Earnings & Summer Stressing

Goldman Sachs, JP Morgan, Citigroup and our parent General Electric report earnings this week. Goldman Sachs rumors of a secondary are rampant ahead of the earnings report tomorrow.

The big debates this morning are over the direction of stocks later this summer, and the effect of the stress test results on bank stock prices. The results will not be out until AFTER earnings come out.

Stocks this summer: up or down? Bears argue stocks will move lower in the summer and not bottom until early fall because the average consumer does not have the buying power to lift the economy to any notable degree. Just because we get a bottom does not mean we will see a substantial lift.

Bulls argue the stimulus plans now underway by the U.S., China and Japan are deal changers that will lift earnings and the global economy.

These programs have already put a bid under commodities, they argue. Stocks in Shanghai are at their highest levels since August last year, largely because the Chinese Premier over the weekend again emphasized that the stimulus program there was having an effect. Talk of a second stimulus program is also helping.

Same in Japan, where a third stimulus program is underway.

The stress test. Bears argue that the stress test will show several banks will require large amounts of additional capital, so we will quickly see who gets diluted.

Bulls argue it will not matter as much as bears think, and they point to the recent success of several REITs who have raised comparatively large sums to pay down debt and have not seen stock price declines.


1) Boeing down 5 percent pre-open, cutting production of its 777 by 29 percent starting June 2010, blaming 'significant deterioration' in the environment for airplanes.

Also delaying plans to increase production of its 747-8 and 767 models.

Also reduced first quarter guidance by 38 cents a share because of the sizable hit of its production cuts and 'unfavorable price escalations". Will update 2009 guidance when it reports first quarter earnings on April 22

2) Chevron down 3 percent pre-open, expects first quarter profits to be sharply lower than previous quarter, in part due to the drop in oil and natural gas prices and weak refining margins. Also expecting to wrote off $100 million associated with exploration costs.

3) MGM Mirage up 17 percent pre-openas they won a reprieve from creditors for over $70 million for its $8.6 billion City Center development in Las Vegas, according to Bloomberg. Bankruptcy fears were ignited after Colony Capital broke off talks with MGM last week. WSJ also reporting that Dubai World is proposing to step in with an aggressive rescue package.

4) Wellpoint up 8 percent pre-open as Express Scriptsis buying WellPoint's prescription unit in a cash and stock deal worth $4.68 billion. Deal includes a 10-yr contract for Express Scripts to provide services to WellPoint. Wellpoint will remain control of its medical policy and aspects of designing drug benefits.



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