News, Tracked.com Topics

Another Manic Monday…of Mergers, That Is

By Taryn Cooper, at 12:13 pm on March 1st, 2010

I have to admit, after working for years on an investment banking floor, I still get riled up on Monday mornings when deals are announced.  Oh boy, were they announced today!

Out of four high-ish profile announcements, AIG selling its Asian unit to Prudential plc, Merck KGaA buying life-science company Millipore, Astellas Pharma submitted an unsolicited bid for OSI Pharmaceuticals, and MSCI agreed to acquire proxy advisory firm RiskMetrics.  Those four deals along provided about $50 billion in transaction value to the league tables this morning.

The AIG deal was valued $35.5 billion.  I’m not certain what kind of sign this is for AIG — garbage in, garbage out?  Whatever the case, $35.5 billion is not something to shake a stick, whether or not this is perceived to  be a strong subsidiary that they could get some value from.

What interests me are the pharmaceutical and healthcare consolidations, usually signifying a “healthier” economy (not “healthy” just “healthier” by  most standards).   When you see consolidations in this industry, “they” will come (meaning: investors, driving up the markets!). In fact, as we speak, drug stocks are reported to be “stoked” by this merger activity.

An unsolicited bid, which is just a nice way of saying “hostile” (though technically, a hostile bid is when the target formally rejects the acquirer’s offer), leads me the acquisition of proxy advisory firm RiskMetrics.  RiskMetrics is a great tool to view how strong companies are, regarding their board and internal structure, who may be vulnerable to unsolicited or hostile targeted bids.  MSCI is an interesting acquirer of this set as they are index focused and potentially looking to  build out their index portfolio with a purchase of Russell Investments after a failed bid for the famed Dow Jones indexes.

All in all, a healthy Merger Monday is a good sign of things to come.  That and sun after a particularly blustery weekend!

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Wall Street Wrap

The Greece No-Bailout-Bailout Waiting Game, Market Drops and Pops

By Robert Perrego, at 4:37 pm on February 10th, 2010

The Dow Jones Industrial Average dropped almost 100 points off the open this morning as no bailout for Greece had materialized overnight.  Then, as rumors circulated across trading desks that a plan was forming, the DJIA popped back up to go positive for a short time before selling off moderately into the close as the Greece watching no-bailout-bailout speculation game resumed.

The Dow Jones Industrial Average closed down 20.26 points (-0.20%, 10,0.38.38) with its ETF, “The Diamonds” (NYSE: DIA) losing $0.13 (-0.12%, $100.52).  For the S&P 500 (-2.39, -0.22%, 1,068.13) the ETF is called “The Spiders”, which dropped $0.21 (-0.19%, $107.01).  The Nasdaq 100 lost 4.08 points (-0.23%, 1,749.76) and the tech index’s ETF, “The Q’s” (NSDQ: QQQQ) lost $0.09 (-0.20%, $43.02)

There are rules in place that bar the ECB or other member governments from bailing out Greece by buying their bonds or extending credit, and now that a dire situation is up against these rules it looks like politicians are scrambling to find a loophole.   As strikes and protests loom, Greek Prime Minister George Papandreou stated that they have not asked for aid and market players are either of the belief help is on the way or the bottom is going to drop out.  You can place your bets on any stock exchange in the world by just buying or shorting stocks because if no substantial aid package comes through soon, there will be “blood on the walls” in the credit markets according to one strategist.  You can bet that bleeding in the credit markets turns stock traders screens red as equity markets will drop like they did at the end of last week without these politicians doing something besides holding a lot of lunch meetings.

Federal Reserve Chairman Ben Bernanke testified in front of the House Financial Services Committee today, contrary to reports it was canceled due to the weather, and stated that the central bank is considering raising the discount rate (not the federal funds rate) soon.  This rate usually follows the federal funds rate and is seen by Bernanke as one way to tighten without having to raise the more economically sensitive federal funds rate.  Many past statements by Bernanke have been that the federal funds rate will remain low for ‘an extended period of time.’

