Archive for February, 2008
Filed under: International markets, Earnings reports, Forecasts, Good news, Recession
 It is shaping up to be another tough day for the market as traders continue to express concerns over a possible recession, disappointing earnings numbers, surging crude oil prices and persistent weakness for the U.S. dollar. However, not all the companies are joining the general market anxiety, and Swiss Re made strong gains, trading up 4.9% in the Zurich exchange, despite a plunge of 87% in its fourth-quarter net profit as investors were encouraged by its positive earnings outlook.
The world’s largest reinsurer announced that its quarterly profit had dropped to 170 million Swiss francs ($161.7 million), dragged down by higher write-downs related to bad loans. Its profit numbers were down from 1.3 billion reported in the same period a year ago.
Continue reading Swiss Reinsurance quarterly profit plunges 87% on deep write-downs
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Filed under: International markets, Federal Reserve
The dollar fell to a three-year low against Japan’s yen after traders calculated that the U.S. Federal Reserve is likely to continue to lower interest rates to stimulate the slow growth / extremely sluggish U.S. economy, Bloomberg News reported Friday.
The dollar fell about one yen to 103.86 yen, before recovering slightly to 104.17 yen Friday at mid-day.
The dollar also fell against the world’s other major currencies, falling about one-fifth of a cent to $1.5187 against the euro and about one-quarter of a cent to $1.9867 against the British pound.
Continue reading The Fed signals additional rate cuts, and the dollar’s decline continues
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Filed under: Industry, Ford Motor (F), General Motors (GM), Toyota Motor Corp. (TM)
 Despite all their talk about ethanol and hydrogen, American car companies are way behind in the race to create reduced emission vehicles.
The American Council for an Energy-Efficient Economy recently released its list of the greenest cars for 2008, and it’s dominated by Japanese producers. The list of 12 greenest cars, which is slanted toward hybrids, includes four Hondas (NYSE: HMC) and four Toyotas (NYSE: TM). Ford (NYSE: F) made the list with its Focus hybrid, while General Motors (NYSE: GM) failed to place in the top 12, although its Chevrolet Tahoe hybrid was cited by the group for ’scoring well.’
The good news, if there is any, is that Detroit is not alone in failing to create cleaner cars. The Council also released a Meanest Vehicles for the Environment list which is dominated by German cars, including three Mercedes diesels. But three American vehicles also made the list, including the GMC Yukon and the Hummer H2.
The problem goes way beyond matters of national pride. Green technology is an increasingly important asset for global producers, and it’s obvious that Detroit is still far behind in this important area of competition. Worse, it’s not clear how serious the Big Three are about catching up. When someone like GM Vice Chairman and noted American car nut Bob Lutz dismisses global warming as a “crock,” you have wonder how much effort is going into new technology — as opposed to simply talking about new technology that is always just around the corner but never on the showroom floor.
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Filed under: Bad news, Economic data
The Reuters/University of Michigan Survey of Consumers final February 2008 consumer sentiment index fell to 70.8 from the January 2008 final reading of 78.4, Reuters reported Friday.
Analysts surveyed by Reuters had expected the index to decline to 70.0.
The consumer sentiment index has dropped about 10 points since its 80.9 level in October 2007.
The current conditions index fell to 83.8 in February 2008 from 94.4 in January 2008, while the expectations index fell to 62.4 from 68.1.
Meanwhile, 1-year inflation expectation increased to 3.6% in February 2008 from 3.4%, while the 5-year inflation expectation remained unchanged at 3.0%.
Economic Analysis: The February 2008 statistic — the sentiment index’s third decline in the past four months — indicates U.S. consumers continue to be concerned about the U.S. economy. Almost as important as real income gains and wealth gains, consumer sentiment is a telling statistic because sentiment, or consumer bullishness/bearishness, frequently precedes an increase/decrease in spending. Further, while the relationship between confidence and spending is not perfect, continued declines/increases in consumer sentiment over several months is viewed as an accurate gauge concerning whether they believe economic conditions are improving or deteriorating.
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Filed under: Major movement, Bad news, Industry, U.S. Steel (X), Options, Technical Analysis, Economic data, Commodities
 United States Steel Corp. (NYSE: X) stock is trading lower with other steelmakers this morning after the Commerce Department reported that inflation-adjusted consumer spending was unchanged in January. This has investors worried that a consumer pullback could weaken the economy further, cutting demand for steel. If you think this stock won’t be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on X.
After hitting a one-year high of $127.26 in June, the stock hit a one-year low of $74.41 in August. This morning, X opened at $113.50. So far today the stock has hit a low of $108.76 and a high of $113.75. As of 11:20, X is trading at $109.21, down $5.79 (-5.0%). The chart for X looks neutral and improving, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.
For a bearish hedged play on this stock, I would consider an April bear-call credit spread above the $140 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn’t do what you think but still leverage nice returns. For this particular trade, we will make a 4.2% return in two months as long as X is below $140 at April expiration. US Steel would have to rise by more than 27% before we would start to lose money.
X hasn’t been above $130 at all in the past year and has shown resistance around $121 recently. This trade could be risky if the economy picks up and demand for steel rises, but even if that happens, this position could be protected by resistance X might find between $120 and $130, where the stock has topped out twice in the past year.
