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.
Again this week, in a list of earnings expectations for some prominent companies in a variety of sectors, we see an apparent optimism. That is, analysts are anticipating more earnings growth than earnings declines.
Analysts surveyed by Thomson Financial expect the following companies to report a rise in earnings when compared to the same period of the previous year.
Readers of this space know that my investment bias is toward large-cap companies with demonstrated business models that have a competitive advantage in established markets, preferably with a favorable global trend as a support. And with the aforementioned in mind, Caterpillar is worth a review.
Caterpillar (NYSE: CAT) is the world's No. 1 manufacturer in earth moving equipment and a leader in construction/agricultural equipment.
In general, analysts see CAT's 2008 revenue increasing 7-10% on strong international growth; North American revenue is expected to be flat.
Analysts also like the fact that Caterpillar is well-positioned to secure new business in emerging market economies for construction, infrastructure and land development work.
MOST NOTEWORTHY: GFI Group, Wells Fargo and Cirrus Logic were today's noteworthy downgrades:
Goldman downgraded GFI Group Inc (NASDAQ: GFIG) to Neutral from Buy following the company's announcement that credit chief, Donal Fewer, left the company to go to a rival firm and that about two dozen brokers may defect to follow him.
Oppenheimer cut Wells Fargo & Company (NYSE: WFC) to Underperform from Perform as they believe the company is under-reserved by at least $4.5B and that there is significant room for multiple contraction.
Cirrus Logic Inc (NASDAQ: CRUS) was downgraded at Jefferies to Hold from Buy on valuation, as they believe the risk/reward is no longer favorable at current levels.
The mood this week has changed sharply from the post-GE disappointment, despite weak economics still hitting the screens every morning in economic numbers. In fact, the week went much better than it was looking on Monday, and everyone remembered the old chant, "markets climb up a wall of worry." Even oil heading above the $116 per barrel isn't killing things. Here are unofficial closing levels:
Advanced Micro Devices Inc. (NYSE: AMD) down after reporting a net loss of $358 million on $1.5 billion in revenues. Losses were narrowed from the same quarter last year. The company also released plans to cut additional cost. If insiders want that stock to go up, they need to fire Hector Ruiz. Shares were down 1.6% at $6.09 going into the close.
After hitting a one-year low of $53.75 last May, the stock hit a one-year high of $94.77 in January. DE opened this morning at $91.00. So far today the stock has hit a low of $91.00 and a high of $94.80. As of 11:40, DE is trading at $94.10, up $4.66 (5.2%). The chart for DE looks neutral and improving, 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 a June bull-put credit spread below the $72.50 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 5.3% return in just two months as long as DE is above $72.50 at June expiration. Deere would have to fall by more than 23% before we would start to lose money. Learn more about this type of trade here.
DE hasn't been below $75 since November and has shown support around $80 recently. This trade could be risky if energy costs fall off some, since that would lower the demand for agricultural accessories, but even if that happens, this position could be protected by the support the stock might find from its 200 day moving average, which is currently around $77 and rising.
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 DE or CAT.
Shares of heavy equipment and engine manufacturer Caterpillar Inc. (NYSE: CAT) have been soaring in morning trading after the company reported a growth of 13% for its first-quarter profit, helped by strong international sales. The company offered the perfect example of the international growth importance.
The company said its quarterly profit surged to $922 million, compared with $816 million a year earlier, boosted by strong global gains that offset weakness on highway truck markets in North America. Caterpillar posted earnings $1.45 per share, exceeding analysts' forecast for a quarterly profit of $1.33 per share.
Total sales for the company rose by a respectable18% year over year to $11.8 billion, beating analysts' expectations by $1 billion, according to Thomson Financial. This was mainly because the heavy equipment maker benefited from a rise of 30% in international sales, while North America revenue came with a small increase of only 4%. The results proved continued weakening in North America, where sales have been under pressure from the sluggish economy, but strength internationally where the weak dollar lifted the company's sales.
Earnings are to be reported Friday, April 18 by Caterpillar Inc. (NYSE: CAT). Any analyst concerns about the company's current earnings are focused upon the weakened construction trade and flagging demand for large trucks. However, analysts site the company's large and strong global footprint, along with capital advantages stemming from the depressed dollar, to buttress predictions that company earnings shall keep in step with the previous two quarters. Company sentiment is generally positive overall.