American International Group Inc. (NYSE: AIG) was up 16.33% (+$3.78, $26.92) on news they were selling their Alico subsidiary to MetLife Inc. (NYSE: MET) for $15 billion in stock and cash.  Last August AIG’s share price rocketed on speculation of the sale of a different subsidiary, a short squeeze and news founder Hank Greenberg was back in the fold.  While that rip in the stock took it up to over $55, the unit was never sold due to lack of interest.  This stock move, while not as large as the move to $55, seems to be real even though officers from both firms refused to comment on the situation.

Baidu, Inc. (NSDQ: BIDU) jumped $47.12 (+10.83%, $482.13) to a new all time on above average volume after reporting earnings after the bell yesterday.  BIDU also stands to gain market share as a result of statements by Google Inc. (NSDQ: GOOG) that they might be pulling out of China.  Google currently only has a 17% share of the search market in China, but 17% more is 17% more and the Chinese market is huge.

New York spot gold dropped over $10 an ounce this morning but recovered and was last seen trading at $1,071.90 (-$5.70, -0.53%, 4:30 p.m.).  Nymex crude gained 71 cents to $74.43 a barrel (+0.92%, 4:23 p.m.).  The dollar strengthened on the comments by Bernanke regarding raising the discount rate.  The PowerShares DB US Dollar ETF (NYSE: UUP) finished up 0.29% (+$0.07, $23.56)

Economic reports out of Washington D.C. are being delayed as a result of the federal government being shut down.  When President Obama mentioned a spending freeze for the national budget during his recent State of the Union speech, my reaction was I will believe it when I see it.  I am not sure this is what he meant, but one government official stated that having the Government shut down costs the taxpayers $100 million a day.  If you ask me, the less time these guys have to vote on raising my taxes the more money it saves me, so three cheers for Mother Nature!

Selected earnings estimates for Thursday, February 11:

ASF 0.15 before market open, A 0.32 after the close, ALU 0.08 bmo, AN 0.27 bmo, BEC 1.26, BWA 0.22, CEPH 1.58 atc, CS bmo, DVA 1.06, EXPE 0.28 bmo, BGC 0.24 atc, GPI 0.44 bmo, JASO 0.11, LH 1.15 bmo, CLI 0.76 bmo, MFC 0.57, MAR 0.25 bmo, MFE 0.64, MOH -0.16, PEP 0.91 bmo, PM 0.79, PGN 0.50 bmo, RNWK -0.06 atc, RTP, STRA 2.30 bmo, CAKE 0.24, VFC 1.47, VIA 0.87 bmo, WWE 0.18 bmo.

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News

Doubting Thomas Dissents, iPad iDisappoints?

By Robert Perrego, at 5:46 pm on January 27th, 2010

The Federal Open Market Committee announced that they would keep interest rates at their historically low ‘0-0.25%’ level and also stated that rates would remain low for an “extended period of time.”  Doubting Thomas Hoenig, the Kansas City Fed President, was the dissenting voice but not on the level of interest rates, just on the promise to keep interest rates low.  Hoenig ‘doubts’ the economy is still weak enough to keep the pledge to keep interest rates low for an extended period of time.  This one dissenting vote was enough to send the markets higher after the announcement as the Dow Jones Industrial Average rallied from 10,150 before the release to 10,236.16 (+0.41%, +48.87) at the close.

The S&P 500 experienced a similar turn of fortune on The Fed announcement rising to close at 1,097.50 (+5.57, 0.50%) and the Nasdaq 100 climbed to 1,818.90 (+0.83%, =15.04)

One possible reason why The Fed kept the promise to keep rates low for an “extended period,” is that the U.S. Senate will vote whether or not to confirm Bernanke to a second term as Fed Chairman tomorrow.  While politicians may worry about interest rates and inflation, right now they are more worried about votes and jobs, so losing this ‘extended’ language from the statement might make Ben’s reappointment a bit less certain.

Click ‘here’ to see the text of the FOMC announcement.

