MARKET TALK: Homebuilders See Bearish Options Moves
Edited by Thomas Granahan
Of DOW JONES NEWSWIRES
(Call Us: 201 938-5299; All Times Eastern)
MARKET TALK can be found using code N/DJMT
11:29 (Dow Jones) Is someone betting against the homebuilders? At least one
Wall Street firm is aggressively buying bearish August puts in the sector's
stocks, including D.R. Horton (DHI), Standard Pacific (SPF), Pulte Homes
(PHM), and Lennar (LEN). Homebuilding stocks had slipped in recent sessions
following weak orders in July, and, since new home orders are an indicator
of future earnings, investors have begun questioning their earnings growth.
Horton, for instance, is down 72 cents to $24.40, and the August 25 puts
gained 85 cents to $1.55 on Pacific volume of 1,554 contracts, compared with
open interest of 96. Standard Pacific is off 5.1% at $20.84. The August 25
puts were at $4.60 on Philadelphia volume of 2,080, compared with open
interest of zero. (KT)
11:21 (Dow Jones) Wall Street isn't using words like "predictable" and
"consistent" to describe Procter & Gamble (PG) just yet. But after making
progress with its restructuring plan and beating 4Q views - something
investors haven't seen in a while - the company seems one step closer to
regaining those descriptives. "They showed one more incremental step in the
turnaround," said Bernstein's Jim Gingrich. (CEG)
11:15 (Dow Jones) Why are stock futures rebounding? "Why not?" quips a
trader. Some are surprised it took as long as it did for stock futures to
bounce back, although Nasdaq performance is still tainted by sector
downgrades. After all, Tuesday morning's productivity numbers were better
than expected, and after Monday's weakness, stock futures seemed destined to
recover, floor traders said. Cash has bounced higher, as well, though off
highs - DJIA up 42, Nasdaq up 7, S&P 500 up 5. (ZHS)
11:05 (Dow Jones) ABN Amro says any negative impact to GE's (GE) earnings
profile as a result of potential energy glut will be very limited. Major
impact to GE's Power Systems segment wouldn't be felt until after 2002,
beyond which other segments will step up to fill any potential void left by
the unit's possible departure as a leader in GE's earnings momentum story.
ABN Amro maintains high degree of confidence in 2001 EPS view of $1.45 and
2002 view of $1.72, and reiterates buy rating and $58 target. (TG)
10:57 (Dow Jones) The Chicago Mercantile Exchange plans to create four
classes of Class A common stock with different transfer restrictions on the
way to becoming a publicly traded company. In a filing with the SEC, the
exchange said it would seek shareholder approval for the reorganization in a
special meeting, but it didn't indicate when that meeting would take place.
The CME registered $210,556,000 worth of Class A common stock, and said no
decision had been made on when the public offering would be completed. (TC)
10:50 (Dow Jones) The economic environment and more bankruptcy filings sent
June chargeoff and late-payment rates for securitized credit card loan pools
to highest levels since mid-1997, Moody's said. Chargeoff rate was 6.39% vs
year-earlier 5.26% for fifth straight rise, and delinquency rate was 4.98%
vs 4.26%, the seventh consecutive rise. (SDR)
10:41 (Dow Jones) No doubt Cisco (CSCO) will get s good looking over later
tonight, and not only because it's a big tech name and because virtually
nothing else is going on. Remember, Cisco's latest quarter ended a month
after almost everyone else's, so their take could be a bit different than
some other tech names. Shares off 1.4%. (TG)
10:24 (Dow Jones) UBS Warburg suggests Japan's new mark-to-market accounting
is already having an impact, amid signs that Japanese banks are selling JGBs
to cover equity losses. "If so, this is yen bearish," as it implies losses
are so large that banks are already scrambling to cover losses, UBS says. By
Sept. 30, Japanese banks will, for the first time, have to value equity
assets at market prices. (GMM)
10:16 (Dow Jones) Unfortunately, the start of Tuesday's session smacks of
Monday's dealings. In other words, you're either reading this, or you're
asleep. Productivity numbers seemed to simply reassure that things aren't
falling off a cliff, and right now, that's not enough to get stocks going.
