Thursday Morning, December 13th
Dow Stock News
T AT&T Credit Suisse Price Target Raised Outperform $48 to $50;
Ice Man Stocks
Breakouts the Ice Man may consider trading:
MUR - 79.75
Regular Trades the Ice Man may consider:
MMR - 12.80
X - 115
Depressed stocks the Ice Man may buy:
HOKU -10.75 Gap
Dollar Man Ideas:
FLML - 9
VNDA - 9
Media Commentators
Cramer's Comments:
Bullish: AAPL, HPQ, GOOG, RIMM, INTC, NVDA, TXN, SIGM, MRX(after year end)
Ice Cold Commentators
Break Man Video Summary:
Break out buy (or short sell) watch list for short term gains December 13 includes: IRM, ARB, YUM, X, CNP, MUR, MS.
Several candidates for break out or short sell plays for at least short term gains by buying the break out (or selling the break down) on good volume and closing at least some on the first day.
Swing Man Market Recap:
The market gapped up Wednesday morning after the FED announced a concerted effort by many central banks worldwide to inject liquidity into the banking system. Shortly after the open, the Dow was up 270 points and the SPX was up 34 points at 1511. But that was the high for the day. Steady selling followed as the SPX broke back below 1490 before subsiding somewhat around the 1484 pivot near 1:00. After a slight rally, the market again started heading lower around 2:30 and actually took out the lows of Tuesday by 3:30 as the SPX hit 1468. At this time the Dow was down over 100 points. However, a vicious rally unfolded over the last half hour which pushed the entire market back into positive territory with the SPX closing at 1486. On the day, the SPX/DOW gained 0.45% while the NDX/NAZ added 0.80%. Bonds recovered somewhat from the morning selling losing about one point, Crude jumped $3.70, while Gold rose $2.20. Look for pivot support on the SPX at 1484 and then 1462 with pivot resistance at 1506 and 1530. Short term momentum has been stymied by all this volatility and is currently inching lower below the neutral level. Wednesday afternoon´s selling nearly completely retraced the most recent rally from early December. This market is quite wild, and with trends mixed, can move in either direction at this point in time. Thursday morning core PPI and retail sales will be reported and Lehman Brothers will announce its earnings. Expect the volatility to continue.
While I do believe the FED was working on alternate means of injecting liquidity into the system, I don´t believe that the news this morning was a coincidence. Personally, I think they were somewhat surprised by the markets reaction to their announcement on Tuesday and decided that they needed to attempt to stop some of the bleeding quickly. As I stated Tuesday night, this FED has been dealt a tough hand as a result of the housing bubble bursting. They have to keep an eye on rising food and energy prices while at the same time deal with a credit crunch. Some people are begging for the FED to be more aggressive while others argue for little change. Varying opinions on what is the right strategy but the one thing we know is that the market was clearly disappointed yesterday.
Truthfully, I will refrain from any projections tonight. The market is wild and loose and thus not very conducive to good many good trade setups. The SPX is still attempting to hold near the 1490 area but the overall action the past two days leads me to remain cautious. The market appears fixated on every word out of the FED which only adds to the volatility. The action is the financial sector today was troubling in how they reacted to the Fed plan this morning. Heck, commodity stocks rallied while financials lost ground. There are certainly ongoing concerns relating to this sector and we may learn more shortly as Lehman Brothers will be reporting tomorrow prior to the open. Next week will also hear from Goldman Sachs, Morgan Stanley, and Bear Stearns.
Let me make just a quick comment on some of the charts. Should this market elect to pullback down to retest the lows last month, it´s likely they will be divergent lows. Notice that the daily MACD´s have barely budged on this sell off – this will be something to watch should we move lower. With that in mind, several 15 minute index charts are now displaying falling wedge formation which may be indicative of a bounce should there downtrend lines be broken. This could be negated by Thursday´s news but it´s something to be aware of for Thursday.
