Some may view the sun as rising while others see it setting. Before you send me your rant that the pain has just begun and I am foolish to believe the recent market upswing is anything but a short term reprieve, let me share a few thoughts.
Today Wachovia Corp (NYSE: WB) reported a loss of $1.30 a share compared to the average analysts' guess of $1.27 a share. WB lost almost $9 billion, is cutting the dividend and will layoff 6,400 employees. All bad news -- and still the the stock and the DJIA are up!
At the same time, oil is trading down about $4 a barrel during the busiest driving time of the year because people are actually conserving gas. The market is working. It should also be noted that after the Bush administration spent over seven and a half years stating various preconditions to establishing relations with Iran, last week they decided to send an envoy and start a dialog. It may be good or bad politics depending on your view -- but it is only good for the stabilization of oil prices.
MOST NOTEWORTHY: Nvidia, Air France and UnitedHealth were today's noteworthy downgrades:
JP Morgan downgraded Nvidia (NASDAQ:NVDA) to Neutral from Overweight following the company's lowered guidance.
Deutsche Bank cut Air France (Other OTC:AFLYY) to Sell from Hold as they believe consensus revenue estimates need to come down.
Following UnitedHealth's (NYSE:UNH) lowered guidance, UBS said there is "little hope" for improvement in 2009 and that the company has above average exposure to the Medicare segment, which is being politically pressured. UBS downgraded shares to Neutral from Buy.
OTHER DOWNGRADES:
Aetna (NYSE:AET) and Health Net (NYSE:HNT) were downgraded to Sell from Neutral at Goldman.
Dice Holdings (NYSE:DHX) was lowered at Wachovia to Market Perform from Outperform.
Zhone (NASDAQ:ZHNE) was downgraded to Source of Funds from Buy at ThinkPanmure.
After a brief refreshment, today just ended up being ugly rather than what many were hoping would be a boring day. Today's action was likely due more to analyst concerns, but a late-day news report on a security breach scare at LAX airport may have added stress to a trading day that would have otherwise been quiet. The markets are grossly oversold, but there just seems to be very few reasons for traders to hit their "BUY" buttons on keyboards.
These are UNOFFICIAL closing bell levels for major index readings:
General Motors (NYSE: GM) was the daily disaster due analyst call. Merrill Lynch downgraded the stock to Underperform and noted that "the chances of bankruptcy aren't impossible." 24/7 Wall St. noted the same weeks before, and we even posted odds on what the chances are that major auto or airline companies would have to file for protection by the end of 2008 to early 2009.
U.S. stock futures were higher Wednesday morning, as Wall Street could try to having yet another positive session. While Starbucks news of store closing and reports Microsoft may still be interested in Yahoo helped lift sentiment, UnitedHealth already issued a warning this morning. Employment data is also on tap before the market opens.
U.S. stocks finally ended higher on Tuesday. Surprisingly, it was car sales that helped the mood on the Street as as June sales came in not as bad as expected. The Dow industrials ended 32 points higher, or 0.28%, the S&P 500 added 4 points, or 0.38%, and the Nasdaq Composite added 11 points, or 0.52%.
Today, investors will have the ADP June private sector employment figures to chew on ahead of the government's report tomorrow. The employment report is expected to be released at 8:15 a.m. EDT. Then, at 10 a.m., May factory orders are due out.
Also on the docket today is weekly crude inventories, usually released at 10:30 a.m. EDT. While oil came off highs Tuesday due to a slightly stronger dollar, it again rose above $141 a barrel Wednesday, due to persistent supply concerns that has analysts warning of higher prices yet. An IEA report saying supplies will remain tight and demand will likely grow despite higher prices helped push prices higher.
Coventry Health (NYSE: CVH) shares were down nearly 17% in after-hours trading Wednesday after the managed-care provider lowered estimates for second-quarter and full-year earnings due to disappointing April and May results. Wachovia downgraded CVH to Market Perform from Outperform. Other healthcare stocks felt the pressure and were down in after-hours or premarket trading: UnitedHealth (NYSE: UNH) -7%, Aetna (NYSE: AET) -9.9%, WellPoint (NYSE: WLP) -6%, Humana (NYSE: HUM) -5% and Cigna (NYSE: CI) -5%.
Carnival (NYSE: CCL) is due to report second-quarter financial results. Circuit City Stores Inc. (NYSE: CC) is due to release first-quarter financial results.
Hewlett-Packard (NYSE: HPQ) is reorganizing its printer unit in the face of declining growth of the business, The Wall Street Journal reported. Basically, as consumers print less, H-P is trying to adapt and is reducing five business unitsto three.
