MARKET TALK: With Rally, Think About Protection
06 Mar 11:28
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
11:27 (Dow Jones) With their recent run-up, many stocks are now approaching
their upper resistance levels. As they enter a testing phase, the Seidman/Skupp
options team at Miller Tabak & Co. has come up with a list of some 34 stocks
that are trading near their 52-week highs but whose defensive put options
nonetheless are still reasonably-priced - an idea for investors who might be
looking for some downside protection. The list includes names like Aetna (AET),
Black & Decker (BDK), Caterpillar (CAT), Fedex (FDX), General Motors (GM),
General Dynamics (GD), International Paper (IP), KLA-Tencor Corp. (KLAC),
Minnesota Mining and Manufacturing (MMM), Nike (NKE) and Whirlpool Corp. (WHR).
(KT)
11:16 (Dow Jones) Williams Cos.' (WMB) successful restructuring of the $1.4
billion Williams Communications (WCG) Note Trust is a positive move, but the
company still has issues. The higher interest expense from added debt will eat
into the company's earnings, said J.P. Morgan's Anatol Feygin. He cut his 2002
and 2003 earnings estimates to $2.00 and $2.20 a share, respectively. The
reduction puts Feygin's estimates sharply below the Wall Street consensus
estimates published by Thomson Financial/First Call. Other analysts may be
waiting until after Williams' analyst meeting in New York Friday to revise
their numbers. Also noteworthy, Feygin estimates Williams' debt-to-capital
ratio has bounced up to 68%. The higher leverage puts Williams in a precarious
position because a lower credit rating would likely hurt its marketing and
trading business. (CCC)
11:09 (Dow Jones) Fed chairman Alan Greenspan was born on March 6, 1926,
making today his 76th birthday. (JM)
10:56 (Dow Jones) It wasn't everything we asked for but we'll take it. That's
pretty much steel producers' reaction to Bush administration tariff ruling
yesterday, and Nucor (NUE) repeated that line on its conference call earlier
Wednesday. CEO Daniel DiMicco called the Bush tariffs a "strong, solid remedy."
As for Nucor's bid for some Birmingham Steel (BIR) assets, DiMicco was pretty
mum, saying only: "Our offer is there for Birmingham people to digest." (CCW)
10:49 (Dow Jones) Pacific Growth Equities out to defend Transmeta (TMTA)
after negative article in Taiwan's DigiTimes magazine. Story says the chip
designer is losing support from its main clients, Toshiba and Sharp. "We
believe this article to be false and unfounded," Pacific Growth says. Firm says
Transmeta is actively engaged with all of its preexisting customers. Shipments
of company's TM5800 processor are progressing and are believed to be in volume
shipments to Sony and Fujitsu, Pacific Growth says. Keeps buy rating. TMTA off
1.2% at $3.25. (TG)
10:40 (Dow Jones) Blue chips have gotten back on track after Tuesday's skid,
while tech is generally soft. Factory orders may have had some positive impact,
and the only four losers on the DJIA are in tech: H-P, Intel, Microsoft and
IBM. Banks acting well - JP Morgan is on top of Dow - and biotechs look good,
as well. DJIA up 89 at 10522, Nasdaq Comp eases 13 to 1853, and S&P 500 higher
by 7 to 1152. (TG)
10:30 (Dow Jones) The 0.6% decline in factory inventories in January
reflected a 1.3% decline in finished goods, reflecting continued strong
consumer demand. Inventories of goods in process, however, rose by 0.3%, a
possible sign of a pickup in production by the end of the month. (JM)
10:26 (Dow Jones) Is 15% EPS growth too little to expect from Health
Management Associates (HMA) in the wake of a string of hospital acquisitions?
Credit Suisse First Boston analysts John Hindelong believes so. Hindelong says
it will become apparent during an all-day investor meeting at Health
Management's headquarters tomorrow that management's standard prediction of 15%
EPS growth is "just too conservative" given the rural hospital chain's string
of acquisitions. Health Management bought five hospitals during the first half
of the fiscal year. But previous guidance dictates that it requires two to four
acquisitions a year to arrive at 15% earnings growth for the year, Hindelong
said. (JJO)
10:18 (Dow Jones) Shipments of nondefense capital goods excluding aircraft
rose by 2.5% in January. This is important because the Commerce Department uses
it to estimate business investment in capital equipment in GDP. It suggests an
increase in this key capital spending indicator in 1Q. Moreover, orders for
this category rose by 1.5% in January, suggesting further shipment gains ahead.
