Intel Results Boost Confidence in Microsoft $INTC $MSFT PRICE TARGET $32

Credit Suisse reiterate a Outperform rating on INTC based on our belief that the company is well positioned to benefit from (1) Rebound in enterprise IT spending (60%+ of revs) driven by an aging corporate desktop (~5 yrs) and notebook (~4 yrs) installed base, (2) Accelerating PC growth especially in emerging markets, (3) Strong Nehalem driven server cycle in volume (Dual-Processor or Nehalem/Westmere EP) and high performance (Multiprocessor or Nehalem EX), and (4) Ramp of higher margin 32nm products in 2010/11 with manufacturing, cost and performance advantages over competition. Concerns on the stock continue to be dominated by inventory double ordering, weak enterprise PC demand, weakening product mix driven in part by Intel Atom’s “goodenough” computing and the mix-shift towards consumer PCs, and lastly, increased
competition from ARM processor based low-end netbooks.

Financial Sector Stories In Play today $LM $BLK $HIG

Financials

·         FINANCIALS: The group is trading in-line with the market as Greece headlines dominate and credit tightens. Volumes and flows are light this Friday as the group remains range-bound ahead of earnings which kick off next Wednesday. Banks are outperforming insurers as non-life insurers continue to be used as a source of funds. Vanillas are quiet today, as HFs are our most active clients. The vanilla flows we are seeing are better for sale into strength in the group, while HFs are more balanced. We're not seeing much shorting being done today. The macro picture (mainly Greece) and earnings will be the main drivers of the group in next week's trading.

·         Brokers – GS falls into the red mid-day today (nothing all that specific out there; keep in mind the stock had a strong rally this week). 

·         Asset managers – the group is higher pretty much across the board.  LM, TROW, BLK, BEN among the best performing names. 

AAPL iPhone OS event. $AAPL #IPAD #APPLE

·         AAPL iPhone OS event.  New software for iPhone made available to developers (will be available to users in the summer).  gives color on iPad and iPhone sales.  so far seems to be non-event.

·         Apple Event update.  the co held an event @ 1pmET Thurs to unveil its next-gen iPhone OS

·         New features include Multitasking for third party apps; Folders to better organize and access apps; improved Mail with a unified inbox, fast inbox switching and threaded messages; enhanced Enterprise support with even better data protection, mobile device management, wireless app distribution and more; Apple's new iAd mobile advertising platform; and iBooks, the delightful new ebook reader and online bookstore recently debuted on the iPad.

·         The iPhone OS 4 beta software and SDK are available immediately for iPhone Developer Program members at  developer.apple.com. iPhone OS 4 will be available as a software update to iPhone and iPod touch users this summer

Market Equity sectors – Update - Corp. Credit Economics Headlines $SPY

·         SPX: 1169.44, (0.33%) NASDAQ: 2397, (0.53%) Russell 2000 (0.77%)

·         Market Update – very quiet session for the most part; investors main goal was to run out the clock on Q1 w/o a lot of fireworks (sp500 ends off 3.8 points to 1169; range today 1174-1165).  Equities remain resilient, shrugging off the weak ADP # and renewed worries around Greece, as buyers came in on this morning’s weakness.  That said, really not a lot of conviction or volume today; the holidays have thinned out attendance and hurt liquidity (this will prob. be worse tomorrow).  The tape drifted lower at around 2:30pm (no apparent major reason). 

·         Equity sectors – Energy was the only sector to stay in the green other than financials as oil shrugged off a larger than expected inventory build and rallied higher. Oil was pretty much unaffected as it was able to stay above $83 and was even as high as $83.80. Servicers and drillers helped lead energy higher on news that Obama plans to expand offshore drilling in the United States. Financials finished up slightly, led by the banks (BKX index was up 0.3% and ~21% for Q1). Utilities, healthcare, and telecoms were mostly off with the market. Discretionary, staples, industrials, materials, and tech weighed on the market as all were off 0.5-0.8% on the day. Investors will be focused on RIMM/MU for tech and MOS for materials as all three are set to report earnings after the bell.

Market Update ,Commodities;Treasuries: $SPY

OVERVIEW

·         Market Update – another very quiet session; as we exit Q1, sp500 remains in the same range it has spent much of the last couple weeks (high 1160s/low 1170ds); for the day, major indices are approx flat as of noon.  Holidays impacting volume/attendance and hurting liquidity (this will prob. only become worse tomorrow).  Equities opened on the lows following this morning’s sluggish ADP report & some fresh Greece worries, but once again demonstrating resiliency as we rally back to flat heading into the afternoon.  Investors most interested in return preservation through the end of the day and not really doing a whole lot in either direction. 