Brent Archer is an options analyst and writer at Investors Observer. At publication time, Brent neither owns nor controls positions in X.
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Filed under: Major movement, Analyst reports, Bad news, Industry, Morgan Stanley (MS), Options, Technical Analysis
 Morgan Stanley (NYSE: MS) stock is falling this morning after an analyst at Punk, Ziegel & Co. reiterated the stock at “Sell” but lowered his price target for the stock to $43 from $49. He also lowered his first-quarter EPS estimate for MS to 75 cents from $1.70, and lowered his 2008 EPS estimate to $5.38 from $6.93. The analyst is the latest in a line of peers reducing expectations for the sector, but also added that Ben Bernanke’s warning about possible bank failures in Congressional testimony on Thursday was unnecessary, saying that he thinks “most banks are well capitalized by the standards established by Mr. Bernanke’s agency.” If you think this stock won’t be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on MS.
After hitting a one-year high of $90.95 in July, the stock hit a one-year low of $40.76 last week. This morning, MS opened at $43.60. So far today the stock has hit a low of $43.05 and a high of $44.00. As of 11:00, MS is trading at $43.07, down $1.34 (-3.0%). The chart for MS looks bearish but improving slightly, while S&P gives the stock a negative 2 STARS (out of 5) sell rating.
Continue reading Morgan Stanley (MS) lower on analyst’s comments
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Filed under: Analyst reports, Novartis AG ADS (NVS), Analyst initiations
.gif) MOST NOTEWORTHY: Novartis, Waste Systems, AirMedia Group, and PAETEC Holding were today’s noteworthy initiations:
- Novartis (NYSE: NVS) was initated with a Neutral at Cowen, which cited the company’s upcoming patent expirations.
- Gabelli initiated Waste Systems (NASDAQ: WSII) with a Buy, as it believes consolidated operations in Florida, increased waste internalization, and continued price increases, should lead to expanding EBIT margins.
- Oppenheimer initiated AirMedia Group (NASDAQ: AMCN) with an Outperform, as it believes that the Beijing Olympics will help the company acheive better than expected earnings.
- Deutsche Bank initiated PAETEC Holding (NASDAQ: PAET) with a Buy, as the firm believes PATEC is well-positioned to benefit from improving industry conditions.
OTHER INITIATIONS:
- Wachovia started Seaspan (NYSE: SSW) with a Market Perform.
- Needham initiated Memsic (NASDAQ: MEMS) with a Buy.
- Oppenheimer started Intellon (NASDAQ: ITLN) with an Outperform.
- Morgan Stanley initiated Dice Holdings (NYSE: DHX) with an Equal Weight.
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Filed under: XM Satellite Radio (XMSR), Sirius Satellite Radio (SIRI), Options
 XM Satellite Radio (NASDAQ: XMSR) is recently down 24cents to $11.87. XMSR and Sirius (NASDAQ: SIRI) announced in February 2007 a merger of equals. XMSR shareholders will receive 4.6 SIRI shares for each XMSR share.
The Department of Justice (DOJ) is expected to make a ruling on the SIRI-XMSR merger soon. Wachovia Securities say’s “Weak Satellite Radio Trends continue.” XMSR March option implied volatility of 135 is above its 26-week average of 93 according to Track Data, suggesting larger price movement.
Volatility Index S&P 500 Options-VIX up 1.78 to 25.36.
Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.
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Filed under: Analyst reports, Analyst upgrades and downgrades, Diageo plc (DEO), Novartis AG ADS (NVS), Amer Intl Group (AIG)
MOST NOTEWORTHY: Novartis, AIG, Diageo, and BEA Systems were today’s noteworthy downgrades:
- HSBC downgraded Novartis (NYSE: NVS) to Underweight from Neutral, as they believe the company’s mid-single digit pharma sales growth is not sustainable.
- AIG (NYSE: AIG) was downgraded to Market Perform from Outperform by Keefe Bruyette due to their concerns about the company’s deteriorating profit trends.
- Diageo (NYSE: DEO) was lowered to Neutral from Buy by Goldman Sachs to reflect a lack of near-term catalysts.
- Deutsche Bank downgraded BEA Systems (NASDAQ: BEAS) to Hold from Buy, as they believe it is likely that the acquisition will close in April.
OTHER DOWNGRADES:
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Filed under: Analyst reports, Analyst upgrades and downgrades, Dell (DELL), Pfizer (PFE)
MOST NOTEWORTHY: Pfizer, Dell, Quest Diagnostics, and Societe Generale were today’s noteworthy upgrades:
- Lehman upgraded Pfizer (NYSE: PFE) to Equal Weight from Underweight on valuation.
- Friedman Billings raised Dell (NASDAQ: DELL) to Outperform from Market Perform, citing expectations for improved margins next quarter, and valuation.
- Quest Diagnostics (NYSE: DGX) was upgraded to Outperform from Neutral by Credit Suisse, which cited valuation.
- Lehman upgraded shares of Societe Generale (OTC: SCGLY) to Overweight from Underweight to reflect a potential takeover by BNP Paribas and limited downside.
OTHER UPGRADES:
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