Could Swine Flu Create Another Slowdown?

Great. As if the bank stress test wasn't confusing enough, as if the auto restructuring wasn't enough uncertainty, now we have half of the trading community frantically Googling "Tamiflu" this morning. The concern is that swine flu this could create another slowdownin global travel just as we are trying to figure out a bottom. Commodities, airlines, and hotels are weak this morning.

AMR, Delta, Continental down about 8 percent pre-open, but Chinese airlines that trade here like China Souther and China Eastern are down almost 20 percent.

Walgreen, CVS, and Rite Aid are all trading up pre-open on unusually heavy volume.

This is an excellent opportunity for bears to shake this market up; if they can't sell off the market today, they are in trouble.


1) As expected GMannounced it would eliminate its Pontiac brand, will cut its hourly work forced to 40,000 in 2010 from 610,000 now, and will restructure its dealers. The number of plants will be cut to 34 from 47 now by 2010, and to 31 by 2012. Current shareholders will have only 1 percent of the company. The government will get 50% of what they are owed in common stock.

2) Whirlpool reported a global sales decline of 14 percent for the first quarter, 20percent in North America. More importantly, they reaffirmed full year guidance of $3.00-$4.00 vs. analyst estimates of $2.78; they expect to generate free cash flow of $300-$400 million.

Whirlpool is the world`s largest producer of home appliances. Besides selling under Whirlpool and KitchenAid, remember they acquired Maytag in March 2006, and are also the primary Original Equipment Manufacturer (OEM) of Kenmore appliances sold through Sears.

3) Health insurer Humana up 8 percent pre-open after its first quarter earnings came in at $1.22, 5 cents better than estimates. Results were helped by a 28 percent rise in Medicare premiums and lower prescription drug claims. For the year, the company raised its guidance to $6.10-$6.20, well above expectations for $5.90.

4) Shares of LCD maker Corning are up fractionally in early trading this morning. Despite seeing its earnings fall substantially from last year, first quarter earnings of 10 cents was twice analyst expectations. Results were helped by "continued strength of LCD TV sales."

While no specific revenue or earnings guidance is provided, CFO James Flaws expects "significant" growth in earnings, sales, margins in the current quarter. The company's CEO has also seen LCD demand "pick up sooner than anticipated." For the year now, Corning expects LCD TV units to rise 18 percent this year - double its prior forecast of 9 percent.

Another hopeful sign: while Corning primarily used existing inventory to satisfy LCD glass demand in the first quarter, it now expects to increase new production as demand grows in the second quarter. CFO James Flaws foresees "relighting several of our glass melting tanks sooner than planned."

5) The World Steel Association predicts global steel demand will plunge 15 percent this year for its biggest decline since World War II. However, "steel demand is expected to stabilise in the latter part of 2009 leading to a mild recovery in 2010."




Questions? Comments?