Monday Morning Musings

Morning News of Note:

• Gapping Up
  IFO +14% (Kaufman upgrade, $12 tgt), LBIX +4.1% (extends momentum, stock +124% in one month), LVLT +2.7% (Needham upgrade), AAPL +2.2% (mentioned positively in Barron's), MCD +2.2% (guides above consensus on strong Jun same store sales), QCOM +1.7% (UBS upgrade), HDI +1.6% (reports Q2 in-line, beats on revs), SNDK +1.5% (introduces new product)... Mining stocks are strong driven by escalalting violence in Mideast: PAAS +4.7%, N +2.7%, RGLD +2.3%, EZM +1%.
• Gapping Down
  SPC -8% (guides lower; may sell some assets), ONXS -2.7% (guides below consensus), NTAP -2.5% (Morgan Stanley downgrade), PD -2.2%, ING -2.2%, CCL -1.6%, C -1% (reports Q2)... European stocks remain weak on escalating Mideast violence: CRXL -5.3%, UBS -4.4%, ABB -4%, RTP -3.6%, TS -3.3%, ALA -3.1%, BOBJ -2.9%, TOT -2.7%, ABN -2.5%, VOD -2.4%, NOK -2.3%, AAUK -1.9%, ASMI -1.9%, BP -1.5%... Under $3: IMR -80% (judgment goes against company), THLD -42% (prostate drug fails to meet endpoints), TCX -7.5%, LU -1.9% (in sympathy with ALA).
• Israel's Lebanon assault could end in days, according to Israel TV - Reuters
  Reuters reports that Israel could wrap up its offensive in Lebanon within days, Israel's Channel 10 television said on Monday, quoting a senior military officer. But with Lebanese Hizbollah guerrillas continuing their cross-border rocket strikes, Channel 10 also quoted the military officer as saying Israel could escalate its assault by destroying Lebanon's electricity grid.
• C Citigroup reports in-line with Reuters consensus, penny below First Call consensus (47.58 )
  Reports Q2 (Jun) earnings of $1.05 per share, in-line with the Reuters Estimates consensus of $1.05 and a penny below the First Call consensus of $1.06; revenues rose 10.0% year/year to $22.18 bln vs the $22.34 bln consensus.
• Study finds backdating of options widespread - NY Times
  The New York Times reports more than 2,000 companies appear to have used backdated stock options to sweeten their top executives' pay packages, according to a new study that suggests the practice is far more widespread than previously disclosed. The new statistical analysis, which comes amid a broadening federal inquiry of the practice of timing options to the stock market, estimates that 29.2% of companies have used backdated options and 13.6% of options granted to top executives from 1996 to 2005 were backdated or otherwise manipulated.
• AAPL Apple Computer mentioned positively in Barron's (50.67 )
  Barron's reports as interest in Macintosh computers picks up market share, bulls on Apple Computer (AAPL) maintain that shares will jump anywhere from 45% to 75% in the next twelve months. Right now, Apple's stock is cheaper than it has been for a long time. It's trading at about 25 times the consensus estimate for this fiscal year's earnings -- down from an average multiple of 61 since the beginning of 2002. This is reasonable in view of the co's growth prospects: The consensus is for earnings growth averaging 20% a year over the next five years.

Market Comments: The market is getting a nice bounce at the open; let's just hope it lasts. Most people were probably very nervous about how the market would open on Monday morning, given the escalating violence in the Middle East. But absent any major developments, there has been a bit of a sigh of relief.

The dollar is trading higher (flight to safety), which is weighing on the commodity complex, including gold and oil. This has the energy stocks trading lower. Financials are mostly higher, despite a slight disappointment in Citi's earnings.

Tech is up across the board in early trading. Barron's did a positive piece on Apple, which is boosting the stock. GOOG is also higher, despite more noise about click fraud. And the semis are up as well.

Earnings season really heats up this week. I will do my best to provide color on any notable earnings reports, and links to updates/transcripts from the conference calls.

long AAPL, C, GOOG