Analysts first quarter profit estimates for Caterpillar range mainly between 1.33 and 1.49 per share on revenue of $10.77 billion. These numbers would be in keeping with results from Q4 2007. The company seems to be holding up extraordinarily well under current economic conditions. Analysts forward outlook for Caterpillar seems positive yet guarded.
The Associated Press sites the opinion of Andrew Casey, analyst for Wachovia (NYSE: WB). He indicates that Caterpillar is improving the margin on it's engines business. Casey is quoted as stating "This should be a positive short-term catalyst for stock price action.''
I believe that steel and fuel prices have put a bit of extra drag on Caterpillar's earnings for the first quarter. I'll state my earnings prediction to be within a penny of 1.40, give or take.
Gary Sattler is a freelance blogger. He does not knowingly have interest in the companies mentioned in this blog post.
For the full year, the company forecast a profit of $1.85 to $1.87 per share. The consensus estimate of analysts polled by Thomson Financial is for full-year earnings of $1.52 per share. In after-market trading yesterday, J. Crew shares rose $1.36, or 3.2%, to $43.96, and they continued to rise in morning trading to $46.17.
During a presentation to analysts and investors, heavy machinery maker Caterpillar Inc. (NYSE: CAT) forecast that the company's earnings per share will rise 5% to 15%, to between $5.64 and $6.18 per share, and that revenue will climb between 5% and 10% from the $44.96 billion it reported in 2007. On average, analysts polled by Thomson Financial expect profit of $5.89 per share on revenue of $48.2 million.
Caterpillar also said that the company's profit will rise between 15% and 20% from 2005 through 2012, and that sales will approach $60 billion by 2010. Caterpillar shares were up about 4% to $75.59 in morning trading.
TheStreet.com's Jim Cramer says Tuesday's action addressed the systemic risk, but not the earnings problems.
Oh, shoot ... the fundamentals. Remember them? The ones not covered by Caterpillar's (NYSE: CAT) (Cramer's Take) rosy forecast for 2010? Yeah, those bits and pieces called earnings?
That's how I always feel after a big rally day when I know the economy is slowing, not getting better. We get some terrific news from the Fed as we did Tuesday, and we want to sound the all-clear. Instead we have to now deal with companies' earnings, and we know from Wellpoint (NYSE: WLP) (Cramer's Take) et al and Texas Instruments (NYSE: TXN) (Cramer's Take) et al that the Fed safety net doesn't take everything in with it.
So what did happen yesterday? After pondering it for seemingly every waking -- and sleeping! -- hour since it happened, I am thinking that yesterday's Fed move took off the systemic risk of a major financial failure.
The compelling question following the Fed's action, in conjunction with the world's other, major central banks, is whether it will work. Will it be enough to get the U.S. economy moving again?
And as is so often the case in economics, the answer depends on three unknown factors, a pair of economists told BloggingStocks Tuesday. (In an initial review, the market appeared to signal its approval of the Fed's action, with investors sending the Dow 300 points higher to 12,156 in late Tuesday afternoon trading. )
New Fed tool: TSLF
First, the Fed's new Term Securities Lending Facility should convince bank dealers that liquidity should not be an issue, economist David H. Wang said Tuesday. "No bank or bond dealer should fear that they won't be able to find financing. That should improve bond market liquidity," Wang said. In addition, the Fed's willingness to swap U.S. Treasuries for mortgage-backed securities (MBS) should restore some trust -- but by no means total trust -- to the MBS market and help market participants price these securities, he said. The Fed's accepting private mortgage debt collateral speaks directly to where the market is stressed the most, Wang said. However, if MBS's are not pricing and trading, that would indicate continued concerns about liquidity, he said.
Here are some highlights from this past week's earnings coverage from BloggingStocks: 
.gif){kind=logo}
Here are some highlights from this past week's 
Shares of heavy equipment and engine manufacturer 
Earnings are to be reported Friday, April 18 by 
The week in preview: Chicken soup (or a doughnut) for the recession-weary soul?
Comfort Zone Investing: Oil's down, which is a start, but not good enough
Stocks have their worst week in six years
