Hank Paulson led the charge this morning talking about the need and credibility of the GSE's. Oil was up for a while but after Tropical Storm Dolly headed further south than the oil and gas infrastructure that locked in heavy oil selling. The major focus continues to be earnings and financial stocks in particular. Below are today's unofficial closing bell levels: DJIA 11601.60 (+134.26) S&P500 1276.80 (+16.80) NASDAQ 2303.96 (+24.43) 10YR T-Note 4.097 (+0.03%) 52-Week Lows Top Analyst Calls
American Express Company (NYSE: AXP) was one of the more poor financial stocks today after the company choked on earnings last night. It is also facing deteriorating business despite it being thought of as the highest quality credit card around. Shares were down 9.2% at $37.13 in today's final minutes.
Town Bankruptcy Bad Sign for Other Towns The mortgage crisis, the limping economy and a recent bankruptcy filing by Vallejo - the first municipality to do so since Desert Hot Springs, Calif., in 2001 - have hobbled this town of 120,000. Vallejo's closely watched Chapter 9 bankruptcy filing in federal court in Sacramento may be a warning sign of dangers that could befall other cash-strapped municipalities. Economy hobbles Calif. town - USATODAY.com 10 Funds Suffering the Biggest Exoduses Which mutual funds are seeing the biggest outflows in 2008? They include some very well-known popular funds like Fidelity Low-Priced Stock, American Funds Investment Company of America and the Legg Mason Value funds. The 10 Funds Suffering the Biggest Exoduses
TheStreet.com's Jim Cramer says they're not just the opposite of longs -- they have the power to destroy companies.
Today will be riotously ugly. Today's a day where you could take down a Capital One (NYSE: COF) (Cramer's Take) or a Citigroup (NYSE: C) (Cramer's Take) -- some bad credit card exposure there -- off of American Express (NYSE: AXP) (Cramer's Take). You can bang down Nat City (NYSE: NCC) (Cramer's Take) into oblivionville off of it and hammer Merrill Lynch (NYSE: MER) (Cramer's Take) to the point where you could hear the rumors fly of capital needs. Freddie (NYSE: FRE) (Cramer's Take), merciless Freddie, right at ya. Today's the day when the uptick rule would be the only friend to the notion of owning stocks without fear every minute, fear that they will break your stock. Today's the day that the uptick rule can save Lehman (NYSE: LEH) (Cramer's Take) from $14 or lower. Today's why we need it.
Yet, every time I do a piece that talks about the need to reinstate the uptick rule or enforce the naked short laws, I am immediately greeted with the same nonsense: why should the longs get protection the shorts shouldn't? In fact, other than the usual gang of two -- Patrick Byrne and David Patch -- I don't get any positive feedback on these pieces like the one I did last night on "Mad Money."
American Express (NYSE: AXP) saw a big sell-off in its shares during the after-hours session on Monday following the release of its second-quarter earnings numbers. The shares already closed down over 11%.
It isn't difficult to comprehend this one. According to Earnings.com, Wall Street was hoping for the credit company to make 83 cents per share. American Express only delivered 57 cents per share from continuing operations. Not only did the company disappoint the Street by a very wide margin, but it disappointed itself, since that 57 cents per share represents a 35% drop compared to the bottom-line results achieved a year ago.
Yep, the financial crisis is still with us. American Express needed to significantly add to its credit reserves. Management stated that the economy is having a negative effect on its cardmembers, and that previous guidance can no longer be relied on. Translation: don't buy this stock! At least, that's my opinion.
I simply can't see allocating investment funds to American Express at this point. If investors wanted to get some exposure to plastic, all they would need to do is consider Visa (NYSE: V) or MasterCard (NYSE: MA). Both of these businesses are based primarily on transactions, not on credit risk. Whenever a card is used, these businesses get a little cut. And that adds up, my friends. Granted, both of these companies sold off on Monday and have been weak lately, and they have litigation risk, but I'd at least look at them for the long-term. Over time they should do well.
American Express, however, is way off my list of potential investment ideas. Not even going near this one. Name a timeframe (e.g. year-to-date, one-year, five-year, etc.), and you'll find that the stock is down. The economy is going to have to turn sharply before I even remotely consider it.
Disclosure: I don't own any company mentioned; positions can change at any time.
Stocks futures are lower Tuesday morning, indicating U.S. stock markets will start on a down note following weak outlooks and disappointing financial results from several companies including Apple and American Express. With oil steady and no economic data out today, Wall Street will focus on earnings.
Apple Inc. (NASDAQ: AAPL) reported after the close Monday a record quarter that beat analyst estimates, posting a 31% surge in earnings. Mac and iPod sales satisfied investors, while iPhone sales were somewhat on the lighter side. What concerned investors most was the very weak guidance Apple gave, which was weak even by Apple's standards of lowballing. Other issues included margin squeeze and Jobs health. Apple shares were 10% lower in Frankfurt and premarket trading. American Express (NYSE: AXP), said late Monday its second-quarter results fell 38% due to the weakening economy. The company, which missed projections, caters to the more affluent who have good credit, and yet even this company felt the pains from the slowing economy. AmEx earned 56 cents per share compared to estimates of 83 cents per share. The company's stock tumbled AXP shares are down over 12% in premarket trading.
