May 9, 2008

Friday, May 9, 2008

PreMarket - Trader Talk with Bob Pisani - CNBC.com

Asian and European markets, as well as U.S. futures, weaker on the AIG news. Dollar stronger. For the moment, the risk aversion trade (long bonds, short financials) is back on. Oil at new high not helping.

Thoughts on AIG:

AIG

American International Group Inc

AIG

44.15 UNCH 0%

NYSE

Quote | Chart | News | Profile

[AIG 44.15 --- UNCH (0%)

] down 6 percent pre-open, posted a much bigger loss than expected, a loss of $1.41 on an adjusted basis, compared to a loss of $0.76 per share expected. The usual culprits: weak housing and credit markets, but that doesn't quite do justice to what was going on.

If you want to know how tangled this can get, they had huge losses on Credit Default Swaps (CDS) that were written on Collateralized Debt Obligations (CDOs) which were in turn backed by Residential Mortgage Backed Securities (RMBS). Got that?

If that isn't enough, they also had losses in mortgage insurance, consumer finance, and domestic property & casualty. Uh, I think that's everything, and that is a little bit alarming: even the core insurance business showed signs of deteriorating.

With equity down, it's little surprise they announced a capital raising effort of $12.5 billion to shore up their balance sheet.

The question the Street is grappling with is pretty simple: have the conditions that created these losses abated? If they are abating, then a lot of these losses they are taking now might reverse.

Importantly, AIG is much more exposed to the sub-prime market than most other property and casualty insurers, so I would expected the impact to the P&C group to be somewhat limited.

Elsewhere:

1) Sotheby's

Sotheby s

BID

27.47 UNCH 0%

NYSE

Quote | Chart | News | Profile

[BID 27.47 --- UNCH (0%)

] reported a loss of $0.19 for their first quarter; a gain of $0.10 was expected. They blamed a shortfall in commission revenues and higher expenses. A loss is also expected in the current quarter. Their recent auction of Impressionist art seem to have come in roughly in line with expectations. Down 8 percent pre-open.

2) Citigroup

Citigroup Inc

24.3 UNCH 0%

NYSE

Quote | Chart | News | Profile

[C 24.3 --- UNCH (0%)

] said they intend to shed $400 billion in assets over the next two to three years. They are talking at a analyst meeting today.

3) Circuit City

Circuit City Stores Inc

4.79 UNCH 0%

NYSE

Quote | Chart | News | Profile

[CC 4.79 --- UNCH (0%)

] is allowing Blockbuster [BBI 2.68 --- UNCH (0%)

] and Carl Icahn to conduct due diligence. Icahn indicates he may buy CC if Blockbuster can't get the financing. Wattles Capital also reached an agreement with the Circuit City board whereby they will select three of Wattle's director nominees and include them as nominees at the 2008 annual meeting. Circuit City up 13 percent.

AIG, Oil Drag on Markets & Futures - Trader Talk with Bob Pisani - CNBC.com

Pre Market Trading Indications

Futures indicate a lower open for the mkt on weakness in financials and another record high in crude oil ($125.98). AIG (AIG) shares are under pressure, down 6% pre-mkt, after the co missed by $0.65 in Q1 and announced a plan to raise ~$12.5 bln in capital to fortify its balance sheet and provide increased financial flexibility. Citigroup (C) is currently holding an analyst day (began at 8:30ET), and while there has been no surprises so far, the Financial Times reported overnight that the co will identify as much as $400 bln in non-core assets that could be sold as part of plans to reduce costs and restore profit growth to double-digit rates. Investors paid little attention to this morning's better than expected Trade Balance for March (-$58.2 bln vs -$61.0 bln consensus). Dow is currently -67; Nasdaq is currently -9.3; S&P is currently -6.6.

The Bond mkt is trading higher for the third consecutive session as the risk aversion trade returns following another record in crude oil and AIG's worse than expected numbers. The 10-yr is currently +07/32 to 3.749%...

In Commodities, June crude oil ($125.70 +2.01) once again rallied to fresh all-time highs in early trade, touching $125.98...

In Europe, mkts fell in a broad-based retreat, led by
heavyweight financial, pharmaceutical, energy and mining stocks. FTSE is currently -1.4%; DAX is currently -1.3%; CAC is currently -2.0%. In Asia, mkts fell, led by automakers after Toyota Motor forecast lower profits on rising raw material costs. Nikkei closed -2.1%; Hang Seng closed -1.5%; Shanghai Composite closed -1.2%... Notable pre-market Calls include Upgrades: NVDA at Stifel Nicolaus; Initiations: FSLR (Buy), SPWR (Hold) and ESLR (Sell) at Citi, ABT (Buy) at UBS... On the Earnings calendar, CYCC is the only company confirmed to report today after the close... On the Economic calendar, nothing remains on the schedule for today.

Gapping down in reaction to disappointing earnings/guidance: CCOI -12.7%, LLNW -11.8%, DRQ -9.7%, AGO -9.4%, BID -9.0%, MGI -8.9%, AIG -7.4% (also announces a plan to raise approximately $12.5 billion in capital; ratings also downgraded at S&P and Fitch), BRKS -7.3%, ESIO -6.4%, ZINC -5.8%, SWC -4.9%, NGAS -4.9%, FMD -4.6%, MYL -4.1%, ICFI -3.1%, PEC -3.1% (also downgraded to Neutral at Robert W. Baird)...

