Heading Into An Uncertain Weekend
Morning News of Note:
- Gapping Up
PETC +44% (to be acquired by private equity group; up in sympathy: PETM +6.5%), FRX +14% (Lexapro patent upheld; Jefferies upgrade), STXN +9.4% (reiterates guidance), BIDU +5.2% (Piper upgrade), MT +4.1% (extends momentum related to Arcelor deal; stock +13% in last week or so), HOM +3.5% (extends yesterday's late run), SCUR +3.2% (Matrix upgrade), BDCO +2.9%, LBIX +2.7% (in sympathy with FIZ), PEIX +2.2% (Gov Schwarzenegger visits plant), TS +2.1%, NBR +1.8% (bounces after 3% drop yesterday), CREE +1.5% (bounces after 22% drop yesterday), CHK +1.3%, LHCG +1.2% (prices offering), SAP +1.4% (Citigroup upgrade)... Mining stocks are strong: TGB +7.6%, EZM +4.8% (Canaccord Adams upgrade), AUY +3.3%, GG +1.4%, AAUK +1.3%, GLD +1%.
- Gapping Down
BGP -12% (guides lower; Deutsche downgrade), CAMP -12% (reports MayQ), DHI -11% (guides lower), NWRE -11% (TWP says co provides more clarity on recent revenue shortfall), DTAS -13% (extends recent weakness; although low volume: 2,000 shares), RSH -2.7% (co says it will end qtrly conf calls), WEBX -2.4% (ThinkEquity says it was surprised to see competitor IBM announce a $17 mln contract ), EMC -2.4% (reports Q2), BIIB -2.1% (Bernstein downgrade), CTAS -1.9% (reports MayQ; Baird downgrade), BF -1.2%, ALA -1% (extends recent slide), BRCM -1% (finds backdated options)... Under $3: AMCC -2.6% (announces lawsuit on option grants).
- GOOG Google: High expectations for quarter are warranted; see "blow-out" potential - Amtech (408.83 )
Amtech believes high expectsations for GOOG's Q2 are warranted, and the firm sees "blow-out" potential. They raise their pro-forma EPS estimate to $2.37, which is near street-high ($2.40), compared to consensus of $2.20. They say third party search traffic data shows a very robust Q2 and continued share gains for GOOG. While they note accuracy of third-party data is questionable, there is definite correlation with GOOG's revenue results. Firm notes comScore data for U.S. search queries was down 3% sequentially in Q205 and up 8% in Q204, so indications for greater than 20% growth this year does seem unusual. On their model, traffic growth inline with comScore would represent $0.30-0.35 upside to their estimate for the quarter, about $0.40-0.45 ahead of consensus. As a trading call, they would be long into the report as they see a good chance for material upside.
- GE General Electric reports EPS in line, beats on revs, guides Q3 in line, reaffirms FY06 (32.67 )
Reports Q2 (Jun) earnings of $0.47 per share, in line with the Reuters Estimates consensus of $0.47; revenues rose 9.3% year/year to $39.9 bln vs the $39.41 bln consensus. Co issues in-line guidance for Q3, sees EPS of $0.48-0.50 vs. $0.50 consensus; co issues in-line guidance for FY06, reaffirms EPS of $1.94-2.02 vs. $1.99 consensus. Co expects double-digit segment profit growth in five of its six businesses.
- BONDX Bond Watch: Treasuries Bag More Gains
The market is better this morning following another global rally in bonds overnight while equities continue their sell-off. Bonds around the world have been the beneficiaries of a gradually building safe-haven bid that began when NK missiles fluttered into the Sea of Japan over a week ago. The 10-yr yield is down at 5.049% as technical momentum gathers steam behind this rally. The 2-10-yr yield spread is slightly less-inverted at -4.5 as demand for the long end of the curve is keeping the inversion play in check. Bond prices in the EuroZone are well-higher on geopolitics & weak equities while in Japan, bond prices are similarly well-bid though in this case in spite of the BOJ's first rate hike in 6 years as the statement indicated there would be no rush to add to that hike.
- SNDK Samsung guidance does not bode well for the NAND industry; cutting numbers on Sandisk again - AmTech (41.33 )
AmTech notes Samsung Q2 bit growth was 17% and ASPs were down 32%. The firm believes the NAND flash rev generated by Samsung in Q206 suggests that NAND royalties for the co in Q3 will decline by about $12-13 mln compared to their model of $81 mln. This is primarily attributable to lack of demand, as they observed for the co sell-through. 8Gb MLC was also delayed by a quarter. Samsung's pricing guidance validates that the demand equation is clearly soft. The firm maintains their longer term positive view on SNDK.
Market Comments: The market has opened under some pressure this morning, but is attempting to stabilize. Financials have reversed their early weakness and are mostly trading up. Semis are also trading higher so far, which is a good sign.
Oil briefly touched $78 this morning, which is worrisome to almost everyone, even if it has the energy stocks trading higher. There is a lot of fear about escalating violence in the mid-east, and the possibility of supply disruptions.
The 10-year yield is slightly lower so far (5.07%), falling further below its 50-day average.
GE reported in-line results this morning, but the stock gapped slightly lower and is flirting with new lows. EMC also reported lackluster earnings and has extended its recent decline.
Normally, I would think the market can stage a rally today and finish green, but it is possible that investors are nervous about being long over the weekend and that could pressure the market into the close.
long GE, GOOG