Maybe as we get closer to close, and Cisco numbers, things will pick up.
Disney, P&G, Honeywell on top of Dow, with Boeing, IP, H-P, and Intel at
bottom. SOX off 3.5% on CSFB's downbeat view. DJIA up 4 at 10404, Nasdaq off
10 at 2023, and S&P 500 flat at 1200. (TG)
10:04 (Dow Jones) Mellon Financial (MEL) rolled out its brass in midtown
Monday to brief the investment community on its outlook in light of recent
decision to jettison its retail banking business, and focus on the
higher-growth, fee-based ones. Merrill Lynch analyst Judah Kraushaar left
the meeting reiterating his buy rating, calling the shares "perhaps the
deepest undervalued story in our coverage universe." He still believes MEL's
"growth story remains poorly understood and that tight execution over the
next 6 to 12 months should lead to a substantial snap-back for the shares."
However, at Keefe Bruyette & Woods, analyst Thomas Theurkauf says execution
risk will probably continue to constrain its P/E multiple in the "near to
intermediate term." (TAS)
9:56 (Dow Jones) Network Associates (NETA) filed a lawsuit against eSniff
Inc., a privately held company in Denver, for trademark infringement on the
name of its Sniffer Technologies division. In its complaint, filed June 13,
Network Associates seeks damages and injunctive relief against eSniff. On
June 27, eSniff filed a motion to dismiss or to stay or transfer the case in
light of a lawsuit it has filed. Network Associates said it intends to
oppose the motion. (RG)
9:49 (Dow Jones) A Priceline.com (PCLN) spokesman says that a "substantial
majority" of the 10 million shares registered by Delta Air Lines (DAL) have
already been sold and, contrary to what was indicated from an SEC filing,
are already out on the market. Monday, the SEC released a Form 144 by Delta
indicating its intention to sell 10 million shares of Priceline.com stock
"as soon as practicable." Delta filed the Form 144 with the SEC on July 27.
(TAG)
9:40 (Dow Jones) Nymex crude futures seen opening 40-50 cents a barrel
higher following a technical breakout in overnight trade. Traders and
analysts attribute gains to shortcovering ahead of API's inventory report
due later Tuesday. Most analysts are looking for a build in crude stocks.
Sept. crude, up 45c at $28.19 overnight, faces key resistance at
$28.35-$28.40; "If we break through that, everybody will be talking about
$29," one analyst says. Support is seen at $27.10-$27.20. (MXF)
9:26 (Dow Jones) While S&Ps, which along with the blue-chip index futures
got thrashed Monday, are seeing a slight rebound, floor traders aren't
putting much faith in the sentiment continuing, citing very low volume.
"We'll have more of the same thing - choppy, directionless trade...We
knocked them hard enough yesterday," says one floor trader, who added losses
should be contained Tuesday. (ZHS)
9:19 (Dow Jones) CSFB cut its rating on a slew of semiconductor and
semiconductor capital equipment stocks, saying the "overly optimistic
valuations" on these stocks don't reflect structural issues emerging in the
current downturn. On average the stocks are 20% to 30% higher than what are
reasonable long-term entry points, says CSFB, and structural issues such as
weak global economies, persistent overcapacity through 2002 and a return to
normal growth rates must be worked out before chip stocks can hold a
sustained long-term rally. The downgrade comes just days after Merrill Lynch
upgraded select chip and chip equipment stocks, sparking a rally last week.
(DLF)
9:10 (Dow Jones) Merrill Lynch's Eric Hecht is placing his bets on positive
things over at Idec Pharmaceuticals (IDPH). Despite investor concerns over
the upcoming regulatory review of Idec's investigational cancer treatment
Zevalin and recent difficulties at the FDA, Hecht believes Idec has
responded to the agency's requests and the panel advisory meeting in
September will go well, prompting a "strong boost" in the share price. After
label negotiations, Zevalin should be cleared for sale in the 4Q, he says.
(BMM)
(END) DOW JONES NEWS 08-07-01
11:29 AM
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