From Briefing.com: 5:22PM Market Internals : The Dow decreased 1.77% closing at 11049, the Nasdaq was down 2.24% to finish at 2170, and the S&P was down 1.78% to finish at 1265. Leading sectors included: office reits +2.6%, indust reits +0.90%, health care supp +0.88%, resident reits +0.11%, divers reits +0.02%. Lagging sectors included: steel --6.6%, div mtls and min -5.9%, homebuilding -4.2%, const and farm machinery -4.0%, const matrls -3.9%. Today's movement came from lower than average volume (NYSE 1625, vs. closing avg of 1675; Nasdaq 1816, vs. 2112), with higher advance/decline ratios (NYSE 705/2565; Nasdaq 664/2391, and with new highs coming in lower than new lows on the NYSE, but higher on the Nasdaq (NYSE 55/88, Nasdaq 93/69).
5:01PM Monolithic Power: US patent office grants request for re-exam of O2 Micro patents (MPWR) 14.64 -0.59 : Monolithic Power Systems announces that the US patent office has granted its request for reexamination of O2 Micro's (OIIM 8.87 +0.01) based on a 'substantial new question of patentability' concerning two patents. The PTO has decided to reexamine all claims of the patents. The co had previously announced that the PTO granted its request for reexamination of OIIM's '129 patent. O2 Micro has asserted these three patents against MPWR.
4:56PM Conexant Files Resale Shelf Registration Statement for 4% Convertible Subordinated Notes Due 2026 (CNXT) 2.748 -0.112 : Co filed a shelf registration statement with the Securities and Exchange Commission (SEC) to register the resale by holders of up to $250 mln of its 4% convertible subordinated notes due 2026 and the shares of common stock of the company issuable upon conversion of the
4:32PM Vitesse Semi Announces Investment from Tennenbaum Capital Partners and Provides Company Update (VTSS) 1.69 -0.07 : Co announced today that it has entered into a commitment letter for financing with Tennenbaum Capital Partners. Under the terms of the letter, Tennenbaum Capital Partners, through one or more affiliates, has agreed initially to lend to Vitesse up to $24 mln in the form of a four year, secured note at a LIBOR-based interest rate, and, if requested by Vitesse and subject to the satisfaction of certain conditions, up to an additional $30 mln. The net proceeds will be used to fund new product development, repay certain loan amounts and for general corporate
4:27PM Fairchild Semi Opens Global Power Resource Design Center in South America to Address Critical Markets (FCS) 17.11 -0.52 : Brazil Design Center to assist customers in the region by offering on-site design solutions for their automotive, lighting, motor drive, telecom and consumer electronics applications FCS has expanded its Global Power Resource design centers to nine worldwide with the addition of a facility in Sao Paulo, Brazil. This new design center responds to the burgeoning high-technology markets in S. America. Fairchild is focusing on the S. American region, projected by WSTS to have a 14% growth rate in 2006 and nearly 10% in 2007, to support its manufacturing customers in the consumer electronic and appliance, lighting, automotive and telecom markets.
4:20 pm : Stocks got rocked Monday after hawkish commentary from Fed Chairman Bernanke late in the day exacerbated early weakness that was sparked by mounting tensions with Iran.
Before the market opened, the absence of notable earnings and economic data placed extra emphasis on surging oil prices. Crude oil futures hit three-week highs near $74 a barrel after Iran's supreme leader Ayatollah Ali Khamenei indicated that a "wrong move" against its nuclear facilities could "seriously endanger energy flow in the region." However, even as oil prices eased a bit and were trading near session lows mid-day, ongoing concerns about the pace of economic growth and whether the Fed can keep inflation under control without going too far with its tightening continued to weigh on sentiment, especially ahead of testimony from Bernanke to the American Bankers Association today about international monetary policy.
