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The Wall Street Greek blog is the sexy & syndicated financial securities markets publication of former Senior Equity Analyst Markos N. Kaminis. Our stock market blog reaches reputable publishers & private networks and is an unbiased, independent Wall Street research resource on the economy, stocks, gold & currency, energy & oil, real estate and more. Wall Street & Greece should be as honest, dependable and passionate as The Greek.


Seeking Alpha

Tuesday, January 23, 2007

Wake Up Call - Jan 23

Good Morning. The time is 9:45 AM EST, and the S&P 500 Index has opened slightly higher while the Dow Industrials and the NASDAQ have opened lower. We anticipate a cautious market today, ahead of what President Bush might say in the State of the Union Address this evening.

Asia:
Hang Seng Index -0.01%; Shanghai/Shenzhen 300 +0.68%; NIKKEI 225 -0.09%; BSE SENSEX 30 -1.18%; KRX 100 +0.13%; Ho Chi Minh +1.26%

U.K. & Europe:
DJ STOXX 50 Index -0.15%; FTSE 100 -0.28%; CAC 40 -0.54%; DAX -0.44%; Russian RTS Index +0.68%

KEY HEADLINE NEWS
  • President Bush faces a tough and skeptical crowd tonight that will be dominated by the stoic angry faces of Democrats like Hillary Clinton, Barack Obama and Nancy Pelosi. The president enters the historic speech with his lowest approval rating since taking office, one which challenges the lows of Nixon. According to a CNN/Opinion Research Corporation poll, Bush's approval rating stands at 34% entering the State of the Union Address.
  • The State of the Union agenda typically drives the shares of some industries in the days that follow it, and we've already noticed early activity in the shares of alternative energy firms, which benefited last year. This year's speech is said to focus on a handful of key topics, keying on health care reform. Maybe the Republicans foresee a serious challenge from Hillary Clinton and might attempt to exploit her historical health care wound during the upcoming campaign. All signs point toward a Bush focus on health care tax deductions, a permanent extension of the temporary tax breaks the president has initiated and social security reform. Rumor has it energy could come up again like last year, and the topic of Iraq seems certain to turn the event ugly. I expect to hear boos from the Democrats, at the mere mention of Iraq. As we outlined in detail in "The Greek's Week Ahead," Iran is the hot topic that could push oil prices back up to $60 in a matter of days. We suspect alternative energy stocks and defense stocks might benefit from the president's address as well, depending on how the tone and delivery come across. However, it seems safe and wise for the president to highlight domestic issues and avoid the hot topics we outlined above, so keep that in mind when planning your short-term strategy. Without insight into the speech, we cannot say for sure which health care firms benefit or could be negatively impacted, however, our preview of his plan provides this insight. It seems to help the poor and uninsured, providing a standard tax deduction for health care expenses. Low end retail would seem the best beneficiary, as the poor find more capital within their wallets. Discounters and WalMart for instance, seem like clear beneficiaries from a financially empowered low-end consumer. However, we are not sure this will be obvious to the market, and the impact is not direct and thus difficult to measure. Direct impact might be found within medical service providers, as medicine becomes more accessible to the poor. You want answers and we are not afraid to face up to the challenge, so in summary, though difficult to assess ahead of the speech, the entire health care sector looks like a beneficiary. Still, keep in mind that the devil may be in the details, and remember that any benefits from the speech are short-term drivers. Long-term impact depends on the passage of laws without veto, and Congressional cohesiveness, which seems unlikely over the next two years.
  • Iran's agents are active this morning, severely disrupting daily life in Lebanon. A general strike including the blocking of roads and the filling of the air with fire and smoke, may in fact be the first phase of a coup plot. At least the Lebanese government seems to believe so.
  • The British pound gained further strength against the dollar today, as a report showed industrial producers were able to raise prices at a strong pace. This increased speculation that further rate hikes are likely from the Bank of England, and boosted the pound.
  • Wachovia Corporation, the fourth largest bank in America, posted EPS before merger charges, of $1.21, versus expectations for $1.18, as measured by Reuters. The 34% growth in earnings was driven by the company's acquisition of Golden West Financial and higher fee income. Yahoo! is set to report its earnings this afternoon, but expectations are not high, as the company's efforts to catch up to Google in ad revenue are not expected to show progress until the summer. WB and YHOO shares are both fractionally higher this morning.

We urge you to read our section within the sidebar, entitled "Headline News", for further important information for traders and investors.

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