Good Trading.
CNBC Fast Money Review
1. CREDIT COAL MINE
The headline: Bank Stocks First to Roll Over Wednesday as Investors Question Fed's Cash Injection.
Guy Adami says C, BAC gave up their gains Wednesday as investors bet the Fed plan won't revive subprime-saddled lending markets. Personally, I don´t think investors understand the Fed´s plan.
Pete Najarian says this market isn´t about the long-term. He put a short on GS Wednesday because the day´s market action “just didn´t seem right.’
2. OIL SOARS 5% to $94
Dylan Ratigan explains Goldman Sachs lifted its 2008 forecast for crude oil prices to $95.
Guy Adami thinks it´s just a rotation out of commodities and nothing to worry about.
3. AFTER HOURS ACTION:
The headline: BIIB did not receive any definitive offers to buy company
Pete Najarian says evidently nobody is ready to spend $25 billion for Biogen.
Karen Finerman says no joy for me, I´m long options.
4. CHOOSE YOUR OWN LEHMAN ADVENTURE
Lehman Brothers kicks off the volatile Wall Street earnings trade Thursday. What's the trade as the Street prepares to hear from LEH, GS, BSC and MS.
Pete Najarian recommends selling LEH if Lehman posts “decent results.’ Najarian also expects Goldman and Morgan stock to get dragged down on Thursday by Lehman news.
Karen Finerman said the one thing that´s relevant in the Lehman data is the write-down.
Guy Adami agrees. He´s also worried about downside in LEH.
Jeff Macke says Lehman can´t win, “If they say everything is fine, the Street will say “liar’ if they say everything is terrible the Street will say “I told you so!’
5. RUN FROM THE BANKS?
Morgan Stanley made Citigroup their top short for 2008, citing a dividend cut and deteriorating earnings. Is there still time to trade it?
John Merriman, Chief Executive of Merriman, Curhan Ford & Co. joined the panel for this conversation. Following is a synopsis of his main points.
While not as bad as the banking crisis of the early 90s, today's money center banks still have significant downside ( between 20% - 30%) due to their subprime exposure, says Merriman.
Back in the early ‘90s, he adds, there was legitimate concern that Citigroup would go out of business as the stock sank to the single digits. That's probably not likely now, but I recommend investors short the large money center banks whose accounting remains somewhat opaque.
According to Merriman, names with the biggest downside risk could include BAC, C, and WFC.
Pete Najarian isn´t sure about Merriman's thesis. He likes USB and WFC because Warren Buffett owns these stocks.
6. HOW DO I USE THIS THING?
Momentum is building in wireless. Who are the winners if sales of the iPhone and other handheld devices surge in 2008?
Pete Najarian recommends the “networkers’. He likes CSCO and JNPR for their presence in emerging markets. He also recommends RIMM, which is getting into China.
Jeff Macke adds that these stocks are trading extraordinarily well. He likes the tailwind in tech and recommends INTC.
Karen Finerman reminds the panel of her FTWR trade. But she adds, there´s a great deal of downside risk.
7. POPS AND DROPS
NWS popped 1%. Rupert Murdoch's media empire rose as Dow Jones shareholders approved News Corp purchase.
MT popped 4%. The largest steelmaker in the world announced plans to buyback 44 million shares over two years.
MTW popped 10%. Higher demand for cranes led this construction equipment maker to raise its 2008 forecast.
CMI popped 6%. Guy Adami likes this story because it´s international.
AMR dropped 7%. Adami says the stock could go lower.
ODP dropped 11%. Get out of this stock, says Jeff Macke.
SGP dropped 4%. A congressional panel decided to investigate Schering's handling of a clinical trial for cholesterol drug Zetia, according to the New York Times.
8. YOUR FIRST MOVE FOR THURSDAY
Jeff Macke recommends shorting the Dow with DOG.
Guy Adami thinks CSCO is a buy.