At 2:15 ET, the Fed Chairman acknowledged that the "anticipated moderation of economic growth seems now to be under way," which plays into our Neutral market view. Adding insult to injury, though, Bernanke said consumer spending has "decelerated noticeably" in recent months and he also delivered some sobering comments on inflation trends that swayed the market to believe that a tightening at the June 28-29 FOMC meeting is likely. Due to such "unwelcome developments," Bernanke continued by saying, "the Committee will be vigilant to ensure that the recent pattern of elevated monthly core inflation readings is not sustained."
Prior to Bernanke's remarks hitting the wires, the market was pricing in roughly a 50% probability of another rate hike in June. After Bernanke's comments, the probability increased to as high as 76% and the spread between the 2-yr and 10-yr note yields narrowed to its tightest level since early April, about 5 basis points. The yield on the 10-yr note (-06/32) closed at 5.01%. Further underscoring the nervousness behind the day's drubbing was a 19.3% surge in the VIX (CBOE Volatility Index) -- the "investor fear gauge," which suggested investors are cautiously buying options to hedge against further declines in equities.
Every notable index posted a loss of at least 1.8%, with the Russell 2000 Index suffering the largest blow (-3.2%). Of all 10 sectors losing ground, Energy and Materials paced the way with declines of nearly 3.0% while a 2.0% sell-off in Industrials further underscored profit-taking in this year's best performing areas. The influential Technology sector, amid further deterioration in semiconductor, and the hardware grouping turning negative for the year, was also a drag on the proceedings. Consumer Discretionary was also in focus and nearly halved its 3.5% year-to-date performance after Standard Pacific (SPF 27.39 -2.61) became the latest home builder to discuss softening demand and indicated that it expects to lower its full-year EPS and delivery outlook. The PHLX Housing Sector Index extended its reach into the red for the year and hit a new 52-week low.
Until the Fed Chairman's prepared speech was released, though, investors also found little comfort from the day's only economic report. At 10:00 ET, the May ISM services index dipped to 60.1 from 63.0 in April. This level still reflects solid expansion, but the market was bothered nonetheless since it reflected a deceleration from the prior month. It didn't help matters either that the prices paid component spiked to 77.5, rivaling the all-time high of 78.4 in September 2005. The latter fed into inflation concerns and offered investors no assurance about the Fed's ability to accurately assess the impact of recent rate hikes. The only bright spot on a very dark day for stocks was renewed interest in Office REITs, which paced the way among only a couple of SnP industry groups to trade higher after Brookfield Properties' (BPO 31.16 +0.18) $8.9 bln bid for Trizec Properties (TRZ 28.68 +4.08).DJ30 -199.15 NASDAQ -49.79 SP500 -22.93 NASDAQ Dec/Adv/Vol 2391/664/1.79 bln NYSE Dec/Adv/Vol 2567/690/1.63 bln
4:06PM California Micro devices to provide June quarter guidance (CAMD) .26 +0.01 : Co announces it will hold a conference call on Thursday, June 15, 2006, at 2:00 p.m. Pacific Time to present the financial outlook for its first fiscal quarter of 2007, which ends on June 30, 2006.
4:06PM Transmeta: AMD to provide Transmeta Efficeon Microprocessor supporting Microsoft FlexGo technology in emerging markets (TMTA) 1.59 +0.11 : AMD and Transmeta (TMTA) announced that they have entered into an exclusive agreement under which AMD will market and provide the recently announced specialized version of the Efficeon microprocessor in emerging markets. The AMD Efficeon microprocessor was specifically designed by Transmeta to provide a secure hardware foundation for FlexGo, Microsoft's (MSFT) new technology that enables pay-as-you-go and subscription computing models.
12:06 pm Trizec Properties Inc. (TRZ)
28.58 +3.98: Shares in Trizec Properties Inc. were higher Monday after Trizec Properties Inc. and Trizec Canada Inc. said they had agreed to be acquired by Brookfield Properties Corp. and private equity firm Blackstone Group for $8.9 billion.
Brookfield will buy all outstanding common shares of Trizec Properties that are not owned by Trizec Canada for $29.01 a share, and will acquire all outstanding subordinate voting shares and multiple voting shares of Trizec Canada for $30.97 per share. The prices reflect premiums of 18% on Trizec Properties and 30% for Trizec Canada.
