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Morning Quickie

 

Keystone Morning Quickie        July 16th 2009

Market Commentary

 
 JP Morgan reported earning that smashed analyst expectations by reporting a 36% increase in 2nd quarter net profit. However, Jp Morhab is currently trading down .31 at $35.91.  The futures are flat as Jp Morgans good news is being offset bt the future of CIT. The lender has been seeking government support and as it seems now will not receive any help. Also in the news is that forclosures have reached a new record high to one out of every 84 households with loans. So the picture is mixed, positive earnings yet many of the underlying economic conditions remain poor.  Yesterday’s rally overshot many traders expectations. The SPY closed above a $93.07 which was a fairly big resistance level. We will see if the market opens above or below this figure and trade around it.

  
 

Technical Levels
 

50 Day          200 Day

S&P                                                                      912               875
DOW                                                                     8469              8331
NASDAQ                                                               1782              1621

Keystone’s Trades

 

Dell: long trade
 
If the market hs strength, dell may bounce from some oversold territory. Yesterday it failed to make a lower low and in fact, holding support above Tuesdays low of $11.84. We would look to enter above tuesday’s high of $12.69

 

 
Initial profit target is $12.88

 
profit target: $13.15 
 
stop: $11.75

 
ABT: Short trade 
 

Closed down on the day yesterday on strong volume. It is currently sitting at support at $45.28. If we open below this and hold the stock could go down to the $44 level and if the overall market weakens this may have more room to fall.

 
 
  
Initial stop loss is $44
Initial profit target is $43.31

 
stop $46.04 


 

 

Economic Numbers 
 

 

 8:30am    Initial Jobless Claims                           est. 553K     range 480K to 605K       prior 565K
                Continuing Claims                                   est. 6850K   range 6750K to 6900K   prior 6883K
 
10:00am  Philadelphia Fed                                      est. -4.8       range -10.8 to 5.0           prior -2.2
 
10:30am  EIA Natural Gas Storage Change          est. 92          range 63 to 106               prior 75
 
1:00pm    NAHB Housing Market Index                est. 16           range 14 to 18                prior 15
 

Top News Stories
 

No rescue for CIT. CIT Group (CIT) said ‘there is no appreciable likelihood’ of government support, after officials determined CIT’s problems were too severe to be solved by any of the plans being considered and decided not to inject additional taxpayer funds because the company doesn’t seem to have a viable business plan. This marks the first time since Lehman Brothers’ collapse that the government has chosen not to help a major financial company in distress. It also marks the first loss for TARP, as Treasury officials have essentially written off the entire $2.3B investment made in CIT last year. CIT is trying to line up at least $2B in rescue financing from existing debtholders (though stress tests indicate it may need as much as $4B) and indicated it will likely have to file for bankruptcy without it, possibly as soon as tomorrow.
 
Rock solid Q2 for JPMorgan. Like its peer Goldman Sachs (GS) on Tuesday, JPMorgan (JPM) exceeded consensus with Q2 earnings of $2.7B ($0.53/share) compared to Street estimates of just $0.06 (see numbers below). Record investment-banking revenue from trading and stock/bond underwriting helped offset losses from defaults on consumer loans. JPMorgan’s Tier 1 capital ratio was 9.7% vs. 11.4% last quarter. Credit-loss provisions fell 3.6% from Q1 to $9.7B.
 
BoA’s secret regulatory agreement. Bank of America (BAC) is reportedly operating under a secret regulatory agreement requiring it to overhaul its board and address certain risk and liquidity problems. Federal regulators imposed the memorandum of understa nding in May, giving the bank a chance to work out its problems in private, but also surprising some bank executives who hadn’t expected such a formal rebuke. Sources say Bank of America is coming up against some July and August deadlines, but may get an extension on certain tasks, such as replacing the majority of its board with new directors.
 
Citi in secret talks too. Sources say Citigroup (C) is in talks with the FDIC to enter into a memorandum of understanding, and that the memo will reinforce Citi’s existing strategy of shedding assets and improving governance, among other things. Citi has been working with a similar memorandum of understanding with the Office of the Comptroller of the Currency since last year.
 
Possible SEC charges for Regions Financial. Regions Financial (RF) says its investment bank may face charges related to ‘certain mutual funds’ that sustained heavy mortgage-related losses after receiving a Wells notice from the SE C on July 9. Regions didn’t disclose which mutual funds are being investigated, and said only that they’re part of regional brokerage firm Morgan Keenan.
 
AIG tries to speed deals. AIG (AIG) reportedly asked the buyout firms bidding for its Taiwan life insurance unit to partner with select local companies in the next round of bidding to help secure regulatory approval for the potential $2B deal. Taiwanese regulators have expressed concern over selling the island’s second-largest life insurer to private-equity firms, and had suggested they team with companies that have experience in the field. Separately, AIG said it will speed its efforts to take Alico public and get it listed on the stock market in New York.
 
Porsche, VW close to deal. Multiple German newspapers reported Porsche had agreed to merge with Volkswagen (VLKAY.PK), but a Porsche spokesman downplayed the news, saying the company is not aware of any such agreement by the Porsche and Piech families. However, Volkswagen signaled a deal is imminent, if not already agreed upon, and called an extraordinary meeting of its supervisory board for next week.
 
Germany throws support to Magna. Germany threatened it may withdraw its aid offer to General Motors if GM sells its Opel unit to anyone other than Magna International (MGA). The ultimatum could substantially help Magna, which has seen renewed bid competition from RHJ International as Magna’s talks have stalled.
 
FOMC sees both growth and unemployment. The Federal Open Market Committee released minutes yesterday from its April meeting, suggesting that the pace of contraction is slowing but economic activity will remain weak ‘for a time.’ The FOMC expects exceptionally low levels of federal funds rate for an extended period of time and is wary of buying more Treasurys. Higher unemployment is forecast in conjunction with more robust economic growth than previously expected. (Read the FOMC press release and minutes)
 
Panel chosen for crisis probe. Congress appointed a ten-member panel to investigate the financial crisis. The panel has broad authorities, including the ability to issue subpoenas and investigate individual financial firms, and includes several well-known business and consumer advocates.
 
Foreclosures reach new high. Foreclosures reached a new record in the first half of the year, climbing t o 1.9M filings on 1.5M properties, or one in every 84 households with loans. That’s a 9% jump from H2 2008 and nearly a 15% jump from H1 2008. “Despite everybody’s best efforts to date we’re not really making any headway against the problem,” said Rick Sharga, senior vice president at RealtyTrac.
 
Consumer prices rise. June’s Consumer Price Index rose 0.7% M/M and fell 1.4% Y/Y, vs. consensus of +0.6% and -1.5%. Core CPI was +0.2% M/M and +1.7% Y/Y. The year-over-year drop was led by a 25.5% decline in energy prices. The housing index was unchanged, after falling in each of the three previous months.
 
NY mfg gains. The New York Fed’s Empire State Manufacturing Index gained 9 points to -0.6, vs. consensus of -4.5. The new orders index rose above zero for the first time in several months. Inventories slipped to a record low of -36.5. Future indexes were slightly less optimistic than in June.
 
Industrial production dips. Industrial Production fell 0.4% in June, vs. -0.7% consensus and May’s -1.2% (revised). Capacity utilization was 68% vs. last month’s 68.3%.

 

  
 
 
 

 

   
 

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