Treasury Secretary Timothy Geithner got grilled by members of Congress about his role in how the whole bailout of American International Group (NYSE: AIG) and Goldman Sachs Group, Inc. (NYSE: GS) was handled.  The heart of the issue that members of the House Committee on Oversight and Government pushed was whether or not Geithner made decisions with the best interests of the taxpayer in mind, or the best interests of Goldman Sachs.  Goldman Sachs was the biggest recipient of funds from AIG, and these funds were supplied by the U.S. taxpayer through the TARP fund.  Whether these politicians (and yes, I do not trust any politicians) were stumping and posturing for votes in this coming November’s elections, or whether they actually thought the bailout could have been handled differently, and at a lower cost to the taxpayer, no one knows.  I would say that Geithner and former Treasury Secretary Hank Paulson know a substantial amount more about banking, derivatives and the financial mess we were in than the lawyers and popularity contest winners we call politicians.  Who do you trust more, bankers or politicians?

Steve Jobs rolled out the new Apple Inc. (NSDQ: AAPL) iPad to some underwhelming reviews and this one review that claims it is ‘culture-changing.’ I have an iPhone and its great, but I do not see the reason to buy something that is half the way between my phone and a laptop (or netbook) for $500 to $1,000.  Whether or not the public buys this thing like they bought other Apple products, investors did not like it – until they heard the price!  Apple stock dropped as Jobs unveiled the iPad and you could practically hear the “that’s it?” from stock traders.  When Jobs announced that the lowest cost model would be $499 the stock ripped and closed the day up $1.94 at $207.88.  For Tracked.com’s take on Apple’s new gizmo see:  iPad or iFad?

A Tale of Two Dow Stocks today brings us Boeing Co. (NYSE: BA) and their biggest one day stock jump in over a year on stronger than expected earnings.  Boeing rose $4.22 or 7.31% after reporting $1.77 a share in profit ($1.36 expected) after losing 12 cents a share a year earlier.  The stock you didn’t want to be in today was Caterpillar Inc. (NYSE: CAT) as their earnings announcement came in above expectations ($0.36 vs. $0.28) but their year-over-year comparisons were poor ($0.36 vs. $1.08) and sales in the fourth quarter declined 39% to $7.9 billion.  Just over two weeks ago Caterpillar stock ripped to its highest level since September of 2009 as China announced a strong economy and traders bet Caterpillar was doing brisk business selling them tractors.  This price and volume spike from January 11th has a lot of people disappointed in today’s results from the CAT as the stock dropped $2.41 to $53.44.

Tomorrow we get the vote on whether or not Bernanke keeps his job and Durable Goods Orders (1.6% exp.) and Jobless Claims (440k) at 8:30 a.m.

First look at the companies expected to report tomorrow show that it is airlines day with ALK, JBLU and LCC reporting.  Also, keep an eye on the transportation index as airlines are part and KSU and ABFS are also reporting.

Selected earnings reports for Thursday:

MMM 1.21, ADPT -0.04, MO 0.40 before market open, AEP 0.46, AMCC 0.04 after the close, AZN 1.52 bmo, T 0.51 bmo, BLL 0.71 bmo, BAX 1.03, BDX 1.20 bmo, BMS 0.34 bmo, BCR 1.34 atc, CA 0.42, CP 0.83 bmo, CAH 0.46 bmo, CELG 0.62 bmo, CB 1.46 atc, CL 1.18, CY 0.11 bmo, DHR 1.03, D 0.60 bmo, EK 0.18 bmo, LLY 0.92, BMY N/A, F 0.26 bmo, BEN 1.47 bmo, GNW 0.10 atc, HP 0.50 bmo, JNS 0.19 bmo, JBLU 0.03 bmo, JNPR 0.26 atc, KSU 0.29 bmo, KLAC 0.27 atc, LLL 1.86 bmo, LEG 0.24 atc, LMT 1.99 bmo, MXIM 0.18 atc, MKC 0.91, MSFT 0.59 atc, MOT 0.08 bmo, NOK 0.28 bmo, OXY 1.24, OXPS 0.26 bmo, OSK 1.00 bmo, POT 0.78, PG 1.43, RMBS -0.26 atc, RTN 1.23 bmo, COL 0.73 bmo, SNDK 0.69 atc, SXE 0.47 atc, SY 0.69 bmo, SNV -0.59 atc, TXT 0.09 bmo, EL 1.19 bmo, TWC 0.88 bmo, TYC 0.59, UA 0.25 bmo, LCC -0.50, XEL 0.36 bmo.

