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Buzz Bits: Dow, Nasdaq Close in the Red

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Editor's Note: This is a small sample of the content available on the Buzz and Banter.



Earnings Report - MV News

National Semiconductor
(NSM) reports 1Q EPS of $0.35 vs. $0.32 cons on revs of $541.4 mln vs. $538.3 mln. The company guides 2Q revenues to $514.3 mln -$530.6 mln vs. $553.3 mln cons


Bell Buzz - Todd Harrison - 3:48 PM

  • Hey Hoofy, no soup for you! While the upside effort was admirable, the ducks simply failed to align. The breadth/financial duopoly isn't absolute but it's earned my respect over the years.

  • I gotta tell ya, there's something to be said for opening a taco shack on a Costa Rica beach. When I was younger, I used to look at that existence through vastly different eyes than I do now. I suppose my definition of wealth is a lot different now than it was then.

  • Don't look now, the babysitters dead! Oh wait, wrong synapse. What I meant to say is, don't look now, but the BKX broke the 50-day for the first time since early June (remember how much fun that was?). BKX 109ish is also the Auggie low and alotta folks are eyeing that level.

  • (This is me holding my tongue--again)

  • Strange how the "lower crude, higher stocks" causation has seemingly ceased to exist.

  • I've gotten a flood of emails this past week from folks either A) looking for jobs on the Street, B) leaving the Street altogether or C) generally fed up with the Street. This is par for the course in the long, hard road, my friends, and my fear is that it'll continue.

  • How far? Well, when financials no longer comprise the highest weighting in the S&P---or, dare I say, toggle to the other side of that spectrum--we'll readdress the mess.

  • Can't happen, you say? Tell that to those loaded to the gills with energy in the early 70's.

  • And I don't mean to be a Debbie Downer---trust me, I've got a lot to gain from an "up tape" too. But I'll always be honest, as I was the last few years as the financials administered an equity enema to yours truly. All we can do is the best we can do and as long as we do it with honesty and integrity, we can have no regrets.

  • On that note--and speaking of integrity--I'm gonna ready for a special edition Succofest as we join the Kellners for some fine art and some good vibes. Have a great night, Minyans, and I'll see you on the freak that is Friday.


R.P.

Position in financials



Less Than Meets the Eye - Kevin Depew - 2:45 PM

  • New PnF sell signals continue to lead buy signals (despite the snap off the lows) by a 26 to 7 margin.
  • Overall the count is 61 to 8.
  • The sector distribution is widespread for the sell signals with only Retailing and Internet managing net new buy signal gains.
  • Despite the green for the SOX, Dow Transports and Hombuilders, Semis and Building are actually net negative on the day in terms of PnF breadth with the Transports flat.
  • To sum up, there is less to the rally than meets the eye based on the interior technical health.



Never Another Down Day! - Adam Warner - 1:24 PM

Looking for some (short term) bullish signs in the options marts?

This ISEE Index is virtually at a 52 week low. It is a Call/Put reading that measures ONLY retail and ONLY opening purchases, so low is indicative of excess put buying.

But you want to see that coupled with a lift in volatility. Are we getting that? Well, the VIX is still only 14, but even that meager level is actually *overbought* short term as it sits 10% above its 10 Day SMA.

Anecdotally, the list of options with unusual activity today on rising volatility shows all puts.

So color me a short term Hoofy fan, although given my firm has now filled most gaps, I may deny I ever said that.


What might be another important 'tell' if the market is getting nervous over housing? - Bennet Sedacca - 11:53 AM

In addition to the stubbornly high prices of bank stocks is the stubbornly high price of bank BONDS. What I mean here is that the spread over Treasuries is still historically tight at the moment. The answer why is below as part of a conversation I had with a Smith Barney salesman today.

While folks like Succo and Todd watch options prices as an indication of fear (my firm does too), as the resident 'bond geek' of the Ville, I track the spreads of bank and brokerage paper to determine another important fear factor. You can use junk and emerging market paper as well, but financials are the most important 'tell' for my firm.

And what have we seen and are still seeing? Greed, and an appetite for risk that won't go away. See the excerpt below....

'The BANK sector traded relatively well despite all of the supply as both the 5 and 10 year parts of the curve continue to trade very well.....A significant portion of the recent performance can be attributed to the strong rally in swaps recently as well as ongoing interest from overseas.'

Until this sort of behavior changes, my sense is that danger still looms....and it is why we continue to avoid 'spread paper' while favoring Treasuries generally.

Position in Treasuries


Love-hate relationships always end poorly. - Rod David - 9:23 AM

The Dow seemed barely to have noticed Wednesday's messy open getting a lot messier throughout the day. S&Ps fell under last Wed-Thu's consolidation that had preceded Friday's "breakout," but meanwhile the Dow tested its same consolidation as support.

The Dow doesn't lead the broader market, but it can be revealing of the broader market's sentiment. In this instance the Dow's relative outperformance suggests that Wednesday's decline didn't crush optimism. This isn't healthy from a contrarian perspective now that S&Ps have closed under a prior low. And for the same reason, a bottom won't print until pessimism reaches an extreme.

That doesn't preclude a bounce - in fact, yesterday afternoon's target was just retested at Globex lows to satisfy its selling pressure, and opening gaps tend to expend more energy than they create. But a bounce is expected to be just that - a bounce - and not a resumption of the rally.


Homies lowlights - Fil Zucchi - 9:16 AM

  • Not much to add to the reports by Hovnanian (HOV), KB Homes (KBH), and Beazer (BZH). When orders are down 50% y/y and the commentary is that conditions are deteriorat ing, as in "they are getting worse yet," there isn't much to say.

  • Do note that contract prices for the last quarter at HOV were down everywhere except the Southwest region, by 3%-9%. As has been discussed ad nauseam, prices and debt are the next shoes to drop there.

  • I'll pick on BZH just because it's one I have been following. If one thinks that the stock looks ok based on next year's consensus of $6.20, it may be wise to revisit using $2-3 EPS as an assumption. Just my guestimate, and a generous one I'm afraid.

  • With that said, I plan to use weakness in BZH to further shed my darkside exposure. I may end up leaving some on the table, but that's ok. I still think there are other places where the bad news is not priced in nearly as much.

  • For example, one might want to start thinking about the muni insurers as some "down the food chain" victims of the housing collapse. Real estate taxes are the lifeblood of most local governments and assessments and collections have skyrocketed in the last couple of years. IMHO, some quarters in the future those revenues will be very much at risk.


Position in BZH



What you need to know... - Jon Doctor J Najarian - 8:17 AM

Hewlett (HPQ) Investigation Looms – The California AG and the SEC are looking into whether HPQ and its private investigators crossed the legal line when then obtained board members social security numbers and asked AT&T (T) to send a record of phone calls to and from their homes! HPQ contends the investigation was "legal at the time." Hmmm.

JoS. A. Bank (JOSB) Sales Up 21% - The clothier said that its 2Q net income rose to $7 million, or 38 cents a share, from $5.3 million and $0.03 better than Street estimates. The retailer also reaffirmed that it expects to earn at least $2.15 per share in fiscal 2006.

Palm (PALM) 1Q Revenue To Fall Short! Ouch! Last night PALM warned that their Sept 21 earnings report would miss on the revenue side and I show shares down 6% in the pre in response to that bad news.

BAE Systems Selling Its 20% Airbus Stake – The British defense giant confirmed it will sell its $3.5 billion stake in EADS to the company and use the funds to invest in its core defense business.

Position in PALM

No positions in stocks mentioned.

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