Fourth quarter earnings season begins in earnest this week. On Friday, the weak jobs reportforced traders to question the recent overweight in tech, industrials and materials.
This overweight was based on the assumption that: 1) the U.S. was unlikely to be entering a serious slowdown, and 2) that global growth would remain robust and that U.S. manufacturers would continue to benefit from a strong export market. Both of these assumptions are being questioned now.
Elsewhere:
1) Investment bank Jeffries down 12 percent pre open, projecting a surprising loss of $0.17 for the quarter; analysts had been expecting a gain of $0.33. They lost money on principal trading (some employees were fired); investment banking was also down as several deals had to be postponed.
2) Elan reporting favorable safety data for its multiple sclerosis drug Tysabri. Twenty-one thousand patients on now using the drug. The hope is that the prescriber base may expand now that there have been no more cases of a rare brain disease (PML) reported. up 35 pre-open.
3) IBM and Network Appliance downgraded at UBS on slower hardware spending trends in '08. UBS notes that shares "could be range bound due to spending pressures long-term. For IBM, hardware & services sales could be pressured as it has the largest financial services exposure in the sector."
UBS also talking about slower storage, server and PC spending. They're also lowering price targets for IBM,EMC ,Network Appliance, Sun Microsystems and Dell.
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