Also reporting Monday after the close were Merck & Co., Inc. (NYSE: MRK), Texas Instruments (NYSE: TXN) and SanDisk (NASDAQ: SNDK). MRK shares are down over 6.6% in premarket trading as the company said it would stop give guidance of results. TXN shares are also declining over 10.5% in premarket trading after it gave a disappointing forecast. SNDK shares are plunging over 16% in premarket trading after it swung to a Q2 loss, missing analyst estimates.
This morning we'll have another wave of earnings, and already started were DuPont and Wachovia.
Stock futures were higher this morning after Bank of America joined recent financials and topped Wall Street estimates. Also pushing futures higher is a deal in the pharma sector with Roche bidding nearly $44 billion for the rest of Genentech. However, both Merck and Schering-Plough said they'll postpone reporting their financial results after the close; Apple will also be reporting results then. Finally, oil prices came off a six-week low and are trading back above $130 a barrel due to escalating Middle East tensions. Higher oil prices could dampen the mood on the Street.
Bank of America Corp. (NYSE: BAC), the biggest U.S. consumer bank and home lender, said profit fell 41% to $3.41 billion, or 72 cents a share, much better than analysts estimates of 21 cents according to Bloomberg. The bank curtailed loan losses, adding $2.2 billion to loan loss reserves. The bank has completed the purchase of Countrywide Financial Corp. on July 1. With these results, BAC joins other big banks that have recently reported better-than-expected results. BAC shares are up 8.6% in premarket trading.
Roche Holding on Monday said it was offering $43.7 billion to take over the remaining 44.1% shares of Genentech Inc. (NYSE: DNA) for $89 per share, 8.8% above DNA's closing price Friday. DNA shares are up nearly 18% in premarket trading to $96.50.
Yahoo! Inc. (NASDAQ: YHOO) said Monday morning it settled its fight for control of the board with billionaire investor Carl Icahn. The board will expand to 11 members to include Icahn and the remaining two seats will be filled by the board upon the recommendation of its nominating and governance committee. In addition, Icahn, who owns about 5% on Yahoo common shares, agreed to withdraw his nominees for consideration at the annual meeting and to support the board's nominees. YHOO shares are declining 2% in premarket trading.
When last week one analyst after another suggested a bankruptcy at one of the automakers is inevitable, many readers commented that bankruptcies at financials were very likely as well. One holiday weekend later and it seems Wall Street is more inclined to agree with this analysis than ever.
The day started off nicely with stocks staging a quiet rally as crude prices declined more than $5 a barrel and the dollar strengthened. But by midday, the bears, it seems, have had enough of entertaining the bulls and returned in drove to sell more of their financials holdings, taking the rest of the stock markets with them. By 1:15 p.m., the Dow was off a 100 points, or 0.9%, the S&P 500 was down 1.28% and the Nasdaq composite declined 0.85%.
Financial regulators also announced not too long before the selloff began an information-sharing agreement between the Federal Reserve and the Securities and Exchange Commission "aimed at better detecting potential risks to the U.S. financial system." Perhaps the agreement reminded investors of the fragile condition financials are still in and eroded confidence in their ability to bounce back without any more nasty surprises. Recent mentions of liquidity concerns at banks and brokerages, and their need to raise more capital and sell assets, has been weighing markets and financials down.
MOST NOTEWORTHY: Lam Research, Deutsche Telekom and France Telecom were today's noteworthy upgrades:
Credit Suisse upgraded Lam Research (NASDAQ:LRCX) to Outperform from Neutral citing margin expansion and valuation. Lam was named the firm's top pick in SCE names for 2H08.
JP Morgan upgraded shares of Deutsche Telekom (NYSE:DT) to Overweight from Neutral as they expect a stronger second half of the year for the industry.
France Telecom (NYSE:FTE) was upgraded to Buy from Neutral at Merrill and to Buy from Hold at Societe Generale after the company walked away without bidding for Sweden's TeliaSonera.
Minyanville's top dog, Todd Harrison, dares to ask in public what Wall Street types quietly consider in private. For more insight and ideas, visit www.minyanville.com.
Lot's going on today as I juggle the end of June. With time constraints on both sides of this screen in mind, I humbly offer the following thoughts:
I covered the incremental "fade" exposure in Google (NASDAQ: GOOG) (put out near the opening) and I'm now in watch mode.
It's tough to tell how much of the big beta action is quarter-end proppage and how much is legitimate demand. As I covered my American Express (NYSE: AXP) earlier--and continue to have exposure in Wachovia (NYSE: WB)--I'm leaving it on for the time being (and yes, subject to change).
And yeah, I'm trading around that ugly duckling--nibbling under $15 and trading the swings. There's no putting lipstick on that pig--using it as my vehicle of choice has thus far been wrong. It ain't over till our interns sing, however, so I'm fighting the good fight.
That sorta brings up the question du jour: Are we gonna see quarterly inflows... or quarterly outflows?
The upside seems begrudging. Of course, after the decline we've seen, you'd be grudging too if you were Hoofy.
