Monday, April 16, 2007

Tuesday Curtain Raiser

Black and Decker (BDK) is trading up more than 5% tonight after pre-announcing a big quarterly beat: Black & Decker Sees Higher 1Q Earnings. The stock likely revisits at tough area of resistance in the $90 area on Tuesday.

There was almost no options trading today in BDK ahead of this evening's breaking news.

Another pre-announcement comes our way from Callaway Golf (ELY). Four! Earnings will be as high as 48c vs estimates of 39c.

The BDK and ELY developments set the stage for further mirth and merriment in the early stages of earnings season. Tuesday morning alone features a plethora of releases: DJ, EMC, JNJ, KEY, MI, MMR, MEL, MTB, NTRS, RF, STT, STI, USB, WFC and WB.

Those banking names will be very interesting, especially Washington Mutual (WM) and Wells Fargo (WFC) as both are among the largest mortgage originators in the country of almost every product imaginable from subprime to prime.

According to National Mortgage News Online, Wells Fargo was the #2 overall originator in the 4th quarter ($86.7 bln) while Washington Mutual Originated $43 bln in mortgages in Q4 putting it #6 on the list. Wells ranks as the #6 subprime originator, #4 Alt-A lender, #6 2nd lein lender and as the #1 interest only and jumbo lender. Washington Mutual ranked #9 in the list of subprime originators, the #6 alt-A lender and #2 jumbo lender. From the way the lenders behaved today - lenders of every stripe rising - you'd think this story was from another dimension: California mortgage defaults near decade high.

Another intriguing point of interest will be earnings from data storage company EMC which is expected in the Reuters Q1 consensus estimate to post EPS of 14c and revenue $2.94 bln. I'm intrigued because of the trade of about 15,000 April 15 calls that got by me earlier today. That's a big bet with so little time left and the stock trading at just under $15.

Steel Dynamics (STLD) has had a huge run in the last month and a half, rising by $10/shr. Tonight it posted earnings 5c ahead of estimates for Q1; guidance, however, looks light at as low as 95c vs estimates for $1.00 in Q2.

The bulls do face a challenge tomorrow at 8:30 - economic data. We get the latest read on consumer prices with core CPI expected to come in, up .2% in March. Housing Starts also confront the market. After a Feburary increase, the starts are expected to pull back to a 1.49 mln annual rate. This chart is simply Aunt Esther UGLY - Big UGLY:

Industrial production data will be released at 10 a.m.

Ahead of the dater (a little Ted Kennedy dialect for you), the 10 year treasury drifted and dollar fell further reaching down into the 81 realm for a while closing at just above Dollar Index-82. My favorite gold, continued to forge ahead, up to about the $696 level. My gold futures position as more than doubled in value in the futures market over the past several weeks as I have simply added contracts through my increased buying power as the metal as risen - simply amazing (of course coupled with ongoing trailing stops that haven't been stopped out).

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