·         Equity sectors – Energy is the top performer as oil shrugs off a larger than expected inventory build and rallies higher (the drilling announcement from the US also not impacting crude it seems).  Financials also very strong, led higher by the banks (BKX up another ~0.7% and is up ~22% for Q1).  Discretionary and staples are the weakest areas in the market, largely on profit taking. The rest of the spaces are mixed as materials is the only group to eek out a small gain thanks to a weaker dollar. All eyes will be on tech after the close as RIMM/MU are set to report earnings.

·         Best Performing SP500 stocks: GNW, JDSU, DO, RDC, DNR, VIA, FITB, EXPE, RF

·         Weakest performing: SAI, AN, CEPH, LEN, OMC, BIG, RHI, IP, TGT

·         Commodities:  Commodities are mixed this morning. Gold has come off its highs and is trading around $1115, up ~0.8%. Copper has sold off and is trading near its lows down ~0.75%. Natural Gas has weakened since the open, and is trading near its lows down around ~3.90 down ~1.85% Oil sold – off after inventories rose 2.93M barrels; however, it has come off its lows and has moved past $83, up ~0.9%

·         FX: USD (DXY) has weakened throughout the morning, trading near its lows around $81, down ~0.5%.  The dollar has been steadily moving lower all morning and is essentially flat since 8:15am (when the weak ADP report hit).  The dollar is trading near its lows vs. the Euro, down ~0.7%. After selling off overnight, the dollar has traded mostly flat vs. the Pound and is down ~0.7%. The dollar spiked vs. the Yen this morning, and is trading near its highs, up ~0.9%. The Euro has strengthened vs. the Yen throughout the morning and is trading near its highs, up ~1.6%.

·         Corp. Credit: Corp. Credit is underperforming equities – IG 14 is out 1 bp while HY 14 has lost ½ pt.

·         Treasuries: Treasuries have rallied a bit this morning (caught a bid off the weak ADP number) -- the 2s are yielding 104 bps while the 10s are yielding 3.85%. The 2-10 year spread has flattened a bit to 280bps.

·         Greek debt worries back in the headlines; Greek CDS widening but Euro very strong today.  the country's bonds are selling off and CDS is widening (Greek CDS out at ~340bp, well off the ~280 lows from Mar 3). The debt issue priced this Mon continues to trade poorly in the after hours.  Moody's came out and downgraded 5 Greek banks today and there continues to be articles discussing May funding needs and interest costs that are well outside the projections contained in the country’s budget.  From our desk today on a Greek debt auction - "Market participants seem still to be misunderstanding the 2022 tap which was requested by dealers to clear up a series of fails. Somehow  got reported as a poor auction rather than a successful curve management exercise.  The amount issued was simply a reflection of the size of the street short"

2.18.10 Today’s Top Stories & Catalysts

Today’s Top Stories & Catalysts

· Focus for the most part remains on Europe with little out of Asia (BoJ decision pretty
much as expected and HK’s unemployment rate was unchanged) as China remaining closed.
On the Greek front, no major developments to speak of overnight (to watch coming up
though: the FT is reporting that Greece may test the waters next week w/a bond offering and
the country is expected to deliver more information by Fri 2/19 on its debt swap deals).
There were a handful of earnings out in Europe - Daimler is prob. the standout, w/the
stock off ~7% after reporting disappointing numbers and proposing a dividend cut. SocGen is
down 5% post its earnings (first disappointing European financial report this week after very
strong Barclays and ING #s) although other European financials aren't really getting hit in
sympathy. In London, BT is the weakest stock in the FTSE following a ratings downgrade
from S&P (there are continued worries about the co's pension exposure). On the eco front,
the UK posted a budget deficit for January vs. expectations for a surplus, putting UK
sovereign debt under some pressure (FT).

· tech update from Wed night - big night of earnings - on the whole numbers/trends/mgmt
commentary all remain positive, although inline w/what we heard from companies back in Jul
and also inline w/CSCO's Chambers a couple weeks back. Trends were robust in the CQ4,
trends remained strong in Jan, the CQ1 is shaping up to be better-than-seasonal for many endmarkets,
and mgmt tone remains sanguine on the outlook. The next big catalyst for tech will
be the sell-side conference season and the mid-Q updates - Goldman has a conf next week
and Morgan Stanley the week after - these forums will give companies a chance to update on
the status of Q1 (i.e. are things still pacing better-than-seasonal; how is the outlook for June
shaping up; etc). Also - we will start getting formal mid-Q updates in early Mar. Some
tidbits from Wed night: 1) HPQ tone remains positive on demand; PCs prob. showed biggest
upside (revs much better than St), which isn't surprising given what others have said/reported
(MSFT, INTC, etc); HPQ mgmt said it was component constrained (similar to what others,
inc. CSCO, have said); 2) AMAT beat and raised; tone was positive; one analyst on the call
noted that backing into CH2:10 guidance based on mgmt's color implies a down back-half (if
I take the 25% revenue growth you gave in the April quarter, 100% year on year growth, I
think you are actually talking about a 50% revenue decline from the April quarter level into
July and October"); that said AMAT was sanguine on the outlook looking into ’11; 3) NVDA
said it remained capacity constrained throughout the Q and will remain so into the Apr-end Q
(NVDA said this cost them a couple hundred million in revs in the Q and that they would
have guided for higher Apr revs). Big to watch tonight in techland - DELL and IM earnings.

