer you the following recap of this morning's Buzz as earnings season begins to hit stride.
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MV News (7:13am)
Good morning. Traders power up this Hump Day as earnings season kicks into second gear to find foreign markets mostly higher.
Asian trading closed up jolly and green with the Nikkei +0.21% and the Hang Seng +0.43%. A check across the pond finds CAC +0.28%, DAX +0.24% while the FTSE is the red-headed stepchild -0.24%.
Oil is trading +0.46 to 52.75 this morning while gold is unchanged at 434.4. The dollar index (DXY) is -3 bps to 83.78 while stateside futes are above fair value.
MV News (7:16am)
The Mother Chip Recap...
Intel (INTC) reported Q1 EPS $0.34 vs $0.31 cons on revs of $9.43 bln vs $9.31 bln cons. The company sees Q2 revs of $8.6-$9.2 bln vs $8.9 bln cons. Q1 gross margins came in at 59.3%.
The company raised 2005 capex guidance to $5.4-$5.8 bln vs prior $4.9-$5.3bln.
MV News (7:16am)
After the close Beeks...
The semi equipment book to bill ratio came in at 0.81 in March
ABC / Money consumer confidence index came in at (16) from (18) in prior week
MV News (7:18am)
JP Morgan (JPM) reported Q1 EPS of $0.81, ex-items, vs $0.69 cons. ROE came in at 27%, consistent with a year ago.
MV News (7:19am)
Wyeth? Because we love you...
Wyeth (WYE) reported Q1 EPS of $0.80 vs $0.77 cons on revs of $4.6 bln vs $4.46 bln cons.
The company guided '05 EPS to $2.70-2.80 vs $2.78 cons.
MV News (7:20am)
Smith Barney upgraded Dell Computer (DELL) from hold to buy on valuation.
MV News (7:23am)
Ford (F) reported Q1 EPS of $0.62 vs $0.39 cons (unclear if comparable).
The company reaffirmed recently reduced '05 guidance of $1.25-1.50 and guided Q2 to ($0.15)-$0.00 vs $0.38 cons (unclear if adjusted to reflect recent guidance reduction.
MV News (7:26am)
Spring FON Group (FON) reported Q1 EPS of $0.31 vs $0.32 cons on revs of $6.94 bln vs $6.91 bln cons. Wireless revs were $3.87 bln with net wireless adds of 518k.
MV News (7:28am)
Merrill Lynch upped Juniper (JNPR) from neutral to buy citing the company's strong and secure position in routers.
Last night JNPR reported Q1 EPS of $0.16 vs $0.15 cons on revs of $449.1 mln vs $440.5 mln. The company guided Q2 revs to $470-475 mln vs $458 mln cons.
MV News (7:29am)
United Technologies (UTX) reports Q1 diluted EPS of $1.32, ex-items; vs. $1.25 cons. Foreign Exchange added $0.03 to Q1. Revenues came in at $9.41bln vs $9.19bln cons.
FY05 guidance EPS of $5.90-$6.15, pre-split, vs. $6.06 cons. Prior guidance was $5.85-$6.10 including options expense.
MV News (7:29am)
Last night, Yahoo! (YHOO) reported Q1 EPS of $0.13 vs $0.11 cons on revs of $821 mln vs $796.8 mln.
MV News (7:30am)
Pru upped Adobe Systems (ADBE) from neutral weight to overweight citing valuation and long term strategic fit for the Macromedia (MACR) acquisition.
MV News (7:32am)
Maybe the sharp after-hours pop gave it away?
Google (GOOG) was upgraded to outperform from sector perform at RBC Capital. The firm cites Yahoo's (YHOO) results, which suggest that global search revenues were up in the mid-teens sequentially for the quarter.
RBC raises GOOG revenue estimates to $775mil from $713mil and EPS to $1.01 from $0.88 vs $729.8mil/$0.92 cons.
Neal Dingmann (7:33am)
Despite record production, XTO Energy's 1Q05 EPS came in at $0.55 or two cents less than Consensus estimates. We believe the shortfall was due to higher than expected operating and acquisition expenses YTD.
MV News (7:34am)
According to the WSJ, Fannie Mae (FNM) and Freddie Mac (FRE) will warn Congress that proposed limits on their mortgage holdings may hurt the ability to attract foreign capital into the housing market. The CEOs of both companies are testifying before Congress today.
MV News (7:35am)
The MBA Mortgage Application Index for 4/15 came in at -1.6% vs +6.1%
MV News (7:35am)
Must be the whole finger in the chili thing...
JP Morgan punted Wendy's (WEN) from overweight to neutral citing valuation.
MV News (7:39am)
Morgan Stanley upgraded the mortgage group to attractive from in-line, citing valuation.
