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MV Weather Report: Goldman Looking Hot for Summer


Rain or shine, we review the day's biggest stock stories.

We should have seen this coming. It was just too quiet.

Did we really expect to go into earnings season without hearing from Meredith Whitney? She's the ex-Oppenheimer analyst who correctly called the collapse of Citigroup (C) and the bank rally, then said the banks were shorts. To be quite honest, I'm really lost as to what her view is -- and I'm pretty sure I'm not the only one. But she can undoubtedly move markets, and she moved them again today.

Ms. Whitney, via her new firm, Meredith Whitney Advisors, came out with a note on Goldman Sachs (GS) and the short-term potential for banking stocks. She upgraded Goldman to "Buy," and put a $186 price target on the stock.

On CNBC, Whitney said she was bullish on the stock but bearish on the environment, saying there's a tsunami of debt issuance in the markets that Goldman focuses in.

She also stated she likes the banks here, thanks to the refinancing wave and the potential increase in tangible book value. She thinks that Bank of America (BAC) is the cheapest, with 15% upside potential.

Ms. Whitney obviously still has market-moving potential: She took Goldman up by 5.34% and Bank of America up by 9.34%. The whole banking sector actually traded positive, including Wells Fargo (WFC), JPMorgan (JPM), American Express (AXP).

Her positive comments on the financials led to a market rally, as traders who shorted on Friday where positioned poorly. The S&P finished the day up 2.49%, closing at 901. Quite an impressive move compared to last week's depressing action.

As for tomorrow, it's the more or less official start to earnings season. Before the bell, Goldman Sachs will report earnings. The company will be one of the more important reports, since it will set the stage for financial earnings in the weeks to come.

Gaming EPS is rather difficult. Today on the Buzz and Banter, Jeff Macke gave his thoughts:

"No one has any idea what Goldman Sachs or Bank of America) really earned last quarter. The whisper numbers for a beat are "a ton" and "anything that doesn't involve Ken Lewis, Hank Paulson nudity and beer chugging is a beat", respectively. So, when Meredith Whitney decided she liked Goldman Sachs and the entire sector took off higher like scalded chimps I decided to rent a little BAC on the first pullback.

"Into the close, I'm hedging via the heroin SKF ultra shorts and am taking off about 3.5 bits of worth of gains in BAC. It leaves me slightly net longer the banks than I was this morning. Very slightly. Less of a chase than a half hearted quick step into the close. If BAC touches the May 8 closing highs I'm gonzo, baby."

As Jeff says, no one really knows what these companies earned, but analysts' estimates provide a useful metric for comparison. For Goldman Sachs, analysts' estimates call for EPS of $3.48. Ms. Whitney believes that EPS will come in around $4.65.

Goldman won't be the only company reporting earnings tomorrow. Before the bell, Johnson & Johnson (JNJ) will report numbers. After the market closes, we'll hear from Intel (INTC) and Yum Brands (YUM). There will also be a barrage of economic data: PPI, Retail Sales, and business inventories will be announced.

Tomorrow should be wild. Have a great night!
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