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Wall Street Wrap

Weak Jobs Number Puts Market on the Edge, Obama’s Bank Plan Pushes it Over

By Robert Perrego, at 5:17 pm on January 21st, 2010

Yesterday, the Dow Jones Industrial Average dropped 208 points before recovering to post a 122 point loss on the day.  The S&P 500 also experienced the same deeper drop and recovery into the close.  Looking at the charts for the Dow and the S&P 500 shows that where the two market Indexes closed yesterday, was right on the support of short term uptrend lines that have been in effect since December 17th of last year.  All the market needed to drop was a little push…

This morning before the open, the Jobless Claims came in weaker than expected by 42,000 jobs (482K vs. 440K), and the market dropped a bit off the open.  The 10 a.m. release of a weak Philly Fed survey and a brief released by the White House with details about new banking regulations President Obama had a press conference scheduled for, was enough to push the market over the edge.  In 17 minutes the DJIA dropped 105 points as selling, and possibly the cascading of protective sell stops, took the market on a one way trip lower.  An hour later Obama was on TV, and as he announced his plans a second wave of selling drove the market to its day low at down 229 points.

The Dow Jones Industrial Average lost 213.27 points (-2.01%, 10,389.88) on the day making the drop of the last two days total 335 points, which is the biggest two day loss since June of last year.  The S&P 500 dropped 21.56 points (-1.89%, 1,116.48) and the Nasdaq 100 was off 17.38 points (-0.93%, 1,850.57)

There seems to be a difference of opinion about how Goldman Sachs Group, Inc. (NYSE: GS) will fare under the newly proposed legislation.  Dick Bove of Rochdale Securities LLC says you should buy Goldman on the dip, but Michael Hecht at JMP Secutities and Matt Albrecht at Standard and Poor’s disagree, saying the bank will get hit harder than their brethren.  Goldman announced earnings this morning before the opening bell and crushed the analysts estimates of $5.20 a share by a full $3.00 ($8.20).  With a weak and slowly trending lower market, Goldman stock was off about a dollar when the first market slide hit.  This first slide only took the stock down three more dollars and when Obama got on TV, Goldman was trading at about $164.  Fifteen minutes later, as Obama gave details of his plan, 7 points evaporated off of Goldman’s stock as it traded as low as $156.77.  Calls to Goldman and other banks all got pretty much the same answer of “we don’t really know until we see all the details” which sounds to me like; “It is only proposed legislation and let’s just see what they get signed into law after we pay our lobbyists a small fortune to go talk to some politicians in D.C.”  Goldman stock rebounded to close the day down $6.92 (-4.12%, $160.87).

The newly proposed regulation has at its heart a ban on commercial banks engaging in proprietary trading.  Obama seems to believe that this type of law would be a safeguard against a future financial meltdown similar to that which occurred over the last 18 months.  Never mind the fact that proprietary trading did not have much to do with financial crisis, or that American International Group, Inc. (NYSE: AIG), Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) did not engage in any proprietary trading at all, were at the epicenter of the crisis and together cost the TARP well over $200 billion.  Never mind the fact that Goldman and every other large bank that did engage in proprietary trading have paid back, with interest, every dime the Government loaned them.  The question is, is this type of legislation motivated by actually trying to regulate and make the markets safer, or is it politically expedient to attack the big banks to score a victory after the election in Massachusetts earlier in the week?

Google Inc. (NSDQ: GOOG) reported after the close today, with some of the bigger market players anticipating a large beat.  The analysts estimate for earnings was $6.50 a share and one player I spoke with cited the fact that Google’s numbers were never taken lower during the past year, and that, with the economic pick up the reported earnings beat should be sizable.  In today’s down market, Google closed up $2.57 at $582.57.  The search engine giant reported earnings of $6.79 a share, beating the $6.50, but only by 4.4%.  The stock immediately dropped in after hours trading as it seems others anticipated a larger earnings beat and started to sell.  The stock is currently down 25 points in the after market at 557 (5:00 p.m.).  This pattern seems to be keeping form with selling the tech earnings after the beat expectations (see Intel and IBM earlier in the week).