Under the deal, Brookfield will manage and operate properties in New York, Washington, Los Angeles and Houston and double Brookfield's portfolio in the United States. Blackstone, which represents one of the world's largest private equity funds, will take on properties in Los Angeles, San Diego and New York.
The companies announced that board directors from Trizec Properties, which has a market cap of about $4.5 billion, and Trizec Canada have approved the deal and have recommended the approval of the transaction by their stockholders
--Christine Marie Nielsen, Briefing.com
10:20 am Freeport-McMoRan (FCX)
Extreme volatility has been the name of the game in the copper markets, as a high degree of speculative activity has resulted in significant price fluctuations. The percentages of net longs and shorts change daily, as the market digests implications from rising interest rates on global demand and a cooling housing market. Nonetheless, the copper fundamentals remain tight.
Today, Freeport's subsidiary, PT Freeport Indonesia, lowered its copper and gold sales forecasts by 16%. Reduced copper production from its Grasberg mine in Indonesia -- the second largest copper and the largest gold mine in the world -- increases concerns of a supply deficit this year. This news, coupled with the ongoing worker strike at Grupo Mexico, underscores the enduring bull fundamentals in the copper market, which contributes to our Overweight position in the Materials sector.
Freeport gave an update on PT Freeport Indonesia's 2Q06 mining and milling activities. PT-FI now expects its share of second quarter copper and gold sales to approximate 235 mln pounds of copper and 275k ounces of gold, approx 16% below previous Q2 estimates of 280 mln pounds of copper and consistent with previous estimates for gold sales. The shortfall for copper reflects operational effects associated with mining a relatively small section of ore in the "6 North" pushback with abnormally high clay content, which has adversely affected ore flow, mill recoveries, and concentrate grades.
Freeport stated that while the impact on annual sales "may be significant," preliminary estimates for total sales volumes are expected to be within 5% of its previous forecasts for the 2006-2010 period. While the production shortfall is disappointing, profits continue to escalate as soaring copper and gold prices offset increased production costs. The recent pull back in FCX and shares in our Active Portfolio holding Phelps Dodge (PD) provide an attractive entry point as we believe the fundamentals will continue to support metal prices, as the likelihood of a material increase in supply probably won't happen for a while.
--Kimberly DuBord, Briefing.com
09:27 am Standard Pacific Corp. (SPF)
30.00: Standard Pacific Corp., one of the nation's leading homebuilders, said last Friday it expects to lower its earnings and delivery guidance for the full year when it reports quarterly results at the end of July. The lowered forecast was attributed to lower new home orders for the first two months of the fiscal second quarter, with orders off in Southern California, Northern California, Florida, and Arizona.
Based in Irvine, California, Standard Pacific said that net new home orders for April and May were down 41% from a year earlier, largely due to an increase in cancellation rates and continued softening demand in its larger markets. Meanwhile, gross orders for the two-month period were down 22% year/year.
Separately, the company said it continued to buy back shares of its common stock under the board's $100 million authorization. For the first two months of the second quarter, it repurchased more than 1.7 million shares of its stock, bringing its total to about 3.1 million shares, or approximately 5% of the company's outstanding shares, since the beginning of the year.
Based on the company's reduced outlook, Standard Pacific shares traded sharply lower in pre-market action, reflecting investors' concerns about slowing growth in the nation's housing market. As other large homebuilders such as Toll Brothers (TOL) and Pulte Homes (PHM) have recently noted, housing demand continues to be impacted by rising interest rates, as well as higher cancellation rates and an increase in inventories. Accordingly, we remain bearish on housing stocks as demand continues to return to more normal levels with interest rates on the rise.
--Richard Jahnke, Briefing.com
09:02 am Glaxosmithkline Plc (GSK)
55.99: Shares in pharmaceutical company Glaxosmithkline Plc were poised to start slightly higher Monday after the company said a study of its breast cancer pill, Tykerb, revealed that the drug in combination with capecitabine (Xeloda) versus capecitabine alone nearly doubled time of disease progression.
