TheStreet.com's Jim Cramer says the homebuilders won't quit, and that's making the early-cycle plays work.
Have we really bottomed? The stubborn lack of decline in the homebuilders, coupled with the better-than-expected retail sales, the strong transports, and the conclusion of a deal like Clear Channel (NYSE: CCU) (Cramer's Take), has created an environment where you are hard-pressed, if you rely on stocks as forecasters, to ignore the possibility of a bottom.
I watch the HGX like a hawk, the homebuilding aggregation, and it simply won't come down. That's despite the awful numbers, the covenant violations (Standard Pacific (NYSE: SPF) (Cramer's Take)) the bad loans, the lack of mortgage money, the insistence of a down payment and an abysmal spring traffic season.
So, why are people buying the group that signaled the downturn? I think it comes down to price. If you force the homebuilders to sell, as Toll (NYSE: TOL) (Cramer's Take) did this quarter, taking no gains on homes, you clean up inventory. If you clean up inventory, which is what happened in western Florida, you stabilize pricing. When you stabilize pricing, you bring out buyers. It is a virtuous circle.
Crude surpassed $126.00 before retreating down by $1.85 to $124.11 late in the day. Many are citing that the interest in owning the dollar is also partly to thank for today's gains. Below are the unofficial closing bell prices for major index levels:
AnnTaylor Stores Corp. (NYSE: ANN) rose today after it forecast that first quarter profit will exceed projections. Additionally, the women's apparel store reported its plans to drop its older women fall line but push the opening of its Loft outlets. Shares were up 16% at $28.50 in the final minutes of trading.
Just a few weeks ago, it looked like the $19.4 billion buyout of Clear Channel Communications (NYSE: CCU) was dead. But in the deal market, things can change quickly.
Just today, the New York Supreme Court said there will be a stay on the litigation on the deal. According to CNBC, it looks like the parties are engaged in heavy settlement talk.
No doubt, a trial could be problematic for the banks that are on the hook for $22 billion in debt financing. These banks include: Citigroup (NYSE: C), Credit Suisse (NYSE: CS), Morgan Stanley (NYSE: MS), Royal Bank of Scotland, Deutsche Bank AG and Wachovia (NYSE: WB).
Now, they may be willing to fund the deal.
Why? Well, it looks like the debt markets are improving and the major banks have worked hard to boost their balance sheets.
In other words, the US credit crunch may be thawing. If so, we may see some more dealmaking – which would be a relief for Wall Street banks eager to get some juicy fees.
So far in today's trading, Clear Channel's shares are up 9.5%.
Thomas H. Lee Partners and Bain Capital have filed suits to try to force a bank group to fund their $19 billion buyout of CCU. The bank group is asking the courts to dismiss a part of the litigation.
Bloomberg is reporting that the CCU trail in New York State Court has been delayed by one day and that lawyers decline to comment on whether a settlement is in the works.
CCU call option volume of 23,870 contracts compares to put volume of 5,295 contracts. CCU May 32.5 straddle is priced at $4.10. CCU June option implied volatility of 89 is above its 26-week average of 61 according to Track Data, suggesting larger price risk.
Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
Shares of radio broadcaster Clear Channel Communications Inc. (NYSE: CCU) were slightly up in early trading after the company posted higher first-quarter profit boosted in part by gains in its outdoor advertising unit. Though, the company was not able to beat analysts' predictions as the weak economy put pressure on the overall advertising market.
Clear Channel Communications announced that its quarterly profit surged to $799.7 million, or $1.61 per share. The income figures were definitely something to cheer about. During its first quarter last year, the company had net income of $102.2 million or 21 cents per share. Excluding one-time items, earnings for the quarter would have been $0.19 per share. Analysts' forecast (which typically exclude one-time items) was for $0.21 per share, according to Thomson Reuters.
The media and advertising display company also said that quarterly revenue rose 3.9% to $1.56 billion, compared with $1.51 billion reported in the same period a year ago, helped by favorable foreign exchange rates; excluding the effect of the week dollar, revenue rose only 1%. Analysts had been expecting to see slower sales of $1.53 billion.
Activision (NASDAQ: ATVI) late Thursday reported a fourth-quarter profit that handily beat expectations as video games sales nearly doubled with strong demand for Guitar Hero 3 and Call of Duty 4 games. ATVI shares are up over 4.5% in premarket trading.
Bristol-Myers Squibb (NYSE: BMY) and Sanofi-Aventis (NYSE: SNY) are about to face a generic threat from Swiss drug firm, Schweizerhall Holding, that said it's going to soon launch a generic version in Germany of Plavix blood-thinning drug.
Clear Channel (NYSE: CCU) reported its profit soared to $799.7 million or $1.61 per share in the first quarter while revenues rose 4% to $1.56 billion. The results beat expectation even when taken excluding one-time items that have earnings rising 70% to $161.4 million or 32 cents a share.
Wendy's International Inc (NYSE: WEN), struggling since the 2002 death of founder Dave Thomas, and pressed by investor Nelson Peltz to improve results, will today announce a deal with Peltz, the Wall Street Journal reported.
The Wall Street Journal also reported that the House Financial Services Committee voted to approve $15B in loans and grants so that local governments can buy foreclosed homes throughout the U.S. Committee chairman Barney Frank said the bill will avoid abuse, including requiring that purchased homes be a minimum 60 days into the process.
Adding to evidence of a rally in corporate credit markets, the Financial Times reported that Deutsche Bank AG (NYSE: DB) is preparing another big sell-off of its leveraged loans in Europe.
