MARKET TALK: Terror Insurance Backstop May Be Tough Sell
05 Feb 16:20
Edited by Thomas Granahan
Of DOW JONES NEWSWIRES
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4:19 (Dow Jones) Keefe Bruyette & Woods insurance analyst Cliff Gallant
believes a terrorism backstop for insurance may face an uphill battle if it is
resurrected. Gallant says the push for a federally backed pool or assumption of
risk above an industry limit has lost momentum. "In an election year, many in
Congress may wish to avoid what is widely misconstrued as a bail-out of an
unpopular industry," he said. "Further compounding the problem is hard market
pricing, which makes the argument, for what the public may regard as 'relief',
more difficult to make." (CUB)
4:05 (Dow Jones) Monday's selloff may have knocked many more points off the
major averages, but Tuesday's drop may have Wall Street feeling almost as bad.
Stocks were well on their way to trying to stabilize, but Daschle's killing of
stimulus deal ended that rally in its tracks. Tyco plunges another 24%,
financials still soft. GE lends a hand (at least to its own stock) by backing
views, which doesn't seem all that surprising, while layoff numbers are
worrisome. DJIA drops 1 to 9685, Nasdaq Comp falls 17 to 1838, and S&P 500
eases 5 to 1089 (preliminary). (TG)
3:52 (Dow Jones) After news that Limited (LTD) is looking to buy back what it
doesn't own of Intimate Brands (IBI) at a slight premium to the market,
Limited's shares are off and Intimate Brands' are up, reflecting the usual
arbitrage plays. But at least one Limited shareholder, who asks to remain
nameless, is wondering why any of his fellow shareholders would sign off on
such a deal, which would hand over to Intimate Brands holders a piece of
Limited's considerable balance sheet, as well as stakes in its Express and
Limited businesses and minority stakes in three other companies. "You're giving
them something for nothing, and paying them to take it," the Limited holder
complains. "I don't buy the fact that someday over the rainbow there's going to
be some cost savings that are going to justify me giving away everything I
have." Limited shares off 6.4% at $16.62. (JMC)
3:44 (Dow Jones) Gemstar-TV Guide International's (GMST) call options traded
briskly Tuesday, although it isn't clear what prompted the potentially bullish
trade. At the Pacific Exchange, an institutional investor bought a call spread
- buying Gemstar's May 17.50 calls, which gain in value if the stock price
rises, while selling May 22.50 calls to help offset the cost and set a point of
exit. The stock was down 53 cents to $16.24. Gemstar's May 17.50 calls were at
$2.75 on Pacific volume of 10,059 contracts, while the May 22.50 calls were at
$1.10 on Pacific volume of 7,000 contracts. (KT)
3:42 (Dow Jones) Senate Majority Leader Daschle, D-S.D., says there are
enough votes in the Senate to block drilling in the Arctic National Wildlife
Refuge when the issue comes up for debate in energy legislation later this
month. He told reporters Tuesday he was very confident about the vote count for
enough support to block the initiative. (MHA)
3:36 (Dow Jones) Moody's reports that the credit quality of U.S. corporations
continued to decline sharply in January, as credit rating downgrades exceeded
upgrades 4.5 to 1. Credit quality will not improve until corporate earnings
improve, Moody's said. (JD)
3:25 (Dow Jones) Charter Communications' (CHTR) stock dipped under $10 for
the first time in more than a year Tuesday. In addition to its heavy debt,
Charter has another factor working against it in this market: complexity. With
its principal asset a 41% equity stake and 100% voting stake in Charter
Communications Holding Company, Charter's structure may be too complicated for
some, but not for Oak Value Capital Management, says fund manager David Carr.
"If we understand the structure, which we do at Charter,we're comfortable," he
says. Oak Value has been adding to its 5 million shares over the last week.
Shares down 9% at $10.49. (CBN)
3:16 (Dow Jones) S&P lowered the debt ratings for Boeing (BA) and its Boeing
Capital Corp. unit, becoming the second rating agency in less than two months
to downgrade the aerospace giant. S&P cited "significantly weaker commercial
aerospace intermediate-term business prospects" due to the terror attacks, as
well as "substantially higher borrowings" at Boeing Capital, whose airline
customers are struggling financially. But cost cuts and growth prospects for
Boeing's military and space businesses should offset some of the commercial-jet
slump. (SON)
3:06 (Dow Jones) Daschle has declared the Republican economic stimulus bill
dead in the Senate, noting that neither Republicans nor Democrats will have the
60 votes necessary to win approval of their competing measures. Treasurys like
the news, and it's helping to bring 10's and 30's off their lows for the day.
Stocks have pulled back since the news. (SV)
3:03 (Dow Jones) A Tuesday shuffle of Kmart's (KM) management doesn't provide
any significant new insight into its reorganization plans, says Bruce Zirinsky,
head of financial restructuring at Cadwalader, Wickersham & Taft. "It's
probably a first attempt by management to look closer at the particular markets
they're in," Zirinsky shrugs. Nor is there anything to read between the lines
in Tuesday's announcement about Kmart's anticipated store closings, adds Eric
Beder, an analyst at Ladenburg Thalmann. Although Kmart stores in the Southeast
are suffering the most from competition with Wal-Mart (WMT), Tuesday's shuffle
promoted Kmart's Southeast vice president to president. (JMC)
2:53 (Dow Jones) Those that credit Federal Reserve Chairman Alan Greenspan
for the resilient U.S. economy should really pay homage to Major League
Baseball. "I learned fractions very young because I had to calculate baseball
averages," Greenspan said ata Senate hearing Tuesday on financial literacy.
"By the time I got to fractions in school, I was a whiz." Greenspan advised
lawmakers to keep financial education simple when teaching it in the class
room. (DMK)
2:44 (Dow Jones) The power sector is suffering from an acute case of
Enronitis. Williams Capital analyst Christopher Ellinghaus had bleak words
Tuesday for the group. "In our view, industry valuations and growth have been
perhaps permanently impaired by the fallout from Enron's (ENRNQ) collapse," he
said. Ellinghaus cut his ratings for both Calpine (CPN) and NRG Energy (NRG) to
hold from strong buy. Both stocks have once again set 52-week lows intraday.
(CCC)
(END) DOW JONES NEWS 02-05-02
04:20 PM |