Glaxo, which has a market cap of about $158.31 billion, plans to submit the drug to regulators in the United States and Europe for use in the second half of 2006.
Estimates are that the London-based company's breast cancer pill could see sales above $1 billion a year. In addition to Tykerb, the company hopes to launch cervical cancer vaccine Cervarix and platelet-booster eltrombopag next year.
Briefing.com has a Market Weight rating on the Health Care sector as its defensive characteristics in a rising interest rate environment are being overshadowed by concerns over the rising cost of health care and intensifying competition among managed care providers.
--Christine Marie Nielsen, Briefing.com
08:43 am Iranian Tension Pushes Crude Higher
Seventeen million barrels of oil a day flow through the Straits of Hormuz. The fact that Iran controls the eastern shore of this waterway, where the Persian Gulf empties into the Arabian Sea, is making the oil markets quite nervous. Crude oil prices rose to their highest point in three weeks after Iran said that any military action against its nuclear facilities risked disrupting crude shipments from the Persian Gulf, which supplies 20% of the world's oil.
Yesterday Iran's supreme leader, Ayatollah Ali Khamenei, stated the US could "seriously endanger energy flow in the region" by acting against Iran. This thinly veiled threat is the market's worst fear. A possible supply disruption in the Straits of Hormuz would impact all the producers in the region, as tankers would be forced to use alternative routes, increasing transportation costs. Iran, which controls the world's second largest oil and natural gas reserves, certainly isn't going to cut off its own supplies, considering its economy is 80-90% reliant on oil export revenues, but they could cause severe disruptions in the market.
The ongoing battle between the international community and Iran over its nuclear ambitions has been a major driver of oil prices. Between the militant attacks in Nigeria and concerns over supply disruptions in Iran, oil prices have gained over 20% this year. Today, crude for July delivery rose as much as $1.51 or 2% to $73.84 per barrel in after-hours electronic trading on the New York Mercantile exchange, according to Bloomberg.
Last week, Secretary Rice said Iran "must respond within weeks" to incentives offered by the US, China, Russia, the UK, France and Germany to abandon any nuclear weapons development. With the hurricane season now underway, coupled with escalating tensions with Iran, energy prices are likely to move higher before any material relief occurs. We retain our Overweight position in the energy sector and recommend investors buy on weakness.
--Kimberly DuBord, Briefing.com
09:39 am Salesforce.com: UBS upgrades Reduce to Neutral. Target $27 to $31. Firm ups rating as they think the current stock price is reflective of the co's competitive landscape, its strong market position and expectations of the co's performance seem reasonable. Firm says that net new subscribers is expected to decelerate to around 15-20%. Firm believes the AppExchange will help the co expand its presence beyond CRM in addition to increasing its footprint in existing customers, the ASP decline decline that could accompany the OEM version is now likely built into the price. Firm does not expect SAP or ORCL to have significant impact on CRM in the near term.
09:35 am Wet Seal: Brean Murray upgrades Accumulate to Strong Buy. Target $7. Firm ups rating after recent weakness presents a material buying opportunity for noncomp- obsessed investors. The firm notes WTSLA has declined over 12% since the co announced on May 22 that same-store sales for the month were going to be negative (versus a 1.0% increase in the S&P Retailing Index and a 1.9% rise in the S&P 500 in the similar period). They believe this response is very short-sighted and discounts a number of operating positives and key potential catalysts, including the beginning of material unit expansion at the co and a turn at Arden B.
09:34 am OSI Pharm: HSBC Securities upgrades Neutral to Overweight. Target $31 to $38. Firm ups rating and price tgt noting incremental data presentation for Tarceva from the BR.21 pivotal trial and other 1st line patient groups validates broader use. The firm notes Tarceva + Avastin in 2nd line shows good activity suggesting better tolerability vs chemo, slight increased bleed risk. The firm says although Lucentis possesses standard of care efficacy characteristics, Genentech is reluctant to pursue 3 month dosing as optimum administration. They believe this reduces risk of significant near term downward revisions for Macugen rev guidance.