· Gold sales - IMF to Begin On-Market Sales of Gold – hit after the US close on Wed – IMF
said Wed night it will soon kick off the second phase of its gold sales process. The first
phase was set aside exclusively for off-market sales to official holders. The total amount
remaining to be sold is 191.3 metric tons. In accordance with the priority of avoiding
disruption of the gold market, the on-market sales will be conducted in a phased manner over
time.

· China & US tensions growing on economic front - US officials increasingly view the
Chinese currency’s artificially low peg as a threat to worldwide economic stability; the US
plans to press Chinese officials in the coming months to take action and strengthen the yuan.
In addition, US multinational corporations are becoming increasingly vocal about what they
view as anti-competitive practices on the part of the Chinese – WSJ

· Muni market – cities weigh Chapt 9 filings – the WSJ says municipalities around the
country are considering whether to file for Chpt 9 bankruptcy protection; also on the muni
front: States see ~$1T benefits “sinkhole” (there is a massive gap between what states have
promised in pensions, health care, and other benefits, and the available resources)
· Retail earnings season kicks off – WMT earnings due to hit @ 7amET this morning; JCP
comes Fri morning.

· US bank lending falls at fastest rate in history – bank lending in the US has contracted so far in ’10 at the fastest rate in history, raising worries that the Fed is withdrawing its
emergency stimulus measures too early. The M3 broad money supply has been contracting at
a rate of 5.6pc over the last three months. This signals future deflation. London Telegraph.

· Earnings season recap – from JPMorgan’s E Beinstein - Roughly 75% of the non-financial companies in our High Grade bond index have filed their 4Q09 reports. This preliminary data suggests credit metrics continue to improve, but the complexion of the improvement has changed. Recall, trends in 3Q09 credit metrics were positive across almost all sectors. These trends continue in 4Q09, but with a different tone. While companies continue to accumulate cash, the pace is slower. With cost cutting largely finished, profit margins have ticked down as companies must spend more to grow. While leverage has likely peaked earlier in 2009, its reduction will likely be gradual.

Afternoon Review

· Equity Levels: SP500 up 13.86pts to 1089.37 at 12:05PM. The Nasdaq is also up 23 pts to 2206.50. The Russell is up over 5 pts to 616 this morning.

· Equities out of the gate on a strong note today; Catalysts for the move higher: 1) M&A activity (SPG/General Growth and TRA/Yara were the big notable deals); 2) earnings received well (inc. Barclays, which had strong #s this morning in London, esp. from its BarCap division, but also out of MRK, GPC and Q in the US; DRI also had an upside preannouncement); 3) eco #s coming in better (the ZEW in Germany this morning and the Empire Survey from the US); 4) the Euro is finally bouncing, giving a strong bid to all things commodity-related today. On a technical basis, we traded north of 1081 on the sp500 (cash) and now people are watching to see if we can close north of 1090 (which is the 20day MA; we haven’t closed north of this level since Jan 20). Above 1090 looms the 50day MA at 1108. Stocks are drifting towards their highs of the day (so far) as Europe closes, a pattern we have seen over the last ~1-2 weeks (when Europe closes and the headlines around Greece and other sovereigns pass, US stocks seem to feel more comfortable rallying).

· Color from the desk – the tone to trading continues to be better; the heavy vanilla selling of earlier in Feb abated last week and that is carrying over into today. Buyers, which started to nibble late last week, present again today, esp. in some of the higher-beta groups. Still a lack of sellers (both shorts and vanillas) that is helping most although buyers def. more comfortable adding to long exposure. Note that while stocks have a nice bid today, corp credit is weaker (IG is slightly wider and HY is flattish).

· Equity Sectors – across the board rally today. Financials, tech, industrials, discretionary, energy, utilities, materials, and telecoms are all up >1%. Commodity-linked stocks among the best performing in the market (esp. steel stocks, which are higher on back of the weaker dollar and an AKS price hike). Tech is seeing buyers again ahead of a big Wed night of earnings (we get HPQ, AMAT, ADI, NTAP, and NVDA all Wed night); SOX is leading tech higher (SOX is up close to 2%). Financials trading inline w/the tape, led higher by asset managers, money center banks, and credit cards (COF master-trust came in better than expected). Health care and staples, both relative “safe havens”, are underperforming, although each of up 0.8% (within staples, KFT is off 2% post earnings, and WLP is leading HC lower after the co canceled its analyst meeting).