OTHER PAPERS:
Several e-mails that have been obtained by the New York Post sent between Wall Street banks may prove a serious setback in the fight over the takeover Clear Channel Communications Inc (NYSE: CCU). The e-mails reportedly show the banks, led by Citigroup Incorporated (NYSE: C) and Deutsche Bank, looking to get out of financing the buyout by Bain Capital and THL Partners by offering terms "they know the [firms] won't be able to accept."
Bernstein downgraded Salesforce.com (NYSE: CRM) to "market perform" from "outperform" according toBriefing.com. The news service also reports that Citigroup initiated Southern Cooper (NYSE: PCU) with a "sell".
Banc of America Securities said that Allstate (NYSE: ALL) may miss first quarter earnings due to payments for storm damages according to the AP.
True, the M&A business is known for its "feast-famine" cycles, but this time it looks like things could be particularly bleak – and perhaps long lasting. Just look at the break-down of the $19.5 billion buyout for Clear Channel Communications (NYSE: CCU).
Basically, financial institutions are in the process of repairing their balance sheets, and as a result, don't have the firepower to finance deals -- especially large ones. In fact, these firms need to find ways to deal with more than $200 billion in LBO loans.
There is also likely to be a slowdown in strategic acquisitions. That is, as the US economy slows down – which may impinge the global economy – where buyers are likely to get jittery. Why take big risks in such an environment?
Now, there are offsetting factors such as the emergence of mega sovereign wealth funds. However, they may get some political pushback.
In other words, don't expect a comeback anytime soon.
TheStreet.com's Jim Cramer wonders what's going on with the Clear Channel deal.
The focus on this Clear Channel (NYSE: CCU) (Cramer's Take) breakdown, the endless focus, is on the $500 million that the private-equity team, Bain/Lee, will have to pay Clear Channel.
What's more important, I believe, is the billions of dollars I believe the bankers will owe Bain/Lee if they don't find some way to cut this price and make this deal smaller.
There have been dozens of deals that were struck during this period that the bankers wished they could walk away from but didn't. Which says to me, how desperate are they now NOT to have to pay the $22 billion in this very large deal. How desperate are they given the fact that a judge will, I believe, find against them and the damages will be immense, as big as the billions that Lee/Bain can show -- and will -- they would have made if the deal closed in the out years.
U.S. stock futures pointed to a higher open at the start of trading Thursday with Oracle likely to drop after reporting disappointing earnings yesterday. Sentiment could change, however as economic growth reading will be reported an hour before the opening bell.
On Wednesday, U.S. stocks dropped on renewed credit concerns after after news that the Clear Channel deal may be stalled due to financing issues. Declining durable goods orders didn't help sentiment and markets ended up declining with a day that exhibited patterns only too familiar as of late, a surge in commodity prices while the dollar weakened. The Dow industrials dropped 109 points, or 0.88%, the Nasdaq Composite lost 16 points, or 0.71%, and the S&P 500 fell 11 points, or 0.88%.
Today, several more economic readings will help shape the session, especially with the final reading on fourth-quarter gross domestic product -- due out at 8:30 a.m. EDT -- which is expected to remain the same as previous reading and show a 0.6% economic growth, a near standstill, and the weakest pace in five years. The deepening housing slump has probably tipped the U.S. economy into a recession. The situation may not be much better in 2008 as consumer spending has slowed and business investment and the housing market has continued to decline. Despite actions taken by the Federal Reserve and the government, these measures' effect will be a while in stimulating the economy and may not do so soon enough to avoid recession.
Also at 8:30, the Labor Department will release its weekly initial claims report.
Early today, Clear Channel (NYSE: CCU) claimed that it had won a major legal battle in its efforts to get banks to fund a private equity buyout of the broadcast company. According toReuters: "Clear Channel said Judge John Gabriel of the Bexar County district court in Texas found on Wednesday night that the company would suffer irreparable harm if the banks refused to fund the merger."
Citigroup (NYSE: C) and six other banks were to fund the $22 billion takeover by Bain Capital and Thomas H Lee.
The banks, looking at their balance sheets and a recession hitting the media industry, decided to walk. Financial companies have LBO debt on their books and are not able to sell it to other institutions because of the credit crunch.
The legal news is nice for Clear Channel, but the banks are not going to accept a ruling from Bexar County. The dispute has a long way to go.
Douglas A. McIntyre is an editor at 247wallst.com.
Just yesterday we were all scratching our heads and wondering where the bears had gone. It seems maybe they were just out on a binge session. Today was the playbook day of what we had seen so regularly before last week with financials and tech lower, and gold, oil and commodities higher. Oil rose a sharp $4.73 to $105.95 on lower than expected inventory numbers, and gold was up $11.00 at $949.50 in late day trading on the weak U.S.-Peso.
February's Durable Goods brought on more pessimism from the start of the session after posting a 1.7% drop, although this has always been one of the more volatile economic numbers in good times and in bad. The report out of the Commerce Department showed new home sales fell another 1.8% in a fourth consecutive decline, although that was slightly better than many were looking for. Below are the unofficial closing prices for U.S. index levels:
TheStreet.com's Jim Cramer says the homebuilders won't quit, and that's making the early-cycle plays work.
Just a few weeks ago, it looked like the $19.4 billion buyout of 
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Clear Channel
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It's a scary thing for investment bankers: the "credit crunch." It has essentially depleted the industry, as dealmaking has shrunk significantly.
U.S. stock futures pointed to a higher open at the start of trading Thursday with Oracle likely to drop after reporting disappointing earnings yesterday. Sentiment could change, however as economic growth reading will be reported an hour before the opening bell.
Just yesterday we were all scratching our heads and wondering where the bears had gone. It seems maybe they were just out on a binge session. Today was the playbook day of what we had seen so regularly before last week with financials and tech lower, and gold, oil and commodities higher. 
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