Following a large sell-off Friday where the major averages closed at their lows, futures indicate a flat open for the mkt despite continued rumors for more write-downs in the financial sector. Both WSJ and the Times of London reported HSBC (HBC) is expected to announce a write-down this week on its portfolio of high-risk subprime mortgages in the U.S. WSJ quoted two analysts from Lehman Brothers who said the co may have to boost its reserves by as much as $2.4 bln. It's also worth mentioning a Bloomberg report this morning that said Goldman Sachs (GS) held a bigger proportion of hard-to-value assets at the end of Q3 than Citigroup and Merrill Lynch, two of the cos hardest hit by subprime mortgage losses. In addition, E*Trade (ETFC) announced it had observed continued declines in the fair value of its $3.0 bln asset-backed securities portfolio, predominantly within ABS CDO and second-lien securities. The co stated that it expected the declines in fair value to result in further securities write-downs in Q4... The mkt, however, has found some stability this morning. One reason could be the return of M&A activity. This morning, Intl Business Machines (IBM) acquired Cognos (COGN) for $5 bln, or $58/shr in cash. This follows Friday's announcement from Rio Tinto (RTP) that it had rejected an offer from rival BHP Billiton (BHP). Over the weekend, BHP mapped out its plan to acquire RTP, promising to hand $30 bln to shareholders via a share buyback if the deal goes through and signaling it was ready for a long fight. Dow futures are currently +13; Nasdaq futures are currently -1; S&P futures are currently +1.1. Notable pre-market Calls include Upgrades: MIR at Lehman, BHI and HAL at Bernstein, RVBD at Piper Jaffray; Downgrades: FRE and FNM at Lehman, AVR and VSE at Lehman, ETFC at Citi, WB at Keefe Bruyette and Morgan Keegan... On the Earnings calendar: JOBS, BOBE, CNK, ESE, HINT, LINE, OWW and FACE are confirmed to report after the close.Today's Economic calendar is empty.
Gapping up:On strong earnings/guidance: SDTH +6.7%, ERJ +3.7%, PEIX +3.1%... M&A: COGN +7.8% (to be acquired by IBM for $58/share)... European banks rebounding after last week's sell-off: BCS +4.1%, UBS +3.9%, RBS +3.6%... Other news: VDSI +6.6% (upgraded to Outperform at Morgan Keegan), NICE +2.9% (announced DTV has expanded its NICE SmartCenter environment), PCLN +1.5% (Susquehanna made positive comments this morning, continued momentum following Thursday's earnings), INTC +1.2 (added to buy list at tier-1 firm).
Gapping Down:
On weak earnings/guidance: DISH -12.4%, SMTL -7.5%, NCC -4.4% (adjusts Q3 earnings to reflect settlement agreements), IVAN -3.6%, PBR -1.8%... Gold related stocks trading down with spot gold down $20 at $814: LMC -6.4%, AAUK -5.8%, GSS -4.6%, HMY -4.3%, HL -4.2%, GOLD -3.8%, GLD -2.9%... Other News: ETFC -29.9% (announces declines in fair values of ABS portfolio, discloses inquiry; downgraded at Citi and Sandler O'Neill), JNPR -4.2% (downgraded to Mkt Perform at Bernstein), BPOP -3.3% (still checking for anything new), CHL -2.8% (co denies break-up reports), BP -2.8%, TOT -2.4% & RDS -2.3% (declining oil prices pressuring Euro oil stocks), STJ -2.6% (defibrillator wire gets scrutiny - WSJ), CFC -1.6% (disclosed debt rating outlook in 10-Q Friday).
Gapping up: COGN +7.6%, BCS +3.8%, RBS +3.6%, UBS +2.8%, PCLN +2.8%, PEIX +2.0%... Gapping down: ETFC -28.4%, FXI -3.4%, HMY -3.4%, PAAS -2.6%, GLD -2.3%, BIDU -1.4%, RIMM -1.3%, CFC -1.3%.