Somebody call Armond Goldman! l I'm starting the South Beach Diet on Monday, lest anyone wonders what is happening to my sense of humor.
The scariest thing on my screen? The VXO is down 6% today. I repeat, the VXO is down 6% today. Ruh roh...
Mastercard (NYSE: MA) shares are trading higher today after the company announced it will pay competitor American Express (NYSE: AXP) up to $1.8 billion to settle an antitrust lawsuit. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on MA.
After hitting a one-year low of $120.00 in August, the stock hit a one-year high of $320.30 in May. MA opened this morning at $291.10. So far today the stock has hit a low of $290.10 and a high of $295.16. As of 12:40, MA is trading at $294.10, up $13.17 (4.9%). The chart for MA looks bullish but deteriorating, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
For a bullish hedged play on this stock, I would consider an October bull-put credit spread below the $195 range. A bull-put credit spread is an options position that combines the purchase and sale of put 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 a 6.4% return in four months as long as MA is above $195 at October expiration. Mastercard would have to fall by more than 33% before we would start to lose money. Learn more about this type of trade here.
MasterCard (NYSE: MA) is recently trading at $290 in pre-open trading, above its close of $280.37.
American Express (NYSE: AXP) reached a $1.8 billion settlement with MA over the card issuer's lawsuit with the payment processor over allegations MA and some other banks prohibited financial firms from issuing credit cards through AXP.
MA July option implied volatility of 42 is near its 26-week average according to Track Data, indicating non-directional price movement.
Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
I love the long-term prospects of Visa (NYSE: V) and MasterCard (NYSE: MA), but I do have to concede that a pesky lawsuit by Discover (NYSE: DFS) is the one big fly in this story's soup. According to the following article, Discover wants both credit-card companies to pay $6 billion for perceived violations of antitrust regulations. Unfortunately, these damages could be tripled if Visa and MasterCard lose. One of the big problems here is that American Express (NYSE: AXP) already won a settlement of $2.1 billion from Visa late last year and the company established an escrow fund worth $3 billion for litigation payments.
I'll admit, this lawsuit does give me and my credit-card investment thesis a little case of the shivers. After all, tripling $6 billion to $18 billion means that a huge amount of money is in play here, and a successful outcome for Discover would hamper the stocks of the two big card entities. When you read through the litigation risks in Visa's SEC filings (out of MasterCard and Visa, the latter is my favorite since it is still relatively fresh off its IPO and MasterCard has already had a big run), they are pretty scary. And the fact that the $6 billion figure just came to light this week has probably soured the perception of some investors and analysts. Nevertheless, all the previous litigation talk didn't stop Visa's stock from taking off after its IPO earlier this year.
5-Star Stocks in Warren Buffett's Portfolio Morningstar examines the most watched portfolio in the world -- Berkshire Hathaway's. Among the five-star stocks in the Oracle of Omaha's portfolio are Amercian Express, CarMax, J&J, Lowe's, UPS, Wellpoint and Kraft Foods. 5-Star Stocks in the Berkshire Hathaway Portfolio - Morningstar Secret Ways to Boost Your Social Security These four strategies can add as much as $12,000 a year to your retirement income. Secret Ways to Boost Your Social Security - Kiplinger.com
Perini Corporation (NYSE: PCR) is a leading construction services company offering diversified general contracting, construction management and design/build services to private clients and public agencies in the U.S. and selected overseas locations. The firm is well know for its casino and hotel projects, but is also active in the design and construction of schools, health care facilities, entertainment facilities and sports complexes. Its civil division builds and maintains highways, subways, and airports. Clients include Marriott International (NYSE: MAR), Honeywell International (NYSE: HON) and American Express (NYSE: AXP).
The company surprised the Street earlier in the month, when it reported Q1 EPS of 91 cents and revenues of $1.26 billion. Analysts had been expecting 87 cents and $1.27 billion. The COO cited strong contributions from the building and management services segments. Management also guided FY08 EPS to $3.50-$3.75 ($3.73 consensus), FY08 revenues to $5.5-$5.9 million ($5.16B consensus), FY09 EPS to $4.00-$4.20 ($3.85 consensus) and FY09 revenues to $7.3-$7.8 billion ($5.46B consensus).
Stocks futures are lower Tuesday morning, indicating U.S. stock markets will start on a down note following weak outlooks and disappointing financial results from several companies including Apple and American Express. With oil steady and no economic data out today, Wall Street will focus on earnings.
Stock futures were higher this morning after Bank of America joined recent financials and topped Wall Street estimates. Also pushing futures higher is a deal in the pharma sector with Roche bidding nearly $44 billion for the rest of Genentech. However, both Merck and Schering-Plough said they'll postpone reporting their financial results after the close; Apple will also be reporting results then. Finally, oil prices came off a six-week low and are trading back above $130 a barrel due to escalating Middle East tensions. Higher oil prices could dampen the mood on the Street.
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Minyanville's top dog, Todd Harrison, dares to ask in public what Wall Street types quietly consider in private. For more insight and ideas, visit 
MasterCard
I love the long-term prospects of 
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