Tag - Navi

This morning it was reported that payrolls declined at a faster than expected rate and the unemployment rate rose to 9.5%. Neither of these are good news, and the stock market responded with a sharp sell-off. The Dow Industrials fell 212 points or 2.5%, the Nasdaq dropped 49 points or 2.67%, the S&P 500 fell 26 points or 2.8%. Small caps tend to lead, and today was no exception - the Russell 2000 was down 18 points or 3.5%.

Because we are heading into a holiday weekend, volume was on the light side.

Declining stocks outpaced advancing stocks by a 4 to 1 margin. The biggest loser on the day was Discovery Labs (Nasdaq:DSCO). The stock was cut in half after the FDA delay evaluation of the company's infant respiratory distress drug, Surfaxin.

Other top declining stocks include another biotech, Sepracor (Nasdaq:SEPR) which dropped 18% after it released disappointing trial results for a depression drug. The decliners list was littered with regional bank stocks too, including Park Bancorp (Nasdaq:PFED) down 25%, and Starling Banks (Nasdaq:STBK) down 17%.

Ironically, several regional banks made today's top advancing stocks list. Crescent Banking Co. (Nasdaq:CSNT) led the way with a 47% gain. OakRidge Financial Services (Nasdaq:BKOR) rose 25% and Virginia Commerce Bancorp (Nasdaq:VCBI) rose 17%.

NaviSite (Nasdaq:NAVI) rose 23% on heavy volume on news of a lawsuit settlement. And Matrixx Initiatives (Nasdaq:MTXX) rounds out the big winners with a 18% gain.

*****And so it begins. I'm talking about earnings estimate revisions for banks. And yes, they are headed lower. First up is Morgan Stanley (NYSE: MS). Credit Suisse analyst Howard Chen was expecting a profit of $0.80 a share. Now he says a $0.40 loss is more likely.  

Oppenheimer's Chris Kotowski dropped his expected $0.20 per share loss to $0.94 per share.  

Ironically, part of the reason for the downward revisions is Morgan Stanley's credit quality. But even this is misleading. Accounting rule changes earlier this year allowed falling prices for a company's debt to be treated as a profit on the assumption that the company could show a paper profit by buying back debt at a price lower than what it was sold for.  

Make sense. If you sell a bond at $1 and can buy it back for $0,50, you've essentially made $0.50. But of course, no banks actually did this. They didn't have the cash on hand to buy back debt, because one of the reasons a company's debt falls in value is because investors realize the company has assets that are worth less. In the case of the banks, these impaired assets are often non-performing loans or mortgage related securities.  

As these assets fall in value, the banks have to hold more loss reserves. That, of course precludes them from buying back their own debt.  

*****It should be obvious that accounting rules allowing banks to treat falling prices for its own debt as profits is a complete sham. The measure is a bookkeeping trick designed to let the banks appear healthier while they get their act together. It's just buying time.  

Will it be enough time? I don't see how that's possible, and I've outlined my reasoning over the last few days. Basically, unemployment is still rising (the unemployment rate hit 9.5% today) and the improvement in the housing market appears to be temporary based on foreclosure sales and government mortgage assistance. Some see "green shoots" here. I don't. 

*****There's at least one IPO market getting ready to heat up. No, it's not the U.S. It's China. As many as 100 Chinese companies may be getting ready to list their shares in Hong Kong. And many will come calling for inclusion on U.S. indices as well.  
The first company that will float their shares to the public will be a holding company that's constructing high-speed railroads between Shanghai and Beijing. The $5 billion China expects to raise will go to expand other railways. 
Bloomberg reports that since China announced its $585 billion stimulus plan, it's more than doubled its spending on railroads.  

This is more evidence that China is one of the few countries in the world that can actually grow its economy without taking on massive debt. I view this as very bullish and it's why I've been recommending Chinese stocks frequently in my SmallCapInvestor PRO advisory service. To discover what we're buying to take advantage of China's stimulus spending, click HERE. 

*****Here's TradeMaster Daily Stock Alerts' Jason Cimpl with his weekly video chart analysis. I've really been enjoying his analysis. And his TradeMaster readers enjoy the profits it leads to. But I'd like to hear from you.

*****Finally, I want to wish everyone a great 4th of July holiday. And if you're driving, do it safely. Let's get everyone home safe. I'll talk to you on Monday.

The Russell 2000 (NYSE: IWM) posted solid gains today as investors looked ahead to Tuesday’s Fed meeting and welcomed news of a cash injection into a major bank. The small-cap index advanced 5.68 points, or 0.72%, to 791.20. The Dow Jones Industrial Average (INDU) moved up 101.45 points, or 0.74%, to 13,727.03.

