After a day that saw U.S. equity markets decline in the neighborhood of 2%, U.S. stock futures earlier this morning pointed to a rough start Tuesday as well. News late Monday the Merrill Lynch said it's selling a big slice of its asset-backed securities and $8.5 billion in stock, renewed concerns over the financial sector health. But futures have started creeping upward, ahead of the latest readings on house prices with the Case-Shiller home price index for May and Conference Board reading of consumer confidence for July.
Meanwhile, we're still in the middle of earnings season and today
Northrop Grumman (NYSE: NOC), Viacom (NYSE: VIA), Valero Energy Corp. (NYSE: VLO), United States Steel Corp. (NYSE: X)
Electronic Arts (NASDAQ: ERTS) will report after the close of tradin
The big story making headlines since late Monday is the bombshell Merrill Lynch (NYSE: MER) that it is taking an enormous $5.7 billion write-down on losses from mortgage-backed securities (MBSs) and plans to raise $8.5 billion. MER shares already dropped 11.6% Monday before the news was out, and while they're rebounding 2.75% this morning, many are very uncomfortable with Merrill's current situation and actions.
Alcatel-Lucent (NYSE: ALU), the French telecommunications giant, is finally getting rid of its CEO Patricia Russo and Chairman Serge Tchuruk who will both resign later this year. It's no surprise shares are rebounding over 6% in premarket trading. ALU also reported its sixth consecutive quarter of losses. Alcatel-Lucent reported a net loss of 1.1 billion euros ($1.73 billion) for the second quarter including an euro810 million ($1.3 billion) goodwill writedown.
TheStreet.com's Jim Cramer says the biotechs look sweet in a bank-led slowdown.
Thank you, New York Times. Remember just a couple of weeks ago, when The New York Times wrote about how Genentech's (NYSE: DNA) (Cramer's Take) Avastin was too expensive and the stock got cracked down to $77? I know Roche did. I bet that was the last draw. The dramatic decline in the dollar plus a sentiment that has spawned a thousand articles -- that life-saving drugs cost too much -- gave the Swiss giant a chance to bolster its own anemic pipeline by buying what may be the greatest wonder drug of all time in its $43 billion bid, no doubt the beginning price for what will ultimately be a deal close to $100 a share. (I pushed DNA hard here and on "Mad Money" because I have been a huge believer in Avastin and I'm confident that people will pay anything -- or family members will pay anything -- for the hope of three or four months or more of life, or the chance of beating cancer altogether.)
I don't even know where to begin about the positives of this deal. First, it confirms the general trend: the dollar is so weak that it is worth buying anything that's name-brand if you are from Europe, including Anheuser-Busch (NYSE: BUD) (Cramer's Take), a total creature of the weak dollar.
Palm (NASDAQ: PALM), the failing smartphone company, has launched a new version of its Treo handset. According toThe Wall Street Journal, the new version of the product has newest Windows Mobile operating system, a GPS system and WiFi capability. It will run on the fast Sprint (NYSE: S) 3G network.
The new product is unlikely to help Palm, which trades at $5.42, down from a 52-week high of $19.23. For starters, the Treo will compete with another Sprint product, the well-regarded Samsung Instinct. The Apple (NASDAQ: AAPL) 3G iPhone is even more formidable competition. The fact that it sold one million units in its first three days on the market sucks a lot of demand for other products out of the market. And, why not throw in the RIM (NASDAQ: RIMM) BlackBerry.
Palm lost money last quarter. More importantly, the average price of its phones dropped sharply. Selling more handsets only helps so much when the yield-per-units is low.
The Treo may be a good product, but it comes into a crowded field that is already dominated by a few, very well-financed companies with more attractive offerings.
Apple Inc. (NASDAQ: AAPL) is opening its online App Store for iPhone software in a move some think is more important than the 3G iPhone launch on Friday. The App Store will let iPhone users choose from over 500 software applications to download, including games, educational programs, mobile commerce and business productivity tools.
In business, and specifically in technology, there are some people who live in the past and can't see beyond familiar and existing systems. Lucky for us, there are the true visionaries, those who innovate and take things further. Steve Jobs is one such visionary.