Top picks in the group are CFC, FRE, and GDW. The firm also sees good value in WM.
MV News (7:39am)
Women's Wear Daily reported that several firms are interested in a leveraged buyout of Ann Taylor (ANN) at $2 bln or $27 per share.
No specific names were mentioned but ANN is said to be attractive because it's in the midst of a turnaround at core Ann Taylor stores.
MV News (7:41am)
Wachovia upped Jefferies Group (JEF) from market perform to outperform citing valuation, investment banking progress and management execution.
MV News (7:41am)
According to Bloomberg, China's economy, which accounted for
a 10th of global growth last year, expanded more than expected in
the first quarter as exports and investment surged with gross domestic product rising 9.5% to $379 billion vs expectations for 9% growth.
MV News (7:42am)
Brown Paper Bags?
According to the NY Post, Morgan Stanley (MWD) is handing out large retention bonuses to select senior members. A dozen such executives have been offered "incentive" awards or stock grants in the range of $4-7mil as a means of retaining top talent in the wake of the controversy following the management reorganization.
Vesting for the awards is in the range of 3-5 years. Once the award is received, individuals are subject to a non-compete clause.
MV News (7:46am)
The Journal's 'Heard on the Street' says before its IPO, Google (GOOG) used accelerated amortization to speed up the recognition of more than $750mil in expenses related to cheap option grants. The bulk of the expense was recognized in '02, '03 and '04. As a result, the expense related to those options this year will be $146mil down from $279mil last year.
The strategy demonstrates the level of preparation the company put into its IPO. Accounting experts note that the company doesn't appear to have done anything wrong and analysts usually exclude such items from their estimates, though it will impact GAAP earnings.
MV News (7:47am)
Merrill Lynch reiterated its buy rating and offered comments on Amgen's (AMGN) quarter saying it believes management could tighten '05 EPS estimates to the high end of the $2.70-2.85 range vs $2.82 cons.
The firm sees European Aranesp sales as strong but says uncertainty regarding the EPO franchise in 2H could limit near term upside.
MV News (7:47am)
The weekly investors intelligence figures show a rise in Bulls to 48.4% vs prior 46.2% while Bears fell to 26.9% vs prior 29%.
Jason Roney (7:48am)
Just a reminder to keep an eye on the other stocks. Looking back three years for an initial earnings reaction (Intel's next day open) of more than +2%, there were 7 occurrences. In each case, the ND futures opened higher by an average +1.30%. However, the intraday low was negative for each occurrence. In fact, the close was lower in 5 of the 7.
The most recent example was last quarter (January 12, 2005). On that day, the ND futures opened +.41%, made high +.89%, low -.70%, and managed to close +.57%.
MV News (7:52am)
CSFB cut EPS estimates for General Motors (GM). The firm took '05 to ($0.41) from $0.31; Q2 to ($0.20) from ($0.03); Q3 to ($0.19) from $0.37 and '06 to $3.40 from $4.00. The firm maintained its Q4 estimate of $1.46.
The firm cited GM's new truck production forecast.
MV News (7:54am)
Banc of America (BAC) recommends reducing exposure to the Semiconductor Equipment group, citing the increase in Intel's (INTC) cap-ex budget as a short term catalyst and notes it does not alter their view that the memory investment cycle is aging.
The firm believes the upside from INTC is already factored into semi-equipment vendors for the '05 outlook. Their least favorite name in the group is Teradyne (TER) which is rated as sell.
MV News (7:56am)
Honeywell (HON) reports Q1 EPS of $0.42 vs. $0.40 cons and Q1 revenues of $6.5bln vs. $6.38bln cons.
MV News (7:56am)
Smith Barney upped Seagate Tech (STX) from hold to buy and raised estimates for Q4 to $0.44 from $0.30 on revs of $1.9 bln from $1.8 bln, for '06 to $1.60 from $1.18 on revs of $8.3 bln from $7.7 bln, for '07 took revs to $8.8 bln from $8.1 bln.
MV News (7:59am)
#8, THE Iron Man...
Continental Airlines (CAL) reports Q1 EPS ($2.89) vs. ($3.10) cons and revenues of $2.5bln vs. $2.44bln cons.
Todd Harrison (8:01am)
We got the twin grin last night from Intel and Yahoo! as both bellwethers beat the Street. The Mother Chip, boosting their capital expenditure forecast, and the latter, citing a surge in advertising revenue, will look to pace the four-letter race.
These two leaders may pave the way back to our aforementioned line in the sand (NDX 1460) and set up a showdown with some very hungry bears. Again, technicals are one of four primary metrics but they've been a self-fulfilling prophecy as the fund community looks for a framework with which to craft their risk.
