The Morning Buzz
Futures turned down about 6 points at 8:30 AM as Morgan Stanleyreported a loss of $0.57, much worse than the loss of $0.08 expected. This officially ends the streak where banks have beaten estimates. Top line miss was rather large: $3.0 billion vs. $4.8 billion expected.
An improvement in credit spreads cost the company $1.5 billion.
Surprisingly, they seem to have been below expectations on trading, particularly fixed income, an area where others have shined in the first quarter. Trading revenue down 61 percent, dividend goes down to $0.05 from $0.27.
How to reconcile this report with Goldman and JP Morgan? Talk on the Street is that Morgan Stanley is losing ground to their two main competitors.
Morgan Stanley down 8 percent pre-open.
1) Wells Fargoreported earnings of $0.56, roughly in line with guidanceof $0.55; revenues were above expectations.
2) Transports have had a great rally off the March lows, but they are still struggling:
a) Shares of Norfolk Southernfall 8 percent pre-open as its Q1 earnings fell shortof expectations. As a result of poor demand, freight volumes dropped 20 percent, while revenues plunged 22% from a year ago.
b) Trucking company Ryder beat earnings estimates by 3 cents, but it suffered from a decline in demand for its truck rentals and it saw "further reductions" in industry freight volumes. The CEO noted that "the current economic environment has worsened and is significantly less predictable."
As a result, the company is no longer giving earnings guidance for the year.
3) Ford trading up about 8 percent pre-open as Goldman upgraded the auto sector, and was surprisingly bullish on Ford, upgrading to the Conviction Buy list, with a six-month price target of $6. Ford "has sufficient liquidity to make it through to 2010 without additional funding," and will likely not file for bankruptcy.
They are also raising their 2009 auto sales estimate to 11 million from 10 million.
4) Ingersoll Randup 8 percent after reporting a narrower-than expected loss. Revenues fell 24 percent year-over-year, as a result of "an unprecedented decline in volume." "Pronounced reductions" in demand will continue for through 2009, and the climate control manufacturer reaffirms its previously reduced full-year guidance.
5) With its Q1 earnings falling 47 percent from last year,Boeingis up 3 percent pre-open as it reaffirms its 2009 revenue guidance of $68 billion-$69 billion - above analysts' estimates of $67.9 billion.
The aircraft maker also cut its full-year earnings forecast to $4.70-$5.00 from $5.05-$5.35 on lower commercial airplane earnings, but the new range also still lies well above the street's expectation.
6) Earnings from cigarette maker Altria were in-line as the company benefitedfrom recent price increases. Volumes at the Philip Morris unit, however, dropped 14 percent. The reaffirmed guidance for 2009 is also inline with estimates.
7) What's up with housing? Every week we scour the MBA numbers for sign of a pop in applications to buy homes, but it's tough finding that rainbow. Purchases last week FELL 4.2 percent to the lowest since the week ended November 14th. Refis rose 7.7 percent.
8) Banks will be briefed by regulators as early as Fridayon how they did on the stress test, according to the WSJ.