The sky has fallen on Fannie Mae (FNM) and Freddie Mac (FRE). At least that is the rumor. True or not, shareholders are paying a price after hours. Fannie Mae is down 15%.
Whether the stock should be down at all is anyone’s guess.
The news from The Wall Street Journal was terribly thin.
Nokia (NOK) Company says its market share will drop. Shares fall to $19.25 from 52-week high $42.22.
Exelon (EXC) Weal guidance. Sells off to $65.40 from 52-week high of $92.13.
Silver Standard Resources (SSRI) Price of silver falling. Plunges to $19.10 from $48.16.
Ciena (CIEN) Still falling after bad guidance. Drops to $12.39 from 52-week high of $49.55.
Douglas A. McIntyre
Goldman Sachs (GS) analyst William Tanona took the unusual step today of placing Merrill Lynch (MER) on the company’s so-called "Conviction Sell" list. What’s surprising is not that Tanona considers the embattled Wall Street firm a "sell" but that so many of his colleagues still recommend the stock.
Believe it or not, there are only four sells on New York-based Merrill. An equal number of analysts rate the shares a "buy" or "strong buy." About 13 companies urge investors to hold the stock. One analyst who must not have read much on Merrill lately has a $98 price target on the stock. A close look at the number shows that it does not appear to be a typo.
RF Micro Devices, Inc. (NASDAQ: RFMD) is trying to dispute industry woes being seen at other mobile and communication chipset companies. This may sound important as its customers or its customers’ peers are starting to warn of revenue shortfalls ahead. The mobile and communications chipset maker said it is reaffirming its previous guidance today at a Morgan Keegan conference for the September quarter after its guidance of July 29.
The merger chatter this morning has Altria Group Inc. (NYSE: MO) looking at UST Inc. (NYSE: UST) in a deal valued at $10 Billion or higher. This could be a major score for Big Tobacco. The Us cigarette leader could grab hold of the largest smokeless tobacco company. Marlboro could add Skoal, Husky, Copenhagen, and other brands to its smokeless tobacco operations to become the leader in that sector as well. But that may also bring up antitrust issues and potential regulatory hurdles.
SanDisk Corp. (NASDAQ: SNDK) is seeing a surge on reports that Samsung is considering a tie-up or other alternatives with the company to secure its flash memory supply. Samsung said it is considering various opportunities after reports that a deal may come. While this is good news for newer shareholders, there are no assurances that SanDisk management nor shareholders would go along with a merger anywhere close to current prices.
The jobs data isn’t getting better, and in fact is getting worse. The Labor Department has issued unemployment as being 6.1% in August, while consensus estimates were calling for a 0.1% increase to 5.8%. This was the highest unemployment rate since 2003. The non-Farm payrolls also came in at -84,000 rather than the -75,000 expected by economists. If you want some extra salt on that wound, the prior July number was revised to -60,000 from -51,000. It gets worse. June’s 51,000 drop was revised -100,000 jobs. Average hourly earnings are not keeping up with inflation either. Hourly wages rose a whole 0.4% to $18.14.
Just yesterday we identified companies which might lay off 10,000 employees as the conditions continue to weaken. By our calculations this translates to roughly 600,000 job losses since the start of 2008. If you take the current conditions and look at the trends going to an extreme, then all of a sudden 7% to 8% unemployment at the peak of the problems is becoming a possibility rather than just a bad dream. With the declines in autos, airlines, manufacturing, construction, retail, banking, and brokerage firm jobs, we could be facing nearly 1,000,000 jobs destroyed in 2008. And, that does not take into account the number of small businesses that will have to cut personnel because they have no access to credit.
Guess where the gains were. Healthcare and education rose by 55,000 jobs. The government added 17,000 jobs. If you keep backing those out this is getting worse and worse. Thank heavens the government keeps telling us there is no recession. It’s just a recessionless recession.