ALSO

Financials Update 02.16.10

Financials

· Financials: Trading in-line with the broader tape, financials are rallying on a series of headlines including Barclay's earnings, a cancelled strike from Greece's tax collectors, better-than-expected master trust data from the card companies and a NYTimes story stating that the EU is cooling to the Volcker Rules. Volumes are lighter, as are flows this morning. However, we maintain a bias to the buyside which we shifted towards mid-last week. Vanillas remain skewed to the buyside following two weeks of aggressive selling, while HFs remain better to buy as well following two weeks of a more balanced approach. For both vanillas and HFs, we're seeing them play a more positive directional bias after a more market-neutral approach over the past two weeks. In banks, we're seeing vanillas adding to positions in the money centers, and value buyers continuing to show a bid at a slight discount to the current market in the larger regionals. Small cap banks are better to buy as well, as we're seeing HFs cover shorts in these names. In the credit cards, we're seeing institutional buyers of the group as master trust continues to roll out. In insurance, we're seeing a buy-side bias from HFs.

· Asset managers – strength across the board in the group. JNS is leading the traditional names, up ~4%. AB, EB, CLMS, FII, IVZ, and WDR are all up ~2%+. The alternative managers also have a bid – BX, GLG, OZM, FIG are all up ~2%+.

· Banks – trading higher across the board. BAC and C are up ~2-3% and outperforming. Regionals are more mixed but also have a bid – FITB, MTB, MI, TCB, USB are some of the better performing regionals.

· Credit cards – COF is up more than 3% and outperforming after this morning’s master trust #s came in better-than-expected. AXP and DFS also have a bid to them.

· MI/financial guarantors – PMI is off 6% after earnings this morning came in below the St although the rest of the group is trading higher.

· Best Performing SP500 financials (from Bloomberg): JNS, COF, AIV, HCP, BAC, CBG, IVZ, C, ICE, ALL

· Weakest performing sp500 financials (from Bloomberg): BRK’b, LNC, TMK, AOC, ZION, NYX, FHN, CMA, MCO, BBT

HERE

Today’s Top Stories & Catalysts 02.15.10

Today’s Top Stories & Catalysts

· Europe being led higher by financials, which are seeing buy interest on back of Barclays’ stronger-than-expected earnings; most of Asia is closed for the Chinese New Year’s Holiday. On the eco data front, in Europe the German ZEW came in better and UK inflation was inline w/St. but above BoE’s target. In Japan, Q4 GDP #s (out Mon morning) came in higher than expected but the details were not as encouraging. Financials are strongest performing group in Europe on back of Barclays. On the downside, L’Oreal is off 5% and Intercontinental is down ~1%+ (both on earnings).

· Greece Update - Greek government bonds fell after Finance Minister George Papaconstantinou said his country is in a “terrible mess” and compared fixing the nation’s deficit to changing “the course of the Titanic”. Papaconstantinou said his country’s public sector “is out of control” as unions planned more strikes (Greek customs officials walked off the job Tuesday for a three-day strike to protest government austerity measures). The European Finance Ministers meeting commenced Mon and continues through Tues and will probably spend a lot of time discussing Greece although they aren’t expected to make specific announcements on precise aid mechanisms and procedures (similar to the EU Summit statement from last week); the next major event will prob. be mid-Mar, at which time the Greek gov’t’s progress towards achieving its budget goals will be evaluated. Eurogroup chairman Jean-Claude Juncker said Greece must do more to cut its budget and warned that other Eurozone citizens aren’t prepared to pay for its gov’t’s mistakes. ECB president Trichet said promises made last week by Greece and the 26 other European Union governments on finances and the stability of the euro area are “enough” for the time being. The NYT had a big pg 1 article this weekend discussing how “Wall Street”, inc. Goldman, helped Greece to hid the true extent of its debt accumulation w/currency swaps and other techniques; in response to the article, Brussels has given Greece two weeks to answer allegations in the Times article. London Times article Tues morning – “Bite the bullet. Kick Greece out of the euro”.

· Dubai – speculation of a proposed offering to creditors of Dubai World have spooked global markets and caused Dubai CDS spreads to blow out last week; according to speculation, Dubai World will offer creditors either 60 percent repayment over seven years and a government guarantee, or full repayment with a debt for equity swap for property assets of Nakheel and no guarantee. Dubai said on Sunday it had made no formal restructuring proposals and nothing was expected until March or April. CNBC

· MSFT – the co officially launched its new mobile OS, Windows Mobile 7, Mon morning; overall people seemed pleased w/the actual OS during demonstrations, although there is some concern around hardware partners – the co failed to unveil any major new hardware based on the OS. MSFT hopes to have devices w/Win7 Mobile on shelves for the holiday ’10 season. MSFT could have more to say on Win7 Mobile during its MIX conf in Mar.