Karen Finerman prefers shorting MBI.
Pete Najarian likes JNJ.
News and Events Digest
Breaking News
Dow Chemical Co. (DOW), the Midland, Mich., chemicals giant, will join with Petrochemical Industries Co. of Kuwait in a 50-50 petrochemicals venture. In a statement on Thursday, the companies said the $11 billion U.S.-based venture will employ 5,000 people to produce polyethylene and other materials. Terms call for Dow to sell to the Kuwaiti firm a half-interest in five Dow businesses that will make up the venture. Dow will receive $9.5 billion pre-tax from PCI for the 50% stake. Drawing on PCI's expertise in feedstock for petrochemicals, the venture will be fully integrated, from feedstock to derivatives, said Maha Mulla Hussain, managing director of the Kuwaiti firm, in the statement. - MarketWatch
Duke Energy is expanding its renewable energy portfolio through a contract to purchase 100 wind turbines from General Electric.
Vanda Pharmaceuticals Inc. (VNDA) said on Wednesday that data from four late-stage clinical trials showed that its experimental antipsychotic, iloperidone, produced significantly greater improvements in schizophrenia symptoms compared with a placebo. - Reuters
Media Summary
According to Reuters, Paulson says that China is picking up the pace of the yuan rise.
Reuters writesThe Asian Development Bank cut growth rates for countries in Asia including China
Reuters reports that Novartis will cut 2.5% of its work force in the latest sign of trouble at bug drug companies.
The Wall Street Journal writes that The Fed said it will provide banks up to $40 billion in the next eight days to stimulate lending.
The Wall Street Journal writes that a large fund to bail-out SIVs may be losing steam as other alternatives are working.
The Wall Street Journal reports that Biogen (BIIB) has stopped its efforts to find a buyer. Shares fell sharply.
The Wall Street Journal reports that the takeover deal for SLM (SLM) has come to an end.
The Wall Street Journal writes that Rupert Murdoch's purchase of Dow Jones (DJ) is nearly complete.
The New York Times writes that Northern Rock has named a new CEO and will take a $574 miillion write-down for exposure to credit markets.
The New York Times reports that the Illinois attorney general has subpoenaed documents from Countrywide (CFC) as it examines the company's lending practices.
The New York Times writes that Bank of America (BAC) and Wachovia (WB) repoted larger-than-expected losses.
The New York Times also writes that an airline trade group expects profits in the industry to fall further next year.
The FT writes that the head of Goldman Sachs (GS) will be paid $70 million this year.
The FT reports that Paramount will launch a new feature film, Jackass, online, a move which will shake up the movie industry.
CNN Money says that the government upped its forecast for crude prices in 2010 by 20%.
Barron's reports that an ITC judge has determined that Nokia (NOK) handsets do not infringe on Qualcomm (QCOM) patents.