09:31 am bebe stores: Brean Murray upgrades Sell to Hold. Firm ups rating saying while they continue to believe the co's current assortments are extremely weak, with the worst of the comp comparisons behind bebe and the potential for some level of style renewal with the rollout of fall looks, they believe the risk/reward in selling BEBE is no longer attractive. That said, the firm would rather remain on the sidelines until they have some sense the co has recaptured a level of fashion sense before becoming constructive on BEBE.
09:30 am Onyx Pharma: Friedman Billings reiterates Mkt Perform. Target $26 to $21. Firm lowers price tgt after the A.S.C.O. showed that Pfizer's (PFE) data on Stutent in first line renal cancer cell carcinoma is more than doubling of progression-free survival over interferon. Sutent was declared the new standard of care in this setting. Firm lowers their Nexavar first-line RCC sales estimates, as well as their EPS estimates, as a result. Speculation on positive Phase III data in melanoma (medium-to-high risk) and liver cancer (low risk), though, should keep sentiment from getting much more negative. Though Nexavar's PFS of nine months was in the same general ballpark as Sutent, the lack of Nexavar data from a large randomized study likely will mean that Sutent will receive the lion's share of first-line use. Enrollment for Phase III studies in melanoma and in liver cancer was recently completed, and firm could see data by the end of 2006. Firm views the melanoma trial as medium-to-high risk, since the bar is high. Firm estimates that, by 2010, non-RCC sales will account for 46% of U.S. Nexavar sales and think liver and melanoma are somewhat priced into the stock. Firm believes that lung cancer is not priced into the stock, and that is probably appropriate since the data are sparse.
09:29 am Medical Action: Roth Capital reiterates Buy. Target $30 to $26. Firm cuts price tgt following earnings.The firm believes the co is actively pursuing strategic acquisitions that would leverage its existing product and distribution infrastructure and now stands in a strengthening financial position to pursue a potential transaction, with $16 mln in cash on its balance sheet.
09:24 am Stryker: Needham & Co initiates Hold. Firm initiates with a hold saying they are currently in a period where they believe Stryker may struggle to maintain the 20%-plus bottom line growth, which investors have come to expect from the co. The firm ntoes Stryker has guided to 11-14% top line growth in 2006. They forecast rev growth of 12% in 2006 and 11% in 2007. They also believe that 20% EPS growth may be very difficult to achieve without mid-teens top line growth.
09:23 am XTL Biopharma: Brean Murray initiates Accumulate. Target $8. Firm initiates with an Accumulate and $8 price tgt saying they are optimistic about XTL's in-licensing prospects given that current and past mgmt members of Keryx Biopharmaceuticals (KERX) comprise the Chairman and CEO, respectively, of XTL, and that Keryx has done what they believe to be a good job building a renal franchise despite the fierce competition in the drug licensing marketplace. The firm notes XTL's primary programs (XTL-6865 and XTL-2125) are treatments for chronic HCV infection, from which they expect to see Phase 1 data in 1H07.
09:21 am Magna: CIBC Wrld Mkts downgrades Sector Outperform to Sector Perform. Target $93 to $88. Firm lowers rating as a result of the disappointing U.S light vehicle sales reported for May particularly at GM and DaimlerChrysler, in addition to some cuts to the Q3/06 North American automotive production schedule at GM and Ford.
09:19 am Standard Pacific: AG Edwards downgrades Buy to Hold. Firm cuts price tgt noting post-close Friday SPF updated the Street on Apr/May, citing 41% decline in net orders, implying sales per community off 50%+. The firm ntoes SPF reported a 24% cancellation rate in 1Q/06, but the firms analysis suggests that it increased to 36% in Apr/May. While some expect cancellation rates to decline, the firm thinks they will likely remain high given sequentially lower prices. |