Select financial names showing weakness in premarket trading: CIT -2.9% BCS -2.5% MBI -2.1% DB -1.4% WM -1.2% GS -1.1% FNM -1.0%...

Other news: ORA -6.4% (files for 3.1 mln share common stock secondary offering), SNY -5.2% (drops on Schweizerhall plans for Plavix copy - Bloomberg.com), NOK -2.9% (still checking), HLF -2.8% ("Fraud Discovery Institute" issues update to report on HLF related to Venezualan operations), MT -2.1% (announced that it filed suit against Esmark), HOV -1.4% (announces pricing of its 14 mln shares of common stock offering of $9.50)...

Analyst downgrades: ESLR -4.8% (initiated with Sell at Citigroup), IPAS -4.3% (downgraded to Hold at Morgan Joseph), ENER -3.8% (downgraded to Neutral at Broadpoint Capital), HBC -2.2% (downgraded to Underweight at Morgan Stanley), GDP -2.0% (downgraded to Reduce at Suntrust), CELG -2.0% (downgraded to Neutral at Credit Suisse), DRS -1.9% (downgraded to Market Perform at FBR and downgraded to Hold at Morgan Joseph), SWSI -1.7% (downgraded to Sector Perform at RBC), AMSC -1.6% (downgraded to Hold at Jefferies), MCD -1.3% (hearing removed from Conviction Buy List at tier 1 firm), PSS -1.1% (downgraded to Hold from Buy at Soleil).

Gapping up in reaction to strong earnings/guidance: PCLN +13.7%, GSIT +12.5%, SRVY +12.4%, SYX +12.2%, DAR +10.5%, OSIR +10.5% (also Osiris and NuVasive enter into definitive agreement for Osteocel; OSIR to sell business for $85 mln to NUVA), INT +9.1%, RNWK +8.0% (also announces intention to spin off Its casual games business), AYR +7.3%, BSQR +7.2%, SD +7.2%, QSFT +6.7%, POM +5.8%, ADPT +5.5%, AES +5.4%, LUNA +5.3%, TRLG +5.0%, GUID +4.6%, RICK +4.2%, TBSI +4.1%, SLH +3.9%, ATVI +3.4% (also upgraded to Buy at Kaufman), CNQ +2.6%, SONS +2.6% (also upgraded to Buy at Jefferies), WINS +2.6%, TI +2.3%, CCU +2.2%, VRSN +2.0%, NVDA +1.5% (also upgraded to Buy at Stifel Nicolaus)...

Other news: HRS +10.5% (WSJ reports that co may consider a sale), SPAR +6.7% (receives $56.4 mln order for production of MRAPs), NAT +5.9% (Cramer makes positive comments on MadMoney), SNCR +2.5% (still checking), OII +1.3% (profiled in Barron's Online)...

Analyst upgrades: FSLR +2.6% (initiated with Buy at Citigroup), RAIL +2.1% (initiated with Buy at Jefferies).

Gapping up: PCLN +14.3%, GSIT +12.5%, RNWK +11.1%, INT +9.1%, DAR +8.8%, BSQR +7.2%, NAT +6.7%, QSFT +6.7%, POM +5.8%, DROOY +5.8%, LUNA +5.3%, TRLG +5.0%, GUID +4.6%, RICK +4.2%, TBSI +4.1%, ATVI +3.4%, FSLR +2.6%, GM +2.6%, SONS +2.6%, AUY +1.8%, COH +1.4%...

Gapping down: NGAS -11.0%, AGO -9.4%, MGI -8.9%, AIG -7.4%, BRKS -7.3%, SWC -4.9%, FMD -4.6%, MYL -4.1%, PEC -3.4%, ICFI -3.1%, NOK -2.9%, NVDA -2.8%, HBC -2.2%, MT -2.1%, C -1.9%, YHOO -1.6%, FNM -1.0%.

SMall Cap pre-market gainers and losers

Here are the biggest percentage gainers and losers in pre-market trading among companies with a market cap between $50 million and $750 million:

Biggest percentage gainers:

• Aceto Corp. (Nasdaq:ACET), up 13% after the distributor of chemically derived pharmaceuticals, biopharmaceuticals, specialty chemicals and crop protection products posted fiscal third-quarter earnings Friday morning that trumped the consensus on Wall Street and posted sales that increased 29.5% from the year-ago quarter.
• Obagi Medical Products, Inc. (Nasdaq:OMPI), up 9%.
• True Religion Apparel, Inc. (Nasdaq:TRLG), up 8%, after first-quarter results trumped the consensus on Wall Street and the designer jean manufacturer raised its 2008 guidance.

Biggest percentage losers:

• NGAS Resources, Inc. (Nasdaq:NGAS), down 8% after the natural gas exploration and production company reported first-quarter revenues after Thursday’s close that fell below the Street’s view.
• Vision-Sciences Inc. (Nasdaq:VSCI), down 6%.
• Exactech Inc. (Nasdaq:EXAC), down 5% after the producer of bone and joint restoration products said this morning that it has gone back to the equity markets and sold 877,391 shares of its stock at $23.00 per share for gross proceeds of approximately $20.2 million.

Friday’s pre-market gainers and losers - SmallCapInvestor.com