On a year-to-date basis, the Russell 2000 is up 0.48%, while the Dow has added 10.04% and the S&P 500 has climbed 7.01%.

Only the bears showed up today as investors focused their attention on the U.S. Federal Reserve’s Tuesday policy meeting. The Fed is widely expected to lower the federal funds rate, the rate at which commercial banks make overnight loans to each other, to give the economy a boost and ease financial strains.

On Oct. 31, the central bank lowered its target interest rate to 4.5% from 4.75%. During the preceding meeting on Sept. 18, the Fed voted to lower the rate to 4.75% from 5.25%.

The upbeat mood was also due to news that UBS AG (NYSE: UBS) has received a cash injection of about $11.5 billion dollars after the Swiss financial services giant became the latest casualty of the subprime mess.

The bank announced today that it has suffered $10 billion in write-downs due to bets placed on securities backed by subprime mortgages. Consequently, the Zurich-based company expects to report a loss for the fourth quarter and possibly the entire 2008 year.

NaviSite, Inc. (Nasdaq: NAVI), provider of application management, reported a bleaker-than-anticipated fiscal first-quarter this morning.

For the three months ended Oct. 31, the Andover, Mass.-based firm recorded a net loss of $4.1 million, or $0.14 per share, wider than the consensus of five analysts polled by Thomson Financial of a net loss of $0.03 per share.

The net loss included a loss on debt extinguishment of $1.7 million. Excluding the loss on debt extinguishment, the loss would have been $2.4 million, or $0.08 per share.

Revenue was $36.1 million, roughly in line with the Thomson Financial mean revenue estimate of $36.64, polled by five analysts on Wall Street. The current quarter’s top-line represents a 27% increase over the $28.5 million in revenue booked for the first quarter of fiscal year 2007.

For the second quarter of fiscal year 2008, NaviSite is projecting revenue to be between $39 and $40 million and projects revenue for fiscal year 2008 to be between $170 and $180 million. The consensus of five analysts polled by Thomson Financial is for revenues of $41.85 million and $172.5 million for the second quarter and full year of 2008 respectively.

Shares of NaviSite (NAVI) tumbled 27.21%, or $2.34, to $6.26 at 1:16 p.m. ET. Shares of NaviSite have been trading in the range of $4.53 to $11.29 for the past 52 weeks.

The Russell 2000 (NYSE: IWM) and the other major U.S. indices opened with modest gains.
 
At 10:34 a.m. ET, the small-cap index had added 6.08 points, or 0.77%, to 791.60. The Dow Jones Industrial Average (INDU) was up 102.75 points, or 0.75%, to 13,728.33.

The futures were pointing up and stocks are rising as investors anticipate the U.S. Federal Reserve’s policy meeting on Tuesday. The Fed is widely expected to lower the federal funds rate, the rate at which commercial banks make overnight loans to each other, from the current level of 4.5%.

The ongoing, some would say intensifying, slump in the U.S. housing sector, combined with slowing growth in business spending and manufacturing, point to a decline in economic growth.

Factor in the credit squeeze, and you’ll begin to understand why many believe the Fed has no choice but to lower its target interest rate to give the economy a boost and ease financial strains.

Corgi International Ltd. (Nasdaq: CRGI), Verticalnet, Inc. (Nasdaq: VERT) and China BAK Battery Inc. (Nasdaq: CBAK) are among the biggest percentage gainers in Wednesday's trading among companies with market capitalizations under $500 million.

Here are today's biggest percentage gainers:

Graham Corp. (AMEX: GHM) reported record earnings of $3.4 million, or $0.86 a share, for the fourth quarter ended March 31, up from $1 million, or $0.25 per share, in the year-ago period. The Batavia, N.Y.-based vacuum and heat transfer equipment maker reported fourth-quarter revenue of $20.8 million, up from $15.9 million a year earlier.

Sutron Corp. (Nasdaq: STRN) reported it received record bookings in May totaling $9.3 million. The Sterling, Va.-based hydrological, meteorological and oceanic data monitoring company announced a record $18.9 million in revenue for the first five months of 2007.

Senomyx Inc. (Nasdaq: SNMX) announced its first introduction of Nestle Co. food products containing senomyx flavor ingredients.

Rackable Systems, Inc. (Nasdaq: RACK) shares are trading up after online options tracking services reported increased call option activity that may be an indicator of an acquisition offer coming or of further shareholder-friendly developments. Rackable was also mentioned on CNBC Tuesday morning as a potential takeover candidate.

Diamond Foods, Inc. (Nasdaq: DMND) raised sales projections after Monday’s closing bell. The snack company announced Monday that revenue increased 43% to $97 million for the third quarter ended April 30, from $67.8 million a year earlier.

These are the biggest percentage gainers in Tuesday's trading among companies with market capitalizations under $500 million: