2007 October 12 « Trading for the Masses

Back in 2000 I recall MSTR was the first shot across the bow for the internet bubble breaking down. Could BIDU be the MSTR of 2007 to kick off the turn in momentum? Just pointing it out as we won’t know for a while. But that breakdown felt much different there @ 2pm than any other I have seen in a while. It was across the board momentum to the downside as volume picked up 50% over the other days this week. Could BIDU be the MSTR?

Categories: Charts · Forex · Futures · Psychology · Stocks · Technical Analysis · Trading

Good to Go Pile . . .

October 12, 2007 · No Comments

Gapping up: BEAS +31.9%, PTR +9.9%, ZNH +9.5%, LLNW +7.7%, CHA +6.8%, CEA +6.6%, STV +6.5%, PLCE +5.9%, SEED +4.7%, CTEL +4.8%, AKAM +6.8%… Gapping down: CWTR -19.0%, ATI -10.0%, RTI -6.7%, NILE -4.2%, TIE -2.6%, SMH -2.3%, BCS -2.1%, SKM -2.0%.

Bond Watch: Dipped Overnight
The market was eventually offered through the night with yesterday’s late session flip higher sputtering out by the London open.
Globally bonds were better as equities & data were on the soft side. Neither of that seemed to matter to treasuries though as trade, instead, took profits & squared positions ahead of the week’s big data. The 2-10-yr yield spread continues to bat around 50.6 with direction still a little murky. Bond prices in the EuroZone were bid as a surprise weaker-than expected French CPI report added to the generally good sentiment directed at sovereign debt while in Japan, bonds perked up on the soft stocks. Treasuries get a peek at retail sales & PPI for Sep this morning with the former taking much of the spotlight as household consumption is under the microscope for signs of fatigue. Beyond the data, the market will eye stocks for further crumbling while technicals were given a boost yesterday but remain a drag on prices. The buck is up on the euro & yen as traders clean-up ahead of data. Gold is steady to a touch lower as the buck rebounds 747.32 (-0.55) while crude ran up but is now flat at 83.11 (+0.03). Data up is retail sales & PPI (8:30) along with business inventories & UofM sentiment (10). A Fed conference in Dallas has Bernanke giving opening remarks (9:10), & a bunch of other Fedsters making comments. The euro is at 1.4175 & the yen is at 117.4750 while the 10-yr is -03/32nds yielding 4.647%.

Core PPI y/y +2.0% vs +2.2% consensus
PPI y/y +4.4% vs +3.7% consensus
Retail Sales +0.4% vs +0.2% consensus
Core PPI m/m +0.1% vs +0.2% consensus
PPI m/m +1.1% vs +0.5% consensus
retail Sales ex auto +0.4% vs +0.3% consensus

BIDU Baidu.com: Details of Credit Suisse call; believes the potential disappointing 4Q revenue guidance will trigger selling pressure (308.78 ) Credit Suisse notes that BIDU was down 10% yesterday on market concerns regarding a potential slowdown in 3Q/4Q. After checking with various sources, they expect BIDU should experience slowdown since mid-Sep because of the closedown and clean-up of small to medium websites, before 17th Communist Party’s Congress on 15-Oct. As government clean-up should continue until at least mid- Oct, they think the negative impact should last from mid-Sep to mid-Oct. Firm believes the potential disappointing 4Q revenue guidance will trigger selling pressure. Reits Underperform.

NLY Annaly Mortgage: Upgrade details (15.34 )
RBC upgraded NLY to Outperform from Sector Perform and raised thier tgt to $18 from $15. The firm expects NLY to see excellent earnings upside over the next 12-months, given their view that weakening economic conditions will lead to further Fed rate cuts in the year ahead. NLY’s earnings are closely tied to the short-end of the yield curve, so given their macroeconomic/Fed rate view along with NLY’s low credit risk strategy, they think NLY shares are a compelling investment.

ZNH China Southern, airlines climb on profit growth speculation - Bloomberg (67.33 )
Bloomberg reports the co rose the most in six weeks on the Hong Kong stock exchange because of speculation it will report a higher third-quarter profit. Chinese carriers, led by China Southern and Air China, the second biggest, may post improved third-quarter earnings because of rising traffic and a strengthening yuan. China Southern flew 42.7 mln passengers in the nine months ended Sept. 30, 16% more than a year earlier. (Briefing.com note: CEA is also gapping up on the news)

ERTS Electronic Arts’ acquisitions add significant development resources and product arsenal - Lazard (58.69 ) -Update-
Lazard notes that ERTS acquired video game developers BioWare and Pandemic Studios from private equity firm Elevation Partners. Firm believes the acquisition adds significant development resources and product arsenal, including 10 franchises in development, six of which are high-margin, owned-IP. Firm believs BioWare and Pandemic are among the top independent game developers, with track records for developing popular and high-quality video games. Importantly, they believe the studios are a good strategic fit to fill remaining gaps in ERTS’s title lineup. Also, firm says the addition of BioWare/Pandemic provides increasing visibility to peak earnings expectations in the new cycle.

SNDK SanDisk: Hearing SNDK downgraded to Hold at Needham (48.70 )

Buyer: Comarco (CMRO 5.69) 10% Owner Broadwood Partners bought 21,494 shares at $5.49 - $5.57… Sellers: Monarch Casino & Resort (MCRI 30.70) 10% Owner B. Farahi sold 10K shares at $30.76… Catalyst Semiconductor (CATS 6.85) 10% Owner J&W Seligman sold 50K shares at $7.78… James River Coal (JRCC 7.00) 10% Owner aAd Capital Mgmt sold 400K shares at $7.12… Archer-Daniels-Midland (ADM 34.90) Officer sold 13K shares at $34.95… GeoEye (GEOY 25.33) 10%Owner Harbinger Capital Partners Master Fund sold 236,892 shares at $25.65… IPG Photonics (IPGP 19.97) Director TA Associates sold 48,030 shares at $19.63… Range Resources (RRC 44.50) Director sold 10K shares at $45.03… Cantel Medical (CMN 17.20) Officer sold 25K shares at $16.95.

MU Micron rumored to spin off CIS business - DigiTimes (10.56 )
DigiTimes reports it is rumored that the co plans to spin off its CMOS image sensor business and form an independent co. The rumors also note that private equity co the Blackstone Group will invest in the new independent co although Micron will maintain control. The spin-off is expected to be finalized by the end of 2007 at the earliest, according to the rumors, which also imply that after the spin off Micron will focus more on DRAM and NAND flash production.

TAP Molson Coors Brewing: Beer battle may decide merger fate - TheDeal.com (54.85 )
TheDeal.com reports turf battles between the FTC and the DoJ over claim to individual mergers are commonplace, and which agency prevails rarely makes a difference to outcome of the merger. But, according to merger experts, SABMiller’s planned joint venture with Molson Coors Brewing could be a rare case when the outcome hinges on which agency gets to decide. Antitrust lawyers in Washington say that slightly different approaches to merger enforcement at the two agencies would likely influence the outcome, particularly given their leadership. At the FTC, that leadership is split five ways and includes a maverick Republican who has already expressed eagerness to go to court on close calls. At the DOJ, the sole arbiter is Assistant Attorney General Tom Barnett, who approved the controversial merger between rival appliance manufacturers Whirlpool Corp. and Maytag Corp., largely crediting the cost savings the combination would generate. Lawyers speculating about the deal this week, asking not to be identified, said that if the merger lands at the FTC, it’s more likely to face a challenge than at the DOJ. So which agency is likely to lay claim? The FTC has investigated mergers of distilled spirits and many supermarkets, which are an important distribution outlet for beer. Still, under the short-lived 2002 merger clearance agreement, beer mergers were deemed to fall under the DOJ’s purview. Antitrust lawyers said the cos hope the DOJ will win the tussle.

PDLI PDL BioPharma: Positive multiple sclerosis data should facilitate company sale - Broadpoint (22.89 )
Broadpoint reiterates their Buy rating on PDLI following positive top-line results of the Phase II trial of daclizumab for multiple sclerosis. They believe the positive results should help PDLI reach its goal of selling the co and bolster value, thereby increasing their confidence in their estimated valuation of PDLI’s pipeline at $2 per share. Two weeks ago, PDL reported the board’s decision to seek a buyer, which they think means that the valuation should now derive from the worth of the more concrete assets—the Queen patents royalty stream, the specialty pharmaceutical business, and cash.

Economic Perspective: Retail Sales and PPI previews — data due out at 8:30 E.T.
Both retail sales and producer prices are released at 8:30 this morning. Sales provide the most current read on key household and consumer spending. Producer prices provide a read on commodity prices which aren’t having much of an effect on consumer prices. However, as the large PPI declines of a year ago are pulled from annual growth, expect to see a sharp rise in the year-over-year PPI gains through October. Briefing.com expects September retail sales to rise 0.5%. Excluding autos, sales are expected to rebound 0.6% after a 0.4% decline in August. The consensus estimate is for a small 0.2% gain in retail sales and a 0.3% gain, ex-autos. Auto sales provide a modest drag given the flat growth in the number sold. Reduced light truck sales and discounting could leave a small decline from vehicles. It’s the rebound in ex-autos, though, that provides the gain as the sawtooth pattern of monthly gains and declines continues. Exclude auto and gasoline sales, and we expect a 0.5% increase. Overall, this is a solid gain. Strong income growth and the low unemployment rate provide support against the rising trend in energy prices and the reduced wealth effect from lower home prices. Retail sales are expected to show a resilient 5% rise from a year ago despite the drags from weak auto sales and high energy prices. Estimates suggest that real Q3 personal spending (retail goods sales and service spending) will more than double the weak 1.4% gain in the second quarter. Personal spending accounts for 70% of GDP growth… September producer prices (”PPI”) are expected to rise 0.6% after the strong 1.4% decline in August. The consensus estimate is a slightly smaller 0.5% gain. Energy prices continue to be the monthly swing factor as gasoline prices rose and oil prices surged. The ex-food and energy core component is expected to rise 0.2%. Annual growth will rebound higher to 3.8% as the September gain replaces the 1.1% energy-led decline a year ago. The core component will edge lower to a 2.1% annual growth rate. The insight PPI provides is the amount of pricing pressure wholesalers and commodity prices (i.e. inputs) are having on consumer prices. The Fed uses core CPI, though, to gauge inflation and monetary policy. The absent CPI commodity pressures reflect the lack of carry over.

Wachovia initiates networking firms — details
Wachovia initiated coverage on several companies in the networking sector. The firm initiated CSCO, STX, EMC, ELX and NTAP with Outperforms and XRTX, QLGC, BRCD, ISLN, DDUP and WDC with Market Performs. On CSCO, the firm believes it’s strong execution, long-term position as a key beneficiary from DataCenter 3.0 deployments, and expected ongoing momentum in the co’s Scientific-Atlanta results will support ongoing upside. For NTAP, the firm notes while it has clearly faced some increased competition over the past few quarters coupled with some execution-related issues, they believe the co’s fundamental story will improve over the coming quarters driven by an improving demand environment, product cycle, share repurchases, and a focus on operating expense leverage. On ELX, the firm believes it’s positioned to continue to gain market share in host bus adapters over the next few quarters, complemented by an expected ramp in design wins with its ESP in next-generation storage solutions. The firm sees EMC positioned as the most diversified pure play provider of enterprise storage solutions and it can benefit from ongoing storage capacity growth, a diversifying product portfolio, operating leverage, and the build-out of DataCenter 3.0 environments.

AV Avaya: TPG and Silver Lake meet with banks; closing ahead of the road show considered, according to sources - FT Mergermarket (17.12 )FT Mergermarket reports the co’s suitors TPG and Silver Lake are considering closing the transaction prior to the debt syndication, according to sources familiar with the situation. Late last night it was offered that the chances of closing the take private without syndication of the LBO-related debt are now around 50/50. However, the source close to the deal today told dealReporter that chances of closing this deal without the syndication are now much higher than 50%. Now, the delayed TXU deal is pushing Avaya’s closing closer to the last day of the marketing period, increasing the possibility of closing without syndication, it was said. Avaya is one of the deals that needs to be “cleaned up” to appeal to changed conditions in the credit mkt, it was offered. Citigroup is putting pressure on TPG and Silver Lake to introduce features to the current terms of financing, which would make it easier to sell the debt to investors leery of the potential risk.

MCD McDonald’s guides Q3 EPS above consensus; reports Sept same store sales (56.25 )
Co sees Q3 EPS of $0.83, ex items vs $0.77 consensus. Currency translation benefited earnings from continuing operations by $0.03 per share, and growth in other operating income contributed earnings of $0.02 per share. Co reports Sept global same store sales +5.9% vs +4.9% street expectation; reports US +3.5% vs +3.0 street expectation; reports Europe +5.7% vs +5% street expectation; reports Asia/Pacific, Middle East and Africa +12% vs +11% street expectation.

DAI Daimler: Chrysler sees 07 China sales more than double to 20,000, according to Exec - DJ (105.61 )
DJ reports Chrysler is mulling making small, compact cars for China and seeking partners for China small car business, according to Exec.

GOOG Google tgt raised to $700 from $625 at Oppenheimer (622 )

Wachovia cuts their estimates on homebuilders; says hyper-competitive industry structure is creating far worse field performance than anticipated Wachvovia notes that results from their recent Neighborhood Watch Survey depict an exceedingly aggressive promotional environment with relatively limited success, and escalating cancellation rates as well. As such, the firm is reducing their 2007 and 2008 EPS ests for the 13 homebuilders under coverage (BZH, CTX, DHI, HOV, KBH, LEN, MDC, MTH, OHB, PHM, RYL, SPF, TOL). They believe homebuilding’s hyper-competitive industry structure is creating far worse field performance than they anticipated. They now expect 8 of the 13 co’s they cover to post EPS losses in CY 2008, and most of the remainder to be only marginally-profitable.

C Citigroup downgraded to Sell at Deutsche; tgt decreased to $44 (48.32 ) -Update-
Deutsche downgrades C to Sell from Buy and decreases their tgt to $44 from $60. Firm cites valuation, corporate governance issues, as well as reservations regarding mgmt’s ability to execute as reasons for the downgrade.

VMW VMware upgraded to Buy at Caris; tgt raised to $150 (102.69 ) -Update-
Caris upgrades VMW to Buy from Hold and raises their tgt to $150 from $90, to reflect a more aggressive set of assumptions regarding the co’s revenue growth over the next few years. The firm is getting more aggressive because they believe that the marketing buzz related to server virtualization in general and related to VMW in particular continues to increase. At the VMWorld conference, for example, there were well over 10,000 attendees

NBR Nabors Ind: Lowering ests and tgt on weaker NA activity outlook - FBR (30.13 )
Friedman Billings notes that last week, NBR expressed its view for “the increased potential for persistent weak market conditions throughout 2008 in North American businesses. Based on a weaker North American activity outlook and a weaker pricing environment, they are lowering their ests for NBR. The firm’s 2008 and 2009 ests decline by 18% and 27% to $2.95 and $3.45, respectively. Since NBR, over time, will derive the majority of its income from oil-related projects, has significant long-term contracts, is among the most aggressive in introducing new rigs, and will increasingly recognize more of its income from outside the U.S.’ lower 48 states, they believe it will fare better than most of its U.S.-based peers. Firm cuts their tgt to $35 from $37.

VCLK ValueClick: Downgrade details (27.59 )
Jefferies downgraded VCLK to Hold from Buy on valuation, and raised their tgt to $27 from $25. The firm says the stock’s current valuation reflects an appropriate risk-reward profile for the business, especially given the weakness in lead gen following the FTC inquiry and uncertainty over technology post the GOOG-DoubleCick merger. Given the ongoing consolidation in the space, its scarcity value and reasonable valuation (vs. take out prices for aQuantive, 24/7 Real Media and Digitas), they think VCLK remains an attractive acquisition target. Having said that, they find it difficult to maintain a Buy rating largely on the take-out thesis.

LVS Las Vegas Sands: Venetian Macau room rates recover from last week - Susquehanna (139.59 )
(WYNN, MPEL, MGM)

LLNW Limelight Networks: Color on Q3 preannouncement (11.64 )
Friedman Billings notes that LLNW positively preannounced slight rev and earnings upside for 3Q. Although they had lowered their 3Q expectations after 2Q because of concerns over seasonality and pricing pressure, they were glad to see the co bounce back with a respectable qtr. While it has been a rocky start out of the gate for LLNW as a public co, they continue to believe in the underlying end markets for the C.D.N business and in LLNW’s ability to get through these growing pains successfully… Jefferies notes the co added 175 new customers in Q3, raising the total customer count to >1,000. The higher than expected customer count implies an ARPC of $106k, down 5% sequentially, and below the firm’s prior est for $111k. While high level of customer adds are a good indication Limelight’s salesforce is scaling, they say new customers typically carry a lower ARPC, albeit at a higher gross margin.

Upgrades: CIBC upgrades IAMGOLD (IAG 8.57) to Sector Perform from Underperform and raises tgt $11 from $8… CIBC upgrades Safeway (SWY 33.00) to Outperform from Sector Perform and raises their tgt $40 from $39… Downgrades: Lehman downgrades Coldwater (CWTR 10.87) to Equal-Weight from Overweight… Friedman Billings downgrades Alpha Resources (ANR 26.29) to Market Perform from Outperform and maintains their $28.50 tgt, based on valuation… Nasdaq (NDAQ 41.63) downgraded to Neutral from Buy at tier-one firm… Thomas Weisel downgrades Chicao’s FAS (CHS 15.52) to Underweight from Marketweight citing macro pressures on the softlines retailing group, particularly women’s… CIBC downgrades Qiao Xing Mobile Comm (QXM 14.00) to Sector Perform from Outperform… Deutsche Bank downgrades Citigroup (C 48.32) to Sell from Buy and lowers their tgt to $44 from $60, following Citi’s announced management moves… Friedman Billings downgrades Massey Energy (MEE 27.29) to Underperform from Market Perform and lowers their tgt to $27 from $22, based on valuation, a coal group pullback ahead of earnings, Patriot Coal appears to be a better investment option and another blow to mountaintop mining and permit issues… Miscellaneous: BofA initates Great Lakes Dredge & Dock (GLDD 8.97) with a Neutral and $10 tgt… UBS initates Intersil (ISIL 32.24) with a Neutral and $36 tgt… Jefferies assumes coverage of BJ’s Wholesale (BJ 37.22) with a Buy and $46 tgt… Jefferies initiates Costco (COST 69.24) and Target (TGT 64.62) with a Hold… Jefferies initiates Wal Mart (WMT 46.90) with a Buy.

Filings, Offerings, Pricings and IPOs
Filings: INX Inc. (INXI) files for a $100 mln common stock and warrants shelf offering… Digital Realty Trust (DLR) files for a 2.5 mln share common stock offering, supplement to prospectus dated April 4, 2006… VirtualScopics (VSCP) files for a 7.97 mln share common stock offering by selling shareholders… Allis-Chalmers Energy (ALY) files for a 3.2 mln share common stock offering by selling shareholders… Pricings: Annaly Mortgage (NLY 15.34) prices its 62 mln share common stock offering at $15.10/share… Obagi Medical (OMPI 20.6 prices its 6.3 mln share common stock offering at $20/share

BMY Bristol-Myers: Warning on heart test drug widened - Latimes.com (29.50 )
Latimes.com reports that Bristol-Myers Squibb (BMY) strengthened the warning on its drug Definity, used to enhance heart images from ultrasound scans, after a U.S. inquiry into the medicine’s safety. The new prescribing information, highlighted in a black box on the package insert and warning of the risk of “serious cardiopulmonary reactions,” was posted Thur on the FDA’s website. The black box represents the agency’s most serious safety caution. BMY, which makes Definity, and General Electric (GE), which sells Optison, confirmed that they were discussing package insert revisions with regulators. BMY will send doctors FDA-approved letters when “the changes are final,” Plohoros, BMY’s spokeman, said. Sales of Definity were $65 mln in the U.S. last year and less than $1 mln abroad.

Early Research Calls III
Upgrades: Knight Capital (NITE 13.05) upgraded to Buy from Neutral at tier-one firm… RBC upgrades Annaly (NLY 15.34) to Outperform from Sector Perform…Lehman upgrades Centene (CNC 21.74) to Overweight from Equal-weight… Citigroup upgrades Telefonica (TEF 87.99) to Buy from Hold… Downgrades: Bear Stearns downgrades Momenta Pharma (MNTA 13.10) to Underperform from Peer Perform… RBC downgrades Bankrate (RATE 48.82) to Outperform from Top Pick… BofA downgrades Pepsi Bottling (PBG 39.84) to Neutral from Buy… UBS downgrades United Microelectronics (UMC 4.02) to Neutral from Buy… Citigroup downgrades Shaw Group (SGR 66.39) to Hold from Buy… Morgan Stanley downgrades W-H Energy (WHQ 72.07) to Underweight from Overweight… Citigroup downgrades Lincare (LNCR 34.96) to Hold from Buy… UBS downgrades Costco (COST 69.24) to Neutral from Buy… Tier-One firm downgrades National Financial Partners (NFP 55.27) to Neutral from Buy… Citigroup downgrades Blue Nile (NILE 97.5 to Sell from Hold… Miscellaneous: Morgan Stanley raises their Apple (AAPL 162.23) tgt to $180 from $150…

