Goldman, Sachs & Co.
April 16, 2003
DJIA: 8318.67 -0.99%
COMP: 1403.60 +0.90
S&P: 886.20 -0.51
Overall Market Comment:
Markets are mixed as earnings from large cap tech leads that sector higher with the desk seeing broad institutional participation. But the SPX is being led lower by low quality / mixed earnings from lower beta sectors such as consumers and healthcare. The desk is also seeing a rotation out of the telecoms into higher beta stocks. The SPX support level is 883.
COMMUNICATIONS, MEDIA, & ENTERTAINMENT (CME) & TECH:
The desk is seeing broad institutional participation in tech today as the group is led higher by large caps. MSFT (up over 2.5%) is trading right around its 200-day moving average of $25.29. The desk is seeing institutional buyers but there is supply at $25.50. MOT is off over 1.5% and below its $8 trading range support level after disappointing guidance. The desk is seeing institutional selling. INTC is up over 6% on good institutional demand. The stock is trading above the $18 level and it would be considered a bullish signal if it closes above that. EMC is up over 6% after reporting earnings this morning as the desk sees institutional buying in the entire storage space. Internet retailers are down on the day but the desk is seeing demand coming into the names especially from the derivatives standpoint. The desk is seeing short covering in semi cap equipment. SUNW is off over 1.5% as it heads into earnings tonight as investors appear to be trimming back long positions. In CME we are seeing a rotation out of telecom and media and into higher beta tech names. BLS, SBC and VZ are down around 2% each. Selling continues and shorts are being put on in T. In media, TRB reported in-line numbers but the whole publishing space is seeing across the board selling. CCU and VIA are giving back approximately 2.5% of their recent gains.
CYCLICALS:
AMR continues to be a highlight, with the company's potential bankruptcy seemingly on a knife edge. The stock is up over 4% as the market seems confident that the vote by flight attendants will affirm the concessions on the table. The desk feels that if the vote is lost, and AMR files for bankruptcy, then the stock will trade down substantially, and if the vote is won then the stock will be limited on the upside. The desk has been seeing profit taking in the name today. In autos, F reported better than expected numbers and the stock has rallied up over 13%, and the desk has seen selling in the name, both by short money and traders selling long positions. CAT is off under 1% despite raising guidance, though the desk feels the stock was overdone going into earnings. Finally, GD is up over 3% after good earnings, giving a bid to some of the defense names, and the desk is seeing two way flows in the group.
ENERGY:
Crude was initially trading up on bullish API numbers but took a hit after the terrorist threat level was lowered. XOI is trading with the broader market and the OSX feels heavy as the group starts to report earnings.
FINANCIALS:
JPM and MER both reported better than expected earnings but while , and both stocks are up over 1.5%. Today's strength is a continuation of recent momentum, and our trading desk expects this trend to continue. HRB is down over 7% as we see sellers continue to drive the stock lower on continued concerns over their tax business. Regional banks are mixed on the back of earnings.
HEALTHCARE:
Health care underperforming across the board. BAX down over 2.3% as investors seem disappointed with the lowered 2Q guidance. We're seeing an absence of buyers on the desk. STJ is also down over 2% after reporting numbers. We're seen supply in STJ. HMOs and Hospitals underperforming with both groups down 3-4%. UNH reported strong numbers but a competitor downgraded the name due to reserve concerns. Distributors weak on disappointing IMS data. GILD outperforming the broader biotech space. We are seeing institutional demand. MLNM down over 5% after reporting below street estimates. GENZ down over 4% after reporting in line numbers but lower than expected gross margins.
RETAIL:
Much of the consumer space is under pressure today due to a combination of bearish comments relating to earnings in the space. Firstly, KO made bearish comments on volume trends, and the stock is down over 6%. Secondly, SWY is off over 16% after making cuts to its guidance, leading to weakness in the other food retailers today such as ABS and KR both down over 4%, and the desk is seeing short and long selling in both of these names. Also in retail, the desk is seeing selling of JCP and CVS, and buying in SYY on weakness. In consumers, MYG is off over 13% after weak earnings and the announcement of job cuts, bringing WHR ( off nearly 3%) with it. The desk has seen buying in MYG at the $18 level, and the stock is currently holding near long term support of $18.60.