MV News (8:04am)
NYSE charts in the IBD...
CSE, PBH, AVL, NVO, TBL, BYD, CVH, CCK, KBH, LFL, MHS, MON, NNI, OXY, PTC, KWK, SRX, SQM, SWN, TRI, UNH
MV News (8:04am)
NASDAQ charts in the IBD...
DIOD, AFFX, ITRI, JOSB, VLCCF, LIFE, PEET, QGEN, USPI, UTHR, ASCA, BMHC, CHTT, CMTL, HYDL, BLUD, PENN, PSYS, TALX, URBN, VMSI
MV News (8:05am)
The WSJ reports that China plans to raise tariffs on textile exports increasing the duties per item to as much as $0.50 from the current 2 to 3 cents. The increase may commence as soon as May 1st.Officials from the China Chamber of Commerce for the Import and Export of Textiles declined to confirm or deny the reports.
Some analysts believe the move may put some low cost producers out of business. U.S. imports from China have risen sharply this year although total U.S. textile imports have not.
MV News (8:07am)
CNBC's David Faber reported that eight equity sales traders have left Morgan Stanley (MWD) in favor of Deutsche Bank (DB).
He noted that these types of departures are not unusual but take on greater significance given the recent turmoil at Mother Morgan.
Todd Harrison (8:07am)
On the other side of the fence...
Over in the old school, it's a hectic morning as traders chew through their #2's. A slew of Dow components (including JP Morgan, United Tech, Altria and Caterpillar) all spew their dew and that'll shape the broader tape.
Last week's "break" in the industrials (10,375) and the S&P (1163)-coupled with nosty breadth, crashing trannies and funky financials-shifted the burden of proof straight to Hoofy's shoulders. Textbook technical analysis dictates that the time to initiate risk is on a retest of those levels and that could arrive as early as this morning.
MV News (8:08am)
Bell South (BLS) has been upgraded to outperform from sector perform at RBC Capital. The firm cites exposure to wireless growth, noting the company now has 40.5% wireless revenue exposure vs. 24.8% at SBC Communications (SBC) and 23.5% at Verizon (VZ).
MV News (8:12am)
General Dynamics (GD) reported Q1 EPS of $1.66 (including tax benefit) and revenues of $4.8bln vs. $1.53 and $4.93bln cons respectively. The company sees full year EPS of $6.95 vs. $6.81 cons.
MV News (8:12am)
M Systems Flash Disk Pioneers (FLSH) reported Q1 EPS of $0.16 (in-line) on revs of $95.9 mln vs $95.38 cons.
The company guided '05 EPS to at or above $1.00 vs $1.05 cons and revs to at least $450 mln vs $468.45 mln cons.
MV News (8:15am)
St Jude Medical (STJ) reported Q1 EPS of $0.35 vs $0.34 cons on revs of $664 mln vs $646.6 mln cons.
The company guided Q2 EPS to $0.35-0.37 vs $0.34 cons and '05 EPS to $1.39-1.43 vs $1.40 cons.
MV News (8:17am)
The WSJ reports that America West (AWA) and US Airways (UAIRQ) are in advanced merger talks and notes that any deal would still have to be approved by a number of parties, including the bankruptcy judge, US Airways creditors (including GE and AWA shareholders), unions, and the federal government.
If the merger occurs, the new airline would overtake Southwest Airlines (LUV) as the sixth largest US airline. According to the Journal, talks have recently gained momentum and a merger announcement could come as soon as next week.
MV News (8:26am)
Altria (MO) reported Q1 EPS of $1.24 vs $1.23 cons on revs of $23.62 bln.
The company reaffirmed '05 guidance of $4.95-5.05 vs $5.16 cons.
MV News (8:30am)
Breakfast with Beeks...
Consumer price index m/m for Mar came in at 0.6% vs 0.5% exp; CPI ex-food & energy m/m for Mar came in at 0.4% vs 0.2% exp.
Consumer price index y/y for Mar came in at 3.1% vs 3.0% exp; CPI ex-food & energy y/y for Mar came in at 2.3% vs 2.2% exp.
Consumer price index NSA for Mar came in at 193.3 vs 193.1 exp.
MV News (8:36am)
Bodies in motion
CSFB raised EPS estimates for Gilead Sciences (GILD) for '05 to $1.43 from $1.27, for '06 to $1.54 from $1.38, for '07 to $1.70 from $1.55 and for '08 to $1.83 from $1.67.
MV News (8:41am)
Qatar's oil minister sayd the oil markets continue to be well supplied and is confident that OPEC doesn't need to increase its quotas. He also said he doesn't believe forecasts for $100/brl.
