Morning Review - 081010

Nicholas Colas (Chief Market Strategist): 212 448 6095 or ncolas@convergex.
com
Christine Clark: 212 448 6085 or cclark@convergex.com
Beth Reed: 212 448 6096 or breed@convergex.com
Stocks gained Monday on light volume as investors awaited Tuesday afternoon’s news from the latest Morning Markets Briefing
FOMC meeting. The S&P 500 added 0.6%, while the Dow and Nasdaq rose 0.4% and 0.8%,
respectively. MCD (which reported a 5.7% jump in global same-store sales in July), CSCO, and IBM
Market Commentary: August 10th, 2010
boosted the Dow, while HPQ weighed on the index following the resignation of its CEO late Friday.
The VIX fell to an intraday low of 21.4, the least in roughly 3 months. The dollar rose against the yen, A snapshot of the markets through the
after hitting a 15-year low last week as the employment report showed the U.S. economy lost more lens of ConvergEx.
jobs than expected in July. In addition to minutes from the FOMC meeting, Tuesday brings the
Treasury’s $34 billion 3-year note auction and earnings from DIS after the bell.
Revenue Expectations for the Dow 30 – Companies Beat, Analysts Shrug
Summary: With second quarter 2010 earnings season drawing to a close, we offer up our monthly review of analysts’ revenue expectations for the companies of the Dow
Jones Industrial Average. Good news first: revenues have modestly beaten reduced expectations with only a few companies left to report. For Q210, the companies of
the Dow saw average year-on-year revenue growth of 14.8% versus a 14% expected comp rate. Non-financial companies fared even better, with a 17.8% year-on-year
revenue comp, versus a 16.2% expected increase. Now, the bad news: analysts aren’t taking the bait. Instead, they are generally growing more cautious on revenue
growth in future quarters. The most recent set of expectations for Q310 are for 11.9% revenue growth for the Dow 30, versus 12.0% last month and over 13.0% back in
May. The same trend is true for Q410 and through the first half of 2011. Ending on a brighter note, the picture for non-financial companies is a little better. Analysts
covering these companies have very modestly boosted their revenue estimates, although not to the levels seen back in May.
The perennial tug-of-war between macroeconomic and fundamental factors for the heart and soul of the U.S. stock market has been on full display over the last
year. When companies report earnings, the equity market’s animal spirits tend to rise. Investors remember that there are actual companies behind those symbols and
stock prices, making actual products that have been netting them (in most cases) some pretty decent actual earnings. But then the earnings schedule subsides and we
are left with a generally sloppy macro picture, full of stagnant employment, government budget deficits, and the occasional currency crisis to work through.
To my mind, the nexus of macro and micro is the revenue line of an analyst’s earnings model. Having plugged away at scores of financial projections over the years,
on both the buyside and sellside, I can tell you that the revenue line is the single hardest part of a model. Cost structures are usually pretty fixed over the near term, so
getting the top line right is 90% of the battle in getting a reasonably accurate earnings estimate.
Market Commentary – Pages 1-6, Equities/Conferences & Earnings – Page 7, Fixed Income – Page 8, Options – Page 9, Exchange-Traded Funds/Indexes – Page 10, Social
Media & Internet Blogs Top Stories – Page 11
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Nicholas Colas (Chief Market Strategist): 212 448 6095 or ncolas@convergex.com
That is why we track the expected revenues for the Dow Jones Industrial Average every month. Yes, earnings matter to stock prices. They matter a lot. But we are
long past the point in the economic cycle where companies can cut costs, generate a pop in incremental earnings, and see their stock prices rise in appreciation of
management’s cost savings acumen. The macro matters, and the macro appears right at the top of the income statement.
The effectiveness of this analysis at calling directional moves in stocks is pretty compelling. Equity markets in the U.S. peaked in late April/early May, and so did
analysts’ revenue expectations for overall revenue growth in 2010. Moreover, Q110 now looks to be the best revenue comparison (in year-over-year terms) of the entire
post-2008 recovery. At a 15.2% growth rate, the companies in the Dow are now unlikely to post anything close to that comp for quarters, if not years, to come. Q210 had
a shot to beat to Q110, but analysts stopped raising revenue estimates in (you guessed it) late April/early May. Earnings expectations have not seen this kind of
directional volatility – analysts seem more predisposed to hold to either company guidance or their own earnings estimates. So it’s the top line we track, not the bottom.