AMGN Amgen profiled in Inside Wall Street - BusinessWeek Online (57.83 )
BusinessWeek Online reports George Putnam, editor of The Turnaround Letter, is bullish on shares of Amgen (AMGN). Not only are the regulatory issues abating, he says, “but more important, Amgen has the drug pipeline, manufacturing capability, and financial resources to remain a leader in providing biotech solutions” to the many diseases faced by the graying population worldwide. Some of Amgen woes heated up in July, when Medicare said it would limit the use of Aranesp for chemotherapy-induced anemia Medicare also ruled certain treatments were no longer reimbursable. But Steven Silver of S&P, who rates Amgen a buy, says congressional intervention seeking reconsideration of proposed reimbursement limits may yet avert Medicare’s plan, which could cut Aranesp’s sales by $500 mln. Amgen’s fundamentals “remain solid,” says Silver, who has a 12-month target of 64.

Upgrades: Baird upgrades Milennium Pharma (MLNM 10.69) to Outperform from Neutral and raises their tgt to $14 from $11, as they think Velcade is finally primed for reacceleration as the drugs’ mantle cell lymphoma approval, Doxil-combination approval, and JNJ co-promotion all have taken place in the last few quarters, but have yet to manifest discernibly in the numbers while the firm’s most recent hematologist/oncologist survey indicates Velcade is making steady and solid gains in front-line multiple myeloma… Jefferies upgrades PharmaNet (PDGI 31.69) to Buy from Hold and raises their tgt to $39 from $30, as the co has executed its turnaround and is now focused on expanding and upgrading capacity, while cross-selling clients between its early and late-stage clinical business units… Downgrades: Wachovia downgrades Coldwater Creek (CWTR 10.87) to Market Perform from Outperform following a lowering of EPS guidance for Q307… Jefferies downgrades ValueClick (VCLK 27.59) to Hold from Buy and raises their tgt to $27 from $25, based on valuation… Baird downgrades BorgWarner (BWA 96.23) to Underperform from Neutral and maintains their $82 tgt, based on valuation… Merriman downgrades UQM Technologies (UQM 3.81) to Neutral from Buy, following Phoneix Motorcar’s EV ramp that was postponed and given the co’s strong dependence on the Phoenix Motorcars product line as a primary driver for near-term growth… Miscellaneous: Baird resumes Huron Consulting Group (HURN 74.45) with an Outperform and sets a $91 tgt, as they believe their EPS estimates are reasonably conservative based on assumed low-double-digit headcount growth, static 75% utilization rates, flattish Ebitda margins, and no assumed M&A activity while the co is experiencing strong growth from its document review/digital document management services… Baird initiates FTI Consulting (FCN 53.05) with an Outperform and sets a $64 tgt, as they expect near-term EPS upside driven by increased activity from more aggressive enforcement by the DOJ of the Foreign Corrupt Practices Act as well as emerging restructuring opportunities in the financial and home building areas… Baird initiates The Corporate Executive Board Co (EXBD 73.15) with a Neutral and sets an $81 tgt, as they are concerned that growth may be challenged with a slowing economy as they view the service as a somewhat discretionary item, making it more difficult to sell to new clients as corporate budgets tighten…

BEAS BEA Systems: Oracle proposes to buy BEAS for $17.00 per share in cash (13.62 )
Oracle (ORCL) confirmed that it delivered a letter to the Board of Directors of BEAS on October 9 in which Oracle proposes to acquire BEAS for $17.00 per share in cash. “We have made a serious proposal including a substantial premium for BEA… We believe our all cash offer provides the best value for BEA’s shareholders and the best home for BEAS’ employees and customers. This proposal is the culmination of repeated conversations with BEA’s management over the last several years. We look forward to completing a friendly transaction as soon as possible.”