After seeing the success of Palm (NASDAQ: PALM) smartphones initially, and then the addictive-like relationship Research in Motion (NASDAQ: RIMM) BlackBerry owners have with their handsets, it is no wonder Apple could zero in on what consumers want and give it to them in an intuitive way. That has been Apple's mark all along.
Indeed, the Mac OS has always been touted as being the better operating system, and yet it is Microsoft (NASDAQ: MSFT) with its Windows OS that dominates the market. Many say that Jobs' was overprotective of the software, causing third-party developers to shy away. If that's the case, Jobs has learned his lesson and is amending his stance now with the iPhone software, hoping to achieve a new computing platform.
While those names could sound tempting for investors who may think they are cheap, BusinessWeek's Karyn McCormack reminds us that not everything that is cheap is a good bargain, and there are some risks that need to be taken into account.
One common problem for most of these stocks is that they trade under $10 for a reason. That reason is usually hardly any earnings growth, if any at all. And with a weak economy, these companies would have an even harder time to stimulate growth. Add to the mix the fact that institutional investors don't like to touch stocks under $10 and the potential for recovery is not good.
This post is part of my series featuring established companies and the smaller, more aggressive or innovative rivals that may eventually succeed them.
Apple (NASDAQ: AAPL) is one of the great stories of corporate America and the stock market. Under the leadership and genius of Steven Jobs, Apple is emerging as the premier technology growth company of this decade and the next. In the past five years the stock has rocketed from $9 to the current $175, and yet the story is actually stronger than ever before.
Apple has three major legs of growth in its arsenal and a distribution system that is second to none. The products of Apple are both cool and revolutionary. The 2002 introduction of the iPod defined the MP3 player space. Apple has sold over 150 million units as of March 2008 and commands over 70% of the market share. Many iPod owners are on their 3rd and 4th units, so the actual penetration of addressable customers has been barely scratched. The newer versions include touch screen and of course can store up to 20,000 songs and numerous movies and pictures.
The Mac computer has been re-engineered these past couple of years and is now the rage of the personal computer market. The new Mac is beginning to enter the traditional enterprise sector while maintaining its dominance in the consumer sector. The Leopard operating system became available in mid-2007 to rave reviews. Apple is taking market share in the competitive personal computer sector while maintaining its pricing structure. The company doesn't compete on price but offers such superior functionality that buyers do not mind paying full retail price. The attendant software programs are also seeing a resurgence and also carry high margins.
After hitting a one-year high of $19.23 in October, the stock hit a one-year low of $4.21 in March. This morning, PALM opened at $6.15. So far today the stock has hit a low of $5.79 and a high of $6.37. As of 12:40, PALM is trading at $5.85, down 69 cents (-10.6%). The chart for PALM looks bullish but deteriorating slightly, while S&P gives the stock a negative 2 STARS (out of 5) sell rating.
For a bearish hedged play on this stock, I would consider a November bear-call credit spread above the $7.50 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 11.1% return in five months as long as PALM is below $7.50 at November expiration. Palm would have to rise by more than 27% before we would start to lose money. Learn more about this type of trade here.
PALM hasn't been above $7.50 by more than a few cents since November and has shown resistance around $6.80 recently. This trade could be risky if the economy finds its footing, but even if that happens, this position could be protected by resistance PALM might find at its 200 day moving average, which is currently around $8 and falling.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in PALM or RIMM.
U.S. futures were mixed to lower early Friday morning, a day after stock markets sold off, ending at their lowest level in nearly two years. Still, with oil prices reaching another record in Asia, it's questionable whether stocks could indeed stage a recovery.
On Thursday, U.S. stocks sank to lows not seen in nearly two years after Goldman Sachs (NYSE: GS) downgraded investment banks including Citigroup (NYSE: C) and General Motors Corp. (NYSE: GM) to Sell and as Wall Street was also worried about the outlook for tech stocks as both RIM (NASDAQ: RIMM) and Oracle (NASDAQ: ORCL) reported quarterly results Wednesday, giving a tepid outlook. Topping it all were oil prices reaching $140 a barrel. The Dow Jones Industrial Average fell 358 points, or 3.03%, the S&P 500 lost 38 points, or 2.94%, and the Nasdaq Composite dropped 79 points, or 3.33%.
