MARKET TALK: Small-Cap Earnings Worse In This Recession
28 Feb 09:47
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
9:46 (Dow Jones) Merrill's small-cap strategist, Satya Pradhuman, says the
weakness in earnings this cycle is even more severe than in the past recession.
Earnings of smaller stocks slowed to a median growth rate of roughly 1% back in
1990, while the current cycle has seen a collapse of down 15%. He notes
interestingly that small-cap earnings appear to have stabilized in a
quarter-over-quarter comparison, while large-cap earnings fell shy of 3Q
results (down 11% and 14% in 3Q and 4Q for small-caps, respectively, and down
2% and 13% for large-caps). (TG)
9:34 (Dow Jones) Offered a one-time $17 payment by Cox Communications (COX)
to hold onto their convertibles, holders of Cox convertibles due 2021 put back
to the company less than half ($329M, or 42.7%) of the $771M outstanding, says
Deutsche analysts. And they say the converts are still an attractive
investment. Meanwhile, $454.5M, or 99%, of the outstanding Cox Enterprise 2%
convertibles due 2021 were put back earlier in the month, says Morgan Stanley's
ConvertBond.com. COX up 0.8% to $36.05. (RTB)
9:23 (Dow Jones) Goldman Sachs' John Youngdahl says the FOMC's formal
"balance of risks" language "probably will be maintained in the direction of
economic weakness at the March 19 FOMC meeting, though it might well be shifted
to a neutral tone by the following meeting on May 7." (JCC)
9:17 (Dow Jones) Ericsson (ERICY) closed Wednesday at $4.14, and WR Hambrecht
says that's about where it should be. Why? When the firm applies historical P/E
to hypothetical 2003 EPS estimate, which assumes Ericsson can return to its
historical operating margins of 10%-15% (above Hambrecht's current view of 5%),
the number they come up with is $4.25 a share. Starts coverage with market
perform. (TG)
9:10 (Dow Jones) Final sales - GDP less inventories - was revised up to a
strong 3.6% growth from 2.5%, reflecting a smaller trade deficit due to less
imports and increases in consumption and government spending. There was a very
small revision to a smaller rate of inventory reduction. (JM)
9:00 (Dow Jones) Some good, some bad from Wednesday's session, says Lehman's
Jeff deGraaf. Obvious weakness was volume reversal in Nasdaq, and more
specifically the NDX. But while the S&P 500 closed off its best levels, deGraaf
says the consistent themes of firm breadth and expanding new highs is
encouraging. "By no means are we implying that this is the new bull phase," he
says. "Momentum and breadth have not been spectacular, but as investors lament
over the underperformance of tech as the economy turns, the less glamorous and
underinvested areas of the market are providing the best performance." (TG)
8:51 (Dow Jones) July fed funds, which opened a touch lower, slip again after
jobless claims and GDP. Odds of quarter-point hike out of the June FOMC meeting
at about 80% to 82%, trader says. But he notes that change is minimal, with
sentiment shifting from "pretty sure to a little bit better than pretty sure"
of the 25 BP tightening in June. (SPC)
8:47 (Dow Jones) Banc of America analyst Joel Wagonfeld says that while he
thinks the merger of Hewlett-Packard (HWP) and Compaq Computer (CPQ) is viable
long-term, he doesn't think it will get shareholder approval. According to the
analyst, 66% of remaining institutional shareholders must vote yes. "We see
this as a very high hurdle," he says. Although Wagonfeld said H-P did a good
job of recapping the rational for the merger Wednesday at its final analyst
meeting before the vote, he had hoped to here more specifics about near-term
implications and linkages between business segments. (DLF)
8:38 (Dow Jones) Initial jobless claims rose by 17,000 to 378,000 in the week
ended Feb. 23 from a sharply downward revised levelin the prior week. The
four-week moving average fell to 373,250 from 376,250. Despite the one-week
increase, these are encouraging data. (JM)
8:36 (Dow Jones) Tsys retreat, with 2-year yield rising to 3.0%, up 1 BP
since stronger-than-expected 4Q GDP. 10-year yield also up 1 BP since GDP
report, at 4.84%, price down 2/32 on session. (JNP)
8:33 (Dow Jones) Fourth-quarter GDP revised up more than expected at 1.4%
after previously being estimated as a 0.2% rise. The government said upward
revisions to consumer and government spending and a downward revision to
imports resulted in the 1.2 percentage point revision for the quarter. Analysts
had predicted GDP would be revised up to 1.0%. (JCD)
8:30 (Dow Jones) Should be interesting to see how Wall Street reacts to
Wednesday's disappointing afternoon equities dealings. At the moment, things
look flat, but that's almost sure to change: weekly jobless claims, another
reading on 4Q GDP, and, a bit later, the Chicago PMI are all coming out. A host
of retailers have reported their quarterly profits, including Limited (LTD) and
Intimate Brands (IBI), both of whom topped views. EBay bumped up at Morgan
Stanley. Long end of Treasurys flat, short end soft in front of data. (TG)
(END) DOW JONES NEWS 02-28-02
09:47 AM |
