A Dearth of Positive Catalysts - Analyst Blog
February 22 2012 - 4:01AM
Zacks
Stocks will likely struggle for direction given the absence of
any positive catalysts that can push them to new highs. Greece will
remain in the news, as the country suffered a credit rating
downgrade from Fitch following the release of details about the
private sector debt swap.
There is growing unease in the market that while the latest deal
may have averted the possibility of a disruptive near-term default
it is not expected to provide the last word on the country’s
struggles to stay within the union, either.
Greece’s bond swap with its private creditors will help bring
down its debt load by €107 billion. This is accomplished by forcing
bond holders to accept a 53.5% loss on the face value of their
holdings. This bond swap, coupled with a tough new austerity
package that the country had to agree to implement as a price for a
second bailout, will reduce its level of indebtedness from the
current 164% of GDP to around 120% by 2020. But many in the market
are justifiably skeptical of these estimates from the IMF, which is
a party to the bailout.
In addition to a host of assumptions about privatization
proceeds and the direction of interest rates, the IMF forecast for
2020 depends on the Greek economy growing at over 2% annually over
the next seven years after staying flat this year. Please keep in
mind that Greek economy has been in a recession over the last four
years that has resulted in the economy shrinking in excess of a
cumulative 16% in that time period. Given the severity of the new
austerity measures that accompanied the latest bailout deal, the
economy is more likely to remain in the red for quite some
time.
On the earnings front, luxury homebuilder Toll
Brothers (TOL) came out with weaker than expected results
this morning. Dell (DELL) came modestly short of
EPS expectations after the close on Tuesday and also provided weak
guidance for the current quarter. Brocade
Communications (BRCD) came out with better than expected
results. Hewlett-Packard (HP) reports after the
close today.
BROCADE COMM SY (BRCD): Free Stock Analysis Report
DELL INC (DELL): Free Stock Analysis Report
HELMERICH&PAYNE (HP): Free Stock Analysis Report
TOLL BROTHERS (TOL): Free Stock Analysis Report
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