(JM)
10:14 (Dow Jones) A week after a Penn Virginia (PVA) holder urged management
to take actions to increase shareholder value, another has come forward and
said it is reviewing the "feasibility" of making a proposal to acquire all or a
substantial part of the company. A group including BP Capital Management
believes the market value of Penn Virginia's shares is "too low." BP Capital
also revealed it holds a 7.1% stake in Penn Virginia. Last Thursday, a group
led by Daniel Loeb reported a 5.6% stake but said in a letter to Penn
Virginia's management, "Do not confuse our investment as a vote of confidence
in management's ill-conceived acquisition and exploration strategy." PVA up 3%
at $37.45. (RG)
10:08 (Dow Jones) Factory orders rose by 1.6% in January, reflecting a 2.0%
increase in durable good orders (revised from 2.6%) and a 1.1% increase in
orders for nondurable goods. Factory orders for December were revised down to a
0.7% increase from 1.2%. Transportation goods led the orders gain, up 4.1%,
while computer orders rose by 1.9%. Shipments rose by a solid 2.0% which will
actually show up in 1Q GDP. Meanwhile inventories fell by 0.6%. (JM)
9:58 (Dow Jones) Without any real surprises coming from ExxonMobil's (XOM)
meeting with analysts Tuesday, it might be time for some investors to take
money off the table, says Gerard Klauer Mattison's Michael Young. The analyst,
who downgraded ExxonMobil to neutral, said CEO Lee Raymond's comments on capex,
production and cost savings were either at or below market expectations. While
ExxonMobil "remains an outstanding company with a dominant position within the
industry", the stock is closing in on Young's 12-month price target of $45 a
share. Shares up 0.4% at $42.65. (CCC)
9:53 (Dow Jones) Alltel (AT) decided on Jan. 24 to exit its competitive local
exchange, or CLEC, operations in seven states representing less than 20% of its
CLEC access lines. The company determined during an evaluation of its CLEC
operations that a business model that relies on interconnection with other
carriers has limited potential for profitably acquiring market share. Alltel
said it will honor all existing customer contracts, licenses and other
obligations and work to minimize the inconvenience to affected customers during
the course of exiting those markets. The company believes the change will allow
the remaining CLEC operations to generate positive cash flows in 2002. (CC)
9:45 (Dow Jones) Agco's (AG) had a heck of a run, and it might not be over.
Morgan Stanley notes the shares are up 35% year-to-date, and 80% over the last
12 months on improving cash flow, hopes for improvement in the farm sector and
cost saving opportunities. Firm sees another 30% upside, with cost savings and
new distribution opportunities possibly pushing EPS to $3 by 2004. Price target
is $28. AG up 6.7% at $22. (TG)
9:35 (Dow Jones) State Farm's rising auto insurance losses could be a gain
for its publicly traded rivals, said Alice Schroeder, a Morgan Stanley
insurance analyst. The mutual insurer's net written premiums rose 16% in 2001,
reflecting higher rates and volume, Schroeder said. However, the company's
rising auto loss ratio contributed to a $5 billion after-tax loss, Schroeder
said. "We think the cost of increasing market share exceeded State Farm's
expectations, suggesting it may now start raising rates more aggressively," she
said. This could benefit Allstate (ALL) and Progressive (PGR) as they seek
higher rates, Schroeder said. (CUB)
9:26 (Dow Jones) Merrill Lynch would use the recent correction in Home Depot
(HD) stock as a buying opportunity. The firm says the stock is selling at a 5%
discount to buyback parity (which measures the price at which management can
buy back stock accretively if they borrowed in the debt market to repurchase
shares.) Since 1995, HD has never sold at a discount to buyback parity without
delivering a positive next-6-month return, with the average return being 15%.
(GS)
9:17 (Dow Jones) The Travelers Property Casualty IPO is on a fast track, with
underwriters moving the pricing up a week to March 21. Also, the company set
some more terms on the IPO, which will sell 210 million shares at $16 to $19.
Travelers now says it expects to have 1 billion shares outstanding, giving it a
market value of $17.5 billion after the IPO. Citigroup (C) holders will get
their shares by the end of the year. (RJH)
9:08 (Dow Jones) USD generally soft, JPY at its best levels of the day, could
go through resistance at Y131.70. EUR is $0.8736; USD/JPY is Y131.70; EUR/JPY
is Y115.09. (JRH)
(END) DOW JONES NEWS 03-06-02
11:28 AM |