Keep in mind today is the last day of trading for the May contract and we will get weekly DOE inventory data at 10:30amET.
Todd Harrison (8:42am)
I've heard a slew of option guys opine that last week's drip was expiration related (negative gamma) and artificial. I've always said that these events exacerbate volatility but I don't believe it was causation.
Keep an eye on the material stocks on the heels of China's outsized GDP. Also note the level that is CYC 700.
For what it's worth, I think Bank of America's research arm--led by Tom McManus--is setting themselves apart from the crowd. The "lighten semis into the lift" call is a salmon to the mainstream.
Please note the long end of fixed income (-27 ticks) on the heels of a higher than expected CPI.
MV News (8:44am)
Caterpillar (CAT) reported Q1 EPS of $1.63 vs $1.36 cons on revs of $8.34 bln vs $7.30 bln cons.
The company guided '05 EPS to +35-40% y/y and revs to +16-18% y/y.
Todd Harrison (8:49am)
Call us when you have no class!
If any Minyan academia would like to participate in a "beta test syndicate" that is migrating the critters into the university spectrum, please let us know and we'll toss ya an apple!
Todd Harrison (8:54am)
Caterpillar (CAT) is trading sharply higher on the heels of eye-popping earnings. This should help the CYC 700 level that we put on our radar last week.
MV News (9:07am)
Missed it by THAT much...
Piper Jaffray (PJC) reported Q1 (Mar) EPS of $0.38 per share, which was $0.26 worse than then consensus of $0.64. Revenues fell 14.5% YoY to $179.1mil vs. $201.9mil cons.
The company cited reduced institutional sales and trading revenues.
Todd Harrison (9:25am)
Sands through the hour glass...
The migration from Mother Morgan continues as Tom Juterbock, former head of US government bond trading, and Rob "Killer" Korofsky, head of cash and program risk, both pulled the rip cord. In the case of Killer, it seems that he took his entire desk to Deutsche Bank.
If there's a white knight out there, he'd better find a faster horse. This is out of control and my contacts inside the once noble institution tell me that folks are losing faith fast.
Jason Goepfert (9:45am)
If this CPI number was so devastating, I'm wondering why 30-year Treasuries are down less than half a point (especially after the nice rally over the past month)? Wouldn't they be bearing the brunt of the selling? I've never been very good at correlating these econ numbers to future market performance.
Todd Harrison (9:46am)
N's over S's. Ya think? The financials, drugs, homies, retail and metal equities are gettin' spanked while the nets, storage and telecom (JNPR) are being thanked.
Shocka of the session? The semis are flat on the heels of Intel. That, to me, is the single largest surprise thus far (infers supply).
I wore my Minyanville tee while sneaking in a Central Park run last night and was high-fived by no fewer than four Minyans. That's awesome!
It's a crying shame that the Raiders lost Philip Buchannon.
Todd Harrison (10:09am)
Wicked Witch City
Boo just ran through my office yelling "I'm melting, I'm meeeeelting!" as he watches the S's drip, the semis slip and the bulls dig deep to find a grip. I'll tell ya, while I offered this morning that I wanted to sell rallies, I didn't think I'd have to be lickety split quick!
While pockets of optimism remain (nets), the tone of the tape is pretty miserable. Breadth is worse than 2:1 negative, the banks and brokers are leading the bleed and the small caps, energy and biotechs are bringing up the rear. It's early, I know, but it feels like Tuesday was a ray of light in front of a perfect storm.
Can Snapper turn 'em? Yes--but my sense is that he will have to find some footing soon. IF (huge if) they do, the Matador Crowd will surely focus their efforts on the four-letter complex as that's where the relative strength is and that's where room remains (until NDX 1460). As it stands however, good news "doesn't matter" in bad tapes and that's what we're seeing thus far.
As always, I hope this finds you well.
Todd Harrison (10:26am)
Yesterday, during the brief downside pause, we eyed our key tells for clues as to whether it was a reversal (lower) or a pause (before going higher). We're having a similar situation right now as the bulls look in the mirror and find their image.
As it stands, NASDAQ internals have edged to a 3:2 negative stance as the NYSE breadth (skewed lower by heavy bonds) remains 9:5 negative. The Cliff Branch for the bulls remains focused in four-letter land as the semis slink back to Matador City (still much heavier than expected) and some beta chasing (nets) procures.
It's still murky but the N's over S's dynamic remains the clearest thing on my screen. If you're bullish, that's likely where you wanna reside and if you're bangin' with Boo, the old school (ex-the cyclicals) seems like the place to be. I'm still in the "fade (read: sell) rallies" camp (under S&P 1163/NDX 1460) and will pick my spots accordingly.
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