MARKET TALK: Of Bernanke's Proposal And Free Cheese

March 05, 2008, 10:30 p.m. EST 4 Min Read

Edited by John Shipman Of DOW JONES NEWSWIRES (call: 201 938 5171; e-mail:john.shipman@dowjones.com) MARKET TALK can be found using N/DJMT

11:36 (Dow Jones) The proposal floated yesterday by Fed Chairman Bernanke,that financial institutions lower principal amounts for struggling homeowners,has come in for a range of responses, from the cautious to the caustic,MarketBeat notes. Bennet Sedacca of Atlantic Advisors says the idea representsan attempt to short-circuit the cleansing that occurs with downturns in businesscycles. Tim Iacono at The Mess That Greenspan Made goes further. "What aboutcredit cards and auto loans? Why not get out ahead of the curve on thoseproblems that are now starting to blossom? Reduce my outstanding balance! Gimmesome free cheese!" (DG) (http://blogs.wsj.com/marketbeat/)

11:31 (Dow Jones) Optium (OPTM) should have a strong year based on improvingdemand for its 10 gigabits per second transceivers, emerging 40 Gbps businessand ROADM devices, which direct infrared and visible light beams in fiber opticnetworks, Oppenheimer says. Firm upgrades OPTM to outperform from perform; callsfabless semiconductor business strategy suitable for current macro environmentwith short lead times and easy component availability. Adds that althoughfabless provides less margin leverage, there's still room for expansion. OPTM up20% at $7.27. (BDP)

11:23 (Dow Jones) EUR/USD has hit another all-time high at 1.5277 as investorsfocus on weak data - ADP's estimated Feb jobs decline and 4Q unit labor coststhat suggest rising inflation - while shrugging off a non-mfg ISM report thatwasn't as bad as feared. Recently, EUR/USD at 1.5272 from 1.5208 late yesterday,while USD/JPY was at 103.94 from 103.33. (DKM)

11:18 (Dow Jones) Deutsche Post can forget about selling DHL, its ailing USexpress delivery business, to either UPS or FedEx (FDX) because of antitrustconcerns, Bear Stearns says. Both have been linked to loss-making DHL aspotential suitors, and German group is expected to outline restructuring plansfor the business at analysts' meeting tomorrow. Bear thinks it's more likely "DHL will seek to further stem losses by reducing its commitment in the U.S.through cost reductions/restructuring and partnerships...while making it clearthey intend to remain in the U.S." (DWC)

11:06 (Dow Jones) Citigroup downgrades the specialty finance REIT sector onfears that a recession may spread problems seen so far in the subprime andcredit markets to traditionally safer corporate and commercial real estate. Theonly catalyst for a quick rebound for the sector is a broad recovery in creditmarkets, combined with aggressive government action in the residential market,firm says. Citi cuts to sell from hold: RSO, CBF, NCT, ABR; cuts to hold frombuy: NEWS, KFN, CSE, GKK, SFI, and says CSE is best positioned to take advantageof a recovery. (EBW)

10:57 (Dow Jones) Emerging market stocks rebound but bounce may be short-lived, ADR trader says. BoNY's EM ADR index up 1.7% to 356, while bank's LatinAmerica index gains 1.8% and Asia index 1.5% higher. But job data from ADP "notencouraging," trader says, "and market may try new lows toward the end of theday or the week." Russian, Indian and Brazilian stocks outperform. Names towatch include Brazil's paper/pulp company Votorantim (VCP), up 5.4% to $33.30;India's Satyam Computer (SAY), rises 6.5% to $25.89; and Russia's wireless firm VimpelCom (VIP), gains 5.1% to $35.75. (CSS)

10:53 (Dow Jones) BJ's Wholesale (BJ) up on better-than-expected 4Q EPS andFebruary same-store sales gain of 5.9% (3.2% ex-gas) that provides "a solidstart to 1Q," Goldman Sachs says. Op EPS of 80c (vs firm and Street views of74c) driven by lower expenses and share count. February sales helped by anincrease in both traffic (up 1%) and ticket (up 3%), firm says. BJ up 9.6% at $36.48. (MEL)

10:44 (Dow Jones) Investors disappointed that Bank of Montreal (BMO) didn'thike dividend this quarter may need to brace for more letdown. Genuity CapitalMarkets thinks dividend cut or even equity issue is in the future, as firm saysBMO's exposure to two troubled trusts closer to C$1.5B than C$495M. Also notesbank has other exposures to more shaky conduits. CIBC World Markets, however,while not ruling out "bad case" scenario with losses at C$1.3B, says BMO couldhandle an improbable C$3B in losses before equity issue is needed. Both sharplycut share price targets. BMO off 0.8% at $46.56. (MAG)

10:37 (Dow Jones) With nearly one-third of its book of mortgage insurancepolicies "undeperforming," 2008 is going to be a tough year for GenworthFinancial's (GNW) mortgage insurance business, CFO Patrick Kelleher says at aRaymond James conference today. Although he didn't want to go into detail untilthe company's 1Q earnings call, there have been "more developments in themarket," so far this year. That doesn't sound good. GNW up 0.7% at $23.05. (LVK)

10:23 (Dow Jones) Brazilian cattle baron JBS's pending acquisition of Smithfield Foods' (SFD) and National Beef's beef-processing should be a boon for Tyson Foods (TSN), JPMorgan says. While it drops TSN to No. 3 as a US processor,the deal is a "harbinger of much-needed capacity rationalization," brokerageconcludes. It also calls the transaction "slightly good news" for SFD as itlightens its debt load. TSN up 7% at $15.97; SFD up 5.6% at $29.45. (RLG)

10:17 (Dow Jones) Like other rate futures markets, fed-funds contracts extendlosses as traders back off somewhat from thoughts of 75 BP ease at in two weeks.April contract dips to low of 97.625, down 7 BP, pricing in about 50% chance for2.25% funds rate at March 18 meeting. That's down from about 78% chanceyesterday. Sharper loss for May fed funds, recently down 11 BP at 97.925. Itprices in about 70% chance for FOMC to hit 2% at April 29-30 meeting, down fromfully priced yesterday. (HLP)