Anyone hoping that the jobs data was going to help markets is in for another disappointment. DJIA futures were down 60 points and are now down triple digits again. 10-Year T-Note yields are down another 0.05% to under 3.60%. If you were worried about the FOMC raising rates ahead of the election you can rest easily now. The FOMC is likely going to be out of the rate hiking game until 2009.
Jon C. Ogg
September 5, 2008
Nokia (NOK) made a number of odd statements today, the net effect of which was to drive the firm’s stock down 10%. For starters, it said its global market share in the third quarter would be below where it was in the second quarter. For some reason, it held to its prediction about market share being strong for the full-year 2008. If the company was wrong about the current quarter, why would it be right about what will happen next?
Beyond that, the world largest handset company, which has about 40% of the global market last quarter, said it still believes that overall demand for cell phones will grow modestly this year.
These are some of the top upgrades or positive calls we are seeing from analysts this Friday morning:
Jon C. Ogg
September 5, 2008
These are some of the top downgrades or cautious calls we are seeing from analysts this Friday morning:
Jon C. Ogg
September 5, 2008
Merrill Lynch & Co. Inc. (NYSE: MER) is trading down 6% or so in pre-market after Goldman Sachs downgraded the stock to a SELL rating and put shares on its Conviction Sell List. The firm says that it trades at the highest price-to-book multiple in the large cap brokerage firm universe. The firm also noted that Merrill Lynch has some of the most significant exposure to CDO’s, mortgages, and leveraged loans. Shares closed yesterday at $26.21 and are trading south of $25.00 this Friday in pre-market trading.
Just yesterday, Goldman Sachs (NYSE: GS) issued an SEC Filing showing trading losses in one of its hedge fund groups.
Jon C. Ogg
September 5, 2008
Samsung, one of the largest companies in South Korea, says it may want to buy US flash chip company Sandisk (SNDK). The US firm’s stock has dropped from a 52-week high of $56.46 to under $14. If flash memory prices stop falling soon, the acquisition would be a great deal.
What appears to be happening now is that foreign money is turning from buying distressed US financial assets and moved its interests to tech. It could be persuasively argued that there is less risk in own American companies with hard assets and fixed customer bases than banks which could still face billion of dollars of write-offs. The great pools of capital sitting outside the US may be realigning their intentions.
If the markets are to take bond guru Bill Gross at his word, the world’s financial markets could go through a cataclysmic failure. The head of fixed income fund operation Pimco says that a rapid sale of assets by banks, brokers, and hedge funds will cause the credit system to collapse. Almost all of these companies need cash and none of them wants to be left holding the bag if housing and commercial markets go to pieces.
Yahoo! (YHOO) moved close to its five-year low yesterday, trading down at $17.75. It really has not been so long ago that Microsoft (MSFT) made its $33 bid for the portal company.
Yahoo!’s market cap is now down to $24 billion. By many estimates, its ownership in China online company Alibaba and Yahoo! Japan are worth $10 billion. That would put the value of Yahoo! itself at $10.
The analysis of Yahoo! without its overseas asset holdings has been done many times before.
Perhaps some day the Fed will run out of money. The equivalent is happening in China. The People’s Bank of China managed to put a truck-load of money into US mortgage-backed securities and paper issued by Fannie Mae (FNM) and Freddie Mac (FRE).
It is hard to be critical of the communist bankers since they made the same mistake as almost every large financial firm in the US and EU.
According to Reuters, bond giant Pimco called for more governemt support for the financial system saying the the credit crisis could turn much worse.
Reuters writes that Microssoft (MSFT) will begin its $300 million marketing campaign for Windows.
Reuters reports that Bank of America (BAC) plans to settle an auction-rate probe the same was that several other brokers and banks have.
Markets in Asia fell.
The Nikkei was off 2.8% to 12,212, Sony (SNE) hit a multi-year low as it recalled a number of PCs.
The Hang Seng was down 3.2% to 19,747. HSBC (HBC) and PetroChina (PTR) both fell sharply.
The Shangehai Composite fell 3.3% to 2,202.
Data from Reuters
Douglas A. McIntyre
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