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History Making

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Troubled energy trader Enron (NYSE:ENE) reported it had sought Chapter 11 reorganization over the weekend. The Enron filing is the largest bankruptcy in U.S. corporate history. In addition, Enron said that it would sue Dynergy (NYSE:DYN), it's proposed merger partner just a week ago, for $10 billion for withdrawing from the merger.

The Enron bankruptcy totals about $50 billion, far larger than the Texaco filing in 1997. Obviously a $50 billion bankruptcy is going to have ripple effects through the economy and the market. But just how much is Enron going to impact other sectors of the market?

The market discounted the Enron filing last week, judging by Friday's close at $0.26. But it remains to be seen if the market already discounted the impact on other sectors of the market. Perhaps Enron is the reason pre-market futures are down across the board this morning.

Bonds Lower

With the exception of the 13-week bill (IRX.X), Treasuries are lower this morning. The 13-week is unchanged. The Five, Ten, and Thirty year yields are all fractionally higher this morning.

Analyst Actions

Goldman Sachs downgraded shares of Morgan Stanley (NYSE:MWD) this morning and cut its fiscal 2002 earnings estimates. We'll want to keep an eye on the Brokers (XBD.X) today in light of the downgrade.

UBS Warburg downgraded two of the better performing biotech stocks this morning: Immunex (NASDAQ:IMNX) and Gilead (NASDAQ:GILD). UBS Warbug downgraded both stocks to a Hold based "purely on valuation concerns." I've never really understood the "valuation-based" downgrade. We'll see if the Biotechs (BTK.X) shake it off.

Two Nasdaq heavyweights, Sun Micro (NASDAQ:SUNW) and Intel (NASDAQ:INTC), received positive analyst comments this morning. Sanford Bernstein said demand in improving for Sun's products and services in the U.S. and Europe. Banc of America raised its fourth-quarter earnings estimates on Intel. However, both stocks were slightly lower in the pre-open session.

Eric Utley
Option Investor

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