Upgrades: Wachovia upgrades Sprint-Nextel (S 17.99) to Outperform from Market Perform, based on valuation and believe the co is within 6 months of reaching a sustainable turnaround in subscriber growth and that sentiment can’t go much lower… Miscellaneous: Caris initiates Linear Technology (LLTC 34.47) with an Average and sets a $35 tgt, as they view LLTC as one of the higher quality names in the analog space, generating profit and free cash flow margins well in excess of the industry average yet believe top-line will grow more slowly than peers, and EPS leverage is limited… Caris resumes Analog Devices (ADI 35.86) with an Average and sets a $38 tgt, as they remain concerned that growth — and more importantly EPS leverage — is slowing… JMP Securities assumes Navigant Consulting (NCI 14.89) with a Market Perform, as they favor the economic neutrality of Navigant’s business yet are concerned about the implication of weaker utilization rates and higher employee turnover, which has driven the implementation of new, higher expense retention programs…. JMP Securities assumes Huron Consulting (HURN 74.45) with a Market Outperform and sets an $82 tgt, as they believe Huron is well positioned to outperform the market during a slowing economy as its businesses should have a low correlation to the overall macro economy… Wachovia initiates Cisco (CSCO 32.80) with an Outperform… Wachovia initiates Seagate Technology (STX 26.21) with an Outperform… Wachovia initiates Xyratex (XRTX 18.65) with a Market Perform… Wachovia initiates QLogic (QLGC 13.11) with a Market Perform… Wachovia initiates Brocade (BRCD 8.64) with a Market Perform… Wachovia initiates EMC (EMC 22.75) with an Outperform… Wachovia initiates Emulex (ELX 20.30) with an Outperform… Wachovia initiates Network Appliance (NTAP 28.53) with an Outperform… Wachovia initiates Isilon Systems (ISLN 5.94) with a Market Perform… Wachovia initiates Western Digital (WDC 25.63) with a Market Perform… Wachovia initiates Data Domain (DDUP 33.5 with a Market Perform…

Sensex ends down 363pts at 18,451 - The Business Standard
The Business Standard reports that mirroring weakness in the global markets, the Sensex opened marginally lower at 18,795 - down 19 points. After slipping a bit further, the index rebounded into the positive zone and touched a fresh all-time intra-day high of 18,845 - up 31 points from the previous close. However, the index was unable to hold gains for long and instead slipped back into red. A fresh round of profit-taking in the last session saw the index tumble to a low of 18,336 - down 509 points from the day’s high. The Sensex finally ended (provisional) with a loss of 363 points at 18,451, after having gained 1,323 points in the last three trading days.

Asian stocks fall on speculation China to raise interest rates - Bloomberg.com
Bloomberg.com reports Asian stocks fell on speculation China will raise interest rates as soon as today to cool the economy, and after Sony Corp.’s mobile-phone unit reported its first profit decline in two years. China’s CSI 300 Index dropped 0.4%, while Hong Kong’s Hang Seng Index slumped 1% from a high yesterday. Japan’s Nikkei 225 Stock Average lost 0.7%, and South Korea’s Kospi index dropped 1.6%. Most of Asia’s key indexes fell from yesterday’s records. Bourses in Indonesia and the Philippines were closed today for holidays.

German stocks retreat, led by MAN, Infineon, Deutsche Lufthansa - Bloomberg.com
Bloomberg.com reports U.K. stocks declined for the first time in four days, led by Vodafone Group. BHP Billiton and Rio Tinto Group also fell. The FTSE 100 Index lost 43.6, or 0.7%, to 6,680.90 at 8:55 a.m. in London. The FTSE All-Share Index also retreated 0.7% to 3,431.02. Ireland’s ISEQ index sank 1.4%… Germany’s benchmark index fell for the first time in four days, led by MAN AG, Infineon Technologies AG and Deutsche Lufthansa AG. The DAX Index dropped 51.80, or 0.6%, to 7,981.89 at 9:32 a.m. in Frankfurt, heading for a 0.3% retreat for the week.

CTX Centex reports preliminary Q2 results (29.43 )
For the fiscal second quarter, Centex closed 7,350 units, a decrease of 14 percent from one year ago. Net sales (orders) for the period were 5,953 units, a decrease of 13 percent from last year’s second quarter. Also at quarter-end, backlog was 9,633 units, a decrease of 38 percent compared to one year ago. The Company is in the process of completing its quarterly valuation assessment of housing projects and land inventories. For the quarter, the Company expects to record an impairment of approximately $850 million for neighborhood and land inventory, and an impairment and option write-off of approximately $40 million for the Company’s share of land holdings in joint ventures. The Company also expects to write off option deposits and pre-acquisition costs of approximately $40 million and to record an impairment to goodwill of approximately $65 million.