After hitting a one-year high of $59.46 in December, the stock hit a one-year low of $31.49 in May. This morning, UNH opened at $30.30. So far today the stock has hit a low of $30.00 and a high of $30.88. As of 1:25, UNH is trading at $30.70, down 31 cents(-1.0%). The chart for UNH looks neutral and improving, while S&P gives the stock a neutral 3 Stars (out of 5) Hold rating.
For a bearish hedged play on this stock, I would consider a September .bear-call credit spread above the $35 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 a 9.9% return in three months as long as UNH is below $35 at September expiration. UNH would have to rise by more than 14% before we would start to lose money. Learn more about this type of trade here
UNH hasn't been above 35 since May and has shown resistance around $34.50 recently. Brent Archer is an options analyst and writer at Investors Observer.
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 UNH.
In an effort to get a shareholder class-action lawsuit related to options backdating at United Health (NYSE: UNH) dismissed, former CEO William McGuire is claiming that, gee, golly, he just didn't know much about them fancydangled options. He's just a doctor!
The Star Tribune reports that his lawyers have filed a brief stating, in part, that "Dr. McGuire has no formal training or degrees in finance, accounting or law. His only professional training is as a medical doctor with a specialty in pulmonology."
Interesting. I wonder whether Mr. McGuire argued that he should be given a smaller compensation than other CEOs because he had no training in anything related to business. I somehow doubt it. The "I have no idea what happened! I don't know anything! I'm an idiot!" defense has become quite common in white-collar crime cases. After making a variation on mark-to-market accounting a prerequisite for joining Enron, former CEO Jeff Skilling later claimed that he "wasn't an accountant" in defending the fraudulent practices of the company.
At some point, the top men in charge have to be responsible for fraudulent conduct at their companies. If he didn't understand the accounting, he should have made it his business to understand it. He was the CEO.
MOST NOTEWORTHY: National City, Syntax Brillian and Medco Health were today's noteworthy upgrades:
Deutsche Bank upgraded shares of National City (NYSE: NCC) to Buy from Sell on valuation as they believe their $9.00 target is in-line with the company's franchise value.
Baird upgraded Syntax Brillian (NASDAQ: BRLC) to Outperform from Neutral based on recently announced strategic initiatives and valuation.
Jefferies upgraded shares of Medco Health (NYSE: MHS) to Buy from Hold as they believe the company's renewed PBM contract with United Healthcare (NYSE: UNH) removes a major overhang.
OTHER UPGRADES:
Friedman Billings raised Downey Financial (NYSE: DSL) to Market Perform from Underperform.
Volterra (VNASDAQ: LTR) was raised to Buy from Neutral at Piper.
Alliance Data (NYSE: ADS) was raised at JP Morgan to Overweight from Neutral.
MOST NOTEWORTHY: Semiconductor stocks, Norfolk Southern and Textron were today's noteworthy downgrades:
Banc of America downgraded semiconductor stocks as they believe the cyclical recovery that began in early 2007 has "run its course." Banc of America reduced its estimates for sales of integrated circuits in 2008 and lowered their 2008 semiconductor sales growth to 7% from 11%. The firm downgraded Advanced Micro (NYSE: AMD) to Sell from Neutral as they believe the company's Barcelona product will not stem market share losses in servers and desktops vs. Intel (NASDAQ: INTC). They also believe AMD's cost structure will be pressured by higher depreciation and higher material costs in 2008.
JP Morgan downgraded Norfolk Southern (NYSE: NSC) to Neutral from Overweight citing continued weakness in volumes vs. easy Q4 comps, lack of visibility into an upturn and lack of catalysts.
Citigroup lowered its rating on Textron (NYSE: TXT) to Hold from Buy on valuation, as they see a less compelling risk/reward following the 2007 rally.
OTHER DOWNGRADES:
Fossil (NASDAQ: FOSL) was downgraded to Neutral from Buy at Piper.
Some may view the sun as rising while others see it setting. Before you send me your rant that the pain has just begun and I am foolish to believe the recent market upswing is anything but a short term reprieve, let me share a few thoughts.
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U.S. stock futures were higher Wednesday morning, as Wall Street could try to having yet another positive session. While Starbucks news of store closing and reports Microsoft may still be interested in Yahoo helped lift sentiment, UnitedHealth already issued a warning this morning. Employment data is also on tap before the market opens.
UnitedHealth
Here are some highlights from this past week's .gif){kind=logo}
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For blue chip buyers: 'This too shall pass'
With the Fed Funds rate at 2%, why are mortgage rates so high?
Cramer on BloggingStocks: Banks fail to raise money when they could 