M&A Activity:
Automated teller machine operator Euronet Worldwide Inc. on Thursday confirmed it delivered a letter to the board of MoneyGram International Inc. on Dec. 4, offering to acquire the Minneapolis-based money transfer company for about $1.65 billion in stock. - AP
ON Semiconductor Corp. (ONNN) and AMIS Holdings, Inc. (AMIS), parent company of AMI Semiconductor, Thursday announced a definitive merger agreement providing for the acquisition of AMIS by ON Semiconductor in an all-stock transaction with an equity value of approximately $915 million. In addition, ON Semiconductor also said it has increased its share repurchase authorization from 30 million shares to 50 million shares. - MarketWatch
Lehman Brothers Holdings Inc., the nation's No. 4 investment bank, on Thursday reported private-equity investments and investment banking drove its fiscal fourth-quarter profit above Wall Street expectations. - AP
IPO Central:
Med Assets (MDAS) priced its 13.3 million share initial public offering at $16 per share, the high end of its $14-$16 range. The maker of software to help hospitals and healthcare firms improve their cash flows raised $213 million in the IPO. - MarketWatch
Economic Data:
8:30 Retail Sales
8:30 PPI
8:30 Initial Claims
10:00 Business Inventories
Upgrades and Downgrades by Sector:
Beverages
HANS Hansen Natural Stifel Nicolaus Price Target Raised Buy $55 to $58
Biotech
BIIB Biogen Idec Credit Suisse Upgraded from Underperform to Neutral
BIIB Biogen Idec Jefferies & Co Cut Price Target Hold $73 to $52
Brokerage Services
MKTX Marketaxess Banc of America Sec Initiated at Sell $12
CSGS CSG Systems Kaufman Bros Initiated at Buy $22
FIS Fidelity National Information Services Banc of America Sec Initiated at Buy $54
Computer Software
BMC BMC Software Credit Suisse Upgraded from Neutral to Outperform
OMTR Omniture Banc of America Sec Initiated at Buy
RHT Red Hat Banc of America Sec Downgraded from Buy to Neutral $23 to $21
Finance Companies
SLM SLM Corp Keefe Bruyette Upgraded from Mkt Perform to Outperform $40 to $37
COF Capital One Jefferies & Co Downgraded from Buy to Hold $80 to $50
SLM SLM Corp Credit Suisse Cut Price Target Neutral $60 to $27
Gaming Operations
EGT Elixir Gaming Roth Capital Initiated at Buy $5.50
Healthcare
PRX Par Pharmaceutical Lehman Brothers Downgraded from Overweight to Equal-weight
VRTX Vertex Pharm Lazard Capital Initiated at Sell $16
GXDX Genoptix Cowen & Co Initiated at Outperform
Healthcare Equipment
CYNO Cynosure Citigroup Upgraded from Hold to Buy
MMSI Merit Medical Friedman Billings Initiated at Outperform $18
STJ St. Jude Medical Friedman Billings Initiated at Outperform $48
BSX Boston Scientific Friedman Billings Initiated at Underperform $9
Household Goods
SCSS Select Comfort Northland Securities Downgraded from Outperform to Market Perform
Industrial Equipment
AMSC Am Superconductor Deutsche Securities Initiated at Buy
BUCY Bucyrus JP Morgan Initiated at Overweight
Manufacturing
DHR Danaher Credit Suisse Price Target Raised Neutral $85 to $88
BEZ Baldor Electric Bear Stearns Downgraded from Outperform to Peer Perform
Oil and Gas
SUN Sunoco Deutsche Securities Upgraded from Hold to Buy
CLNE Clean Energy Fuels Broadpoint Capital Initiated at Strong Buy $18
Publishing
JRC Journal Register UBS Initiated at Buy
Regional Banks
CNB Colnl BancGrp Morgan Keegan Downgraded from Outperform to Mkt Perform
WM Washington Mutual Banc of America Sec Downgraded from Neutral to Sell $24 to $13
REITs
KRC Kilroy Realty Friedman Billings Upgraded from Mkt Perform to Outperform $82 to $75
Retail Trade
CAO CSK Auto Credit Suisse Cut Price Target Outperform $20 to $13
Semiconductors
CREE Cree Piper Jaffray Upgraded from Neutral to Buy
PMCS PMC-Sierra Banc of America Sec Initiated at Sell $6
Solar Energy
FSLR First Solar UBS Initiated at Buy $350
Telecommunications
ADCT ADC Telecom Merriman Curhan Ford Upgraded from Neutral to Buy
ITRI Itron Deutsche Securities Initiated at Buy
PLT Plantronics JP Morgan Downgraded from Neutral to Underweight
Transpo-Shipping
OCNF Oceanfreight Cantor Fitzgerald Price Target Raised Buy $32 to $33
Utilities
NST NSTAR Jefferies & Co Price Target Raised Hold $35 to $36.50
DYN Dynegy Calyon Securities Downgraded from Buy to Add $10 to $9