Usually, a day after such a selloff, buyers tend to come in, this morning we also woke up to news that oil prices climbed to a record above $141 a barrel in Asian trading, which may dampen the mood on Wall Street again. Light, sweet crude for August delivery rose as high as $141.71 a barrel before pulling back to $141.10. The previous trading record for a front-month contract was $139.89, set on June 16.
Minyanville Professor Adam Katz dares to share the kind of keen insight and actionable information you won't find in any prospectus. For more original thought, visit www.minyanville.com.
I've said it before: the second quarter is going to be the inverse of the first. Expectations going in were simply too high.
What I find interesting is that Oracle (NASDAQ: ORCL), Red Hat (NYSE: RHT) and Research In Motion (NASDAQ: RIMM) have all taken down guidance due to the sluggishness they're starting to see in their businesses.
What the Street seems to be ignoring is that the dollar has been crushed for over a year now, which means that the currency tailwind is only getting weaker as the year drags on. If one uses $1.55 euro per dollar as a benchmark, the second-quarter effect was a 14% year-over-year currency tailwind.
In the third quarter, that drops to 10%; in the fourth, it will drop to 5%. Add in macroeconomic headwinds -- along with the fact that credit markets have been pushed back into a state of mild panic -- and it's a surefire recipe for a very tumultuous back half of the year.
I'm looking hard for reasons to be optimistic, but they seem to be thin on the ground. In the information technology (IT) sector, at least, we'll likely see a meaningful budget flush at the end of the year - if only because they'll be cut in a big way starting in 2009. This means that IT managers, if they even think they might need anything over the next year or so, need to use or lose whatever's left in their 2008 budgets come the fourth quarter.
This will create an environment where people will be calling the bottom for IT in the fourth quarter - but it's more likely to be the last hurrah before the bottom drops out.
The name of Chris Coste probably is not familiar to most investors. Heck, most fans of the Philadelphia Phillies never heard of the journeyman catcher until he made the team after languishing in the minors for more than a decade. But even investors who may not know the difference between a baseball and a football should get to know his story.
His road to the major leagues was a rocky one (both literally and metaphorically, like the movie), which is neatly described in his book The 33-Year-Old Rookie:How I Finally Made it to Big Leagues after 11 Years in the Minors. The North Dakota native never gave up on his major league dream even after he suffered setback after setback. He is not a a superstar and does not pretend to be one. Teams, though, need scrappy utility players such as Coste who can produce clutch hits to help them win games. The same is true for investors building a portfolio.
Too often, the superstar stocks like Google Inc. (NASDAQ: GOOG) or Apple Inc. (NASDAQ: AAPL) get all of the glory. But investors also have their reliable utility players that they can count on when the chips are down. Sometimes, like Coste, they have got some wear and tear on them, but they are still worth considering. Here are a few examples:
What the fundamentals couldn't help with, the charts did.... on selling. If you don't want to blame the charts, you could always point to Goldman Sachs downgrades and a myriad of everything else. The DJIA and S&P 500 Index broke early-year support levels. We even saw oil cross above $140.00 per barrel in electronic trading. Thankfully, there's no speculation driving up oil, because the speculators buying say they aren't driving up prices.
Q1 GDP was revised up 0.1% to 1.0%, although the data is now as old as the hills. While existing home sales posted a gain, we saw yet another median housing price drop. If this sounds overly pessimistic, it is simply because this is the sort of day it was. It even feels like Dr. Pangloss took the summer off.
Citigroup Inc. (NYSE: C) was the first casualty on a Goldman Sachs downgrade accompanies by a note that the company may cut the dividend or need cash. Those shares were down 6% at $17.70 in today's final minutes.