C Big shake-up as Citigroup combines two key units - NY Times (48.32 )
The NY Times reports Citigroup’s (C) chairman and chief executive, Charles O. Prince III, announced a major reorganization and management shake-up last night as questions linger about his ability to run the co. Citigroup announced that it would combine its investment banking and alternative investment units, bringing the groups together under one leader. Vikram S. Pandit, a former Morgan Stanley (MS) executive who runs Citigroup’s alternative investment division, will lead the new group, to be called the institutional client group. Mr. Pandit will oversee two younger executives and will report to Mr. Prince. One of the two executives, James A. Forese, who had been head of global equities, was promoted to co-chief executive of the investment bank and will be responsible for its capital markets activities. The second executive, Michael S. Klein, will remain as a co-chief executive of the investment bank. A third executive, Thomas G. Maheras, who had shared power with Mr. Klein, is leaving the co after a review of the fixed-income trading operations led to the departure of a top lieutenant, Randolph H. Barker. Mr. Barker’s partner, Geoffrey O. Coley, was reassigned, given unspecified responsibilities.

T FCC eases some broadband rules on AT&T - Reuters (41.61 )
Reuters reports the FCC voted late on Thursday to lift some regulations on AT&T’s (T) broadband business. A divided FCC partially granted AT&T’s request to relax rules that govern what the co can charge business customers and rivals for access to some of the its high-speed Internet lines. “This relief will enable AT&T to have the flexibility to further deploy its broadband services and fiber facilities without overly burdensome regulations,” FCC Chairman Kevin Martin said in a statement. Under telecommunications law, the FCC has the authority to waive some regulations if it believes the market has become sufficiently competitive. The FCC action will eliminate a key requirement that AT&T file tariffs with the agency disclosing the rates it charges businesses and rivals for high-speed access.

PTR Buffett’s PetroChina sale - WSJ (193.28 )
The Wall Street Journal reports Warren Buffett is selling off his most high-profile investment in China and investors and social activists are wondering why. The investors, who closely follow Mr. Buffett’s market moves, say the sale of most of Berkshire Hathaway’s (BRK.A) stake in PetroChina (PTR) is a sign that some Chinese stocks are overvalued after a huge run-up and that now could be the time to cash in by getting out. The social activists, who have been pushing investors to sell their shares in PetroChina, see a small victory. They say that PetroChina’s government-controlled parent invests heavily in Sudan and buys a large part of Sudan’s oil exports and that the money is being used by Khartoum to sponsor widespread killings in the Darfur region. “There are a lot of people paying attention to what he is doing and watching the trajectory of his move,” says Andrew Foster, director of research at Matthews China Fund. “As investors, we’re all wrestling with the fact that it’s difficult to justify current valuations in China, even though there has been a lot of fundamental, macroeconomic progress there.” Even some longtime Berkshire watchers suspect that the controversy over Darfur, particularly in light of the coming Beijing Olympics, had some impact on Mr. Buffett’s decision to sell. “I can’t help but believe that some of the commentary didn’t resonate,” Thomas Russo, a partner at investment firm Gardner Russo & Gardner, says about the Darfur issue.

AA Alcoa awarded fighter jet parts deal - AP (38.08 )
AP reports Alcoa (AA) has been awarded a $360 mln contract by Lockheed Martin (LMT) to supply parts for new stealth fighter jets that will replace aging military planes. Alcoa’s forged and cast products division in Cleveland will produce alloy aluminum die forgings for the F-35 Lightning II fighter jet, also known as the Joint Strike Fighter, over the next 10 years, the co said. The U.S. plans to use the F-35 to replace older planes used by the Marines, Air Force and Navy, including F-16, F-18 and Harrier jets. The contract includes the design and manufacture of large aluminum structural die forgings for more than 1,200 aircraft. The forgings consist of 15 large wing- and engine-supporting bulkheads and six wing-box parts per plane. Lockheed Martin expects to build more than 4,000 of the aircraft for the United States and international forces, Alcoa said.

GE General Electric’s Immelt says global orders “everywhere” are “accelerating” - Bloomberg (41.60 )

QXM Qiao Xing Mobile: Downgrade details (14.00 )
CIBC downgraded QXM to Sector Perform from Outperform and removing their $12 tgt on valuation. The firm sees the shares as fully valued and expect the co to deliver in-line to slightly better than expected 3Q07 results. They still believe the co is well positioned in the Chinese handset market and will gain share as it expands its handset portfolio, including new long battery life handsets, as well as mobile TV and stock trading models.

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