Financials Put The Pressure On Futures

Futures lower this morning on pressure from the financials. The UBS headline for the bank analyst report this morning tells the story: lower earnings ahead. They are adjusting their 2008 earnings expectations for many banks and brokers.

In fact, that is what the whole Street is doing. JP Morganreduced estimates on investment banks, with the exception of Goldman Sachs (they raise estimates!). They expect M&A to slow down. Richard Bove at Punk Ziegel downgrades Bear Stearns , Goldman and Lehman to sell after upgrading them recently.


1) Merckreiterates their 2007 outlook, so why is it down 3% pre-open? Their estimates have been below Street estimates. 2008 earnings are just within the range of expectations. They are losing the patent on Fosomax, their osteoarthritis drug, in 2008. Still, Merck has had a great year, up 35%--second best performer after McDonalds.

2) HRB down 7% as they are terminating their deal to sell their Option One Mortgage unit to Cerberus Capital. They will continue to look for buyers. They are essentially getting out of the mortgage business by announcing they will not take new loan applications.

3) Finally, the NYSE made a trio of announcements late last night:

a) It's official--Lehman Brothers has won the bidding to take over the specialist operations of Van der Moolen. Lehman will become the specialists for about 400 NYSE-listed firms, including three Dow components: Disney ,Pfizer , and Hewlett-Packard .

b) Former NYSE CFO Nelson Chai will become CFO of Merrill Lynch , following CEO John Thain.

c) The NYSE will be the first foreign exchange to open a representative office in Beijing; CEO Duncan Niederauer will travel to China December 11th to open the office.

Why open an office in Beijing? Listings! The New York Stock Exchange currently has 49 companies from Greater China, which includes 38 from mainland China, 6 from Hong Kong and 5 Taiwanese companies. This year, 16 new companies from "Greater China" have listed on the NYSE, including 14 IPOs. As of Nov. 30, 2007, the total market capitalization of Mainland Chinese companies on the NYSE is $1.1 trillion and for greater China, $1.6 trillion.

Questions? Comments?