New York spot gold dropped $17.80 to $1,093.50 and Nymex crude lost $1.92 a barrel to $75.82 as just about everything got hit today.

Selected earnings for Friday:

BBT 0.21 before the open, EXC 0.85, GE 0.26 bmo, HOG -0.32 bmo, JCI 0.29, KMB 1.25, MCD 1.02 bmo, SLB 0.64 bmo, STI -0.75 bmo.

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Wall Street Wrap

Home Sales Boost Market

By Robert Perrego, at 4:44 pm on December 22nd, 2009

Seeing as this debt and economic meltdown started with home values, it might be fitting that the signals that a recovery is coming would come from home sales.  The Existing Home Sales report this morning beat expectations by 290,000 sales, were up 44% year-over-year and up 7.4% from last month.  This is the second month of strong growth as October hit a record rate of 9.9% and today’s report sent home builders and the market higher.  Pulte Homes Inc. (NYSE: PHM) was up 4.67% (+$0.44, $9.86) and even though S&P downgraded mortgage insurers this morning, the sales data sent MGIC Invest Corp. (NYSE: MTG) up 24.70% (+$1.26, $6.36) and Radian Group Inc. (NYSE: RDN) up 25.69% (+$1.66, $8.12).  You could say S&P blew that call.

The Dow Jones Industrial Average closed up 50.79 points (+0.48, 10,464.93) and the S&P 500 added 3.97 points (0.35%, 1,118.02).  The S&P 500 broke out to new 2009 highs today, from a sideways trading range the index has been in for six weeks.  The Nasdaq 100 was once again the strongest index up 10.72 points (+0.58%, 1,839.51) and closed at another high for 2009.

American International Group Inc. (NYSE: AIG) jumped 10.65% (+$2.99, $31.05) by backing off their plans to spin off their Chartis property casualty division in a public offering.  Analysts think that the property casualty sector is undervalued right now and by spinning off Chartis, AIG would not get as much as if they wait for another year or two.

Price targets on the airlines were upped by UBS today sending UAL Corp. (NSDQ: UAUA) higher by 12.23% (+$1.41, $12.93) while Jabil Circuit Inc. (NYSE: JBL) did their own heavy lifting and reported earnings yesterday after the close and swung to a gain of 13 cents a share versus last years loss of $1.34 a share.  JBL gapped up 99 cents on the open and traded up all day long (+$2.16, +14.38%, $17.18).

Microsoft Corp. (NSDQ: MSFT) lost an appeal involving one of its most famous pieces of software.  A U.S. Court of Appeals ruled that MS Word used technology patented by a small Canadian firm, l4i.  The ruling awards $290 million to l4i for infringement on the patent.  Microsoft has stated they will remove that part of the program, but will keep their legal options open as well.  Microsoft was up 30 cents on the day (+0.98%, $30.82).

Nymex crude rose on the positive economic expectations sparked by the housing number, gaining 31 cents (+0.42%, $74.03, 4:02 p.m.) even in the face of a stronger dollar.  The U.S. dollar index future spot price added 22 cents or 0.29% to 78.26.  The strength in the dollar did take gold lower, with the New York spot price trading as low as $1,073.30 an ounce before regaining to trade $1,083.00 (-$8.30, -0.76%, 4:08 p.m.).

Tomorrow we get The Mortgage Bankers Association Purchase Applications at 7 a.m. followed by Personal Income and Outlays (0.5%, 0.6%, 0.1%, expected) at 8:30 a.m.  At 9:55 a.m. Consumer Sentiment is announced, and right after that at 10 a.m. New Home Sales is released (440k).  Analysts will be looking for the MBA applications and New Home Sales to confirm the positive number we got this morning.  At 10:30 the EIA Petroleum Status Report is released.

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