MOST NOTEWORTHY: The U.S. Brokers sector, Goldman Sachs and Research in Motion were today's noteworthy downgrades:
Goldman downgraded U.S. Brokers to Neutral from Attractive since they can not find a catalyst to move the group significantly higher over the next few months given the continued deterioration in fundamentals. Goldman added Citigroup (NYSE:C) to their Conviction Sell List as they expect additional write-downs of $8.9B in Q2 and see the potential for additional capital raises. Goldman lowered their target price on Citigroup shares to $16 and recommends a pair trade of long Morgan Stanley (NYSE:MS), short Citigroup.
Wachovia downgraded Goldman Sachs (NYSE:GS) shares to Market Perform from Outperform on renewed economic fears, a likely slower pace of substantial capital raises, seasonally slower prime brokerage, and valuation.
Research in Motion (NASDAQ:RIMM) was cut to Market Perform from Outperform at JMP Securities following the weaker-than-expected Q1 report and guidance and lowered FY09 EPS estimates on increased spending.
OTHER DOWNGRADES:
Red Hat (NYSE:RHT) was downgraded to Market Weight from Overweight at Thomas Weisel.
No sooner than we got used to the huge writeoffs and thought most of the fallout is behind us, that Goldman came today and whacked us on the head. "Over?" it laughed, "you wish!" It then proceeded to downgrade investment banks from Attractive to Neutral. Specifically, it downgraded Citigroup (NYSE: C) to Sell, urging investors to short sell it!
Citigroup will have another $8.9 billion in writedowns, William Tanona, the Goldman analyst said, and added Citigroup to Goldman's "Americas conviction sell" list, cutting his price target on the stock to $16 from $20. Citi shares are down 5.5%.
Merrill Lynch (NYSE: MER) has already been subject to rumors last week it would have to write down more assets. Today, the same Goldman analyst said it will likely incur $4.2 billion of write-downs in the second quarter. MER stock is down 4.5%.
At least Goldman shares have not been immune and are declining nearly 2.7% along with the rest of the investment banks and the market.
Welcome to the Research In Motion first quarter fiscal 2009 results conference call. (Operator Instructions) I will now turn the conference over to Ms. Edel Ebbs, Vice President, Investor Relations. Please go ahead.
Edel Ebbs, Vice President, Investor Relations
Thank you. Welcome to RIM's fiscal 2009 first quarter results conference call. I'm Edel Ebbs, RIM's Vice President of Investor Relations. With me on the call today is Jim Balsillie, RIM's Co-CEO, and Brian Bidulka, RIM's Chief Accounting Officer.
After I read the required forward-looking statements disclaimer, Jim will provide a business and strategic update. Brian will then review first quarter results, and I will discuss our outlook for the second quarter of fiscal 2009. We will then open the call up for questions. I would like to note that this call is available to the general public by a call-in number and webcast. A replay of the webcast will also be available on the RIM.com website. We plan to wrap up the call before 6:00 PM Eastern this evening.
After a day that saw U.S. equity markets decline in the neighborhood of 2%, U.S. stock futures earlier this morning pointed to a rough start Tuesday as well. News late Monday the Merrill Lynch said it's selling a big slice of its asset-backed securities and $8.5 billion in stock, renewed concerns over the financial sector health. But futures have started creeping upward, ahead of the latest readings on house prices with the Case-Shiller home price index for May and Conference Board reading of consumer confidence for July.
The weak market conditions have caused many stock prices to fall under $10. Not only smaller -- and perhaps lesser known -- stocks trade under $10 these days, but also some big and famous names such as 
This post is part of 
U.S. futures were mixed to lower early Friday morning, a day after stock markets sold off, ending at their lowest level in nearly two years. Still, with oil prices reaching another record in Asia, it's questionable whether stocks could indeed stage a recovery.
Minyanville Professor Adam Katz dares to share the kind of keen insight and actionable information you won't find in any prospectus. For more original thought, visit 
The name of Chris Coste probably is not familiar to most investors. Heck, most fans of the Philadelphia Phillies never heard of the journeyman catcher until he made the team after languishing in the minors for more than a decade. But even investors who may not know the difference between a baseball and a football should get to know his story..gif){kind=logo}
Research In Motion
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