The second quarter of 2010 reporting season is now almost entirely in the bag, so let’s look at what analysts are doing with their revenue estimates now:
• We’ll start with some cheery news: the companies of the Dow actually managed to beat revenue expectations for Q210. Against a 14.0% expected
revenue comp, companies printed a 14.8% increase in year-on-year sales. Non-financial companies actually managed an even better result, at 17.8% versus
16.8% expected top line comps.
• Even with this positive outcome, analysts are just not going out on a limb to project better revenues over the next four quarters. Even as they were
writing up positive notes about companies that had just bested their Q2 revenue expectations, they cut their expectations for every upcoming quarter for the next
year.
• Industrial companies – those with little-to-no financial services operations – are seeing some modest pickup in expectations for future quarters. But even
here, analysts are not taking revenue expectations up all that much. They were, in fact, higher in May than they are today.
We’ll use expectations for Q310 and Q410 to illustrate these points.
• In May 2010, analysts expected the Dow companies to show 13.2% top line growth for Q310. Now that we are largely past Q210 earnings season, that
growth rate has fallen to 11.9%. It was 12.0% last month. So forget “earnings were better than expected,” or even “companies had better guidance.” Analysts
are looking at a slowing global economy (the Dow stocks are a great sample of the U.S. market’s most international companies) and curtailing their enthusiasm
about future revenue growth.
• Fourth quarter – Holiday 2010, if you will – is also failing to get analysts in a giving mood. Back in May, analysts were printing a 7.8% comp for the Dow 30.
Now that number is 6.5%, and the revisions have been negative every month since May.
• To end on a happier note, the weakness in revenue revisions is not quite as apparent in the non-financial names, as we noted previously. Industrial
company analysts became a bit more sanguine after their Q210 conference calls, and they now peg Q310 top line growth at 14.1%, on average, up from a 13.6%
average estimate last month. Fourth quarter 2010 is also looking a little cheerier to this group, with a 7.1% expected revenue comp versus 7.0% last month. But
before you start looking at the industrial names as a source of locked-in revenue visibility, consider that analyst had bigger hopes for Q310 and Q410 back in May:
15.1% and 8.1% respectively.
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We have included month-by-month snapshots of analyst’s expectations in the pages that follow. You’ll see that in all cases where the data is relevant, the peak of
enthusiasm for expanding revenues was April/May 2010. It’s been downhill since then.
The bullish case is clear, if not necessarily easy to imagine. Analysts need to find enough macroeconomic stability to hold revenue estimates firm. They modestly
overshot revenue revisions to downside for Q210, and when companies were able to beat them, stocks rallied. The same thing could happen in Q3, as long as world
economies do not weaken further.
The bear case is similarly clear and easier to internalize. Slowing job growth, sluggish international economies, etc.
Either way, however, it looks to me like the market is in a “show me” mood on this issue. And since earnings season is almost over analysts will be left with only
macroeconomic drivers to fine tune their models ahead of September and the end of Q310. History shows – and their reaction to Q2 earnings seems to support – the
notion that this will cause further downward revisions. Yes, the market seems to have a bid at the moment, but August will prove a long and difficult month if analysts
continue to trim their top line projections.
Ticker Current Revenue Estimate for Next 4 Quarters Exp Y/Y Revenue Growth in Q3 '10 Exp Y/Y Revenue Growth in Q4 '10 Exp Y/Y Revenue Growth in Q1 '11 Exp Y/Y Rev Grwth Q2 '11
Current Current Current Current Dec Est Jan Est Feb Est Mar Est Apr Est May Est June Est July Est Aug Est Feb Est Mar Est Apr Est May Est June Est July Est Aug Est Apr Est May Est June Est July Est Aug Est June Est July Est Aug Est
Q3 Rev Est Q4 Rev Est Q1 Rev Est Q2 Rev Est Q3 2010 Q3 2010 Q3 2010 Q3 2010 Q3 2010 Q3 2010 Q3 2010 Q3 2010 Q3 2010 Q4 2010 Q4 2010 Q4 2010 Q4 2010 Q4 2010 Q4 2010 Q4 2010 Q1 2011 Q1 2011 Q1 2011 Q1 2011 Q1 2011 Q2 2011 Q2 2011 Q2 2011
IBM 24,107 27,876 23,632 24,718 2.67% 2.75% 3.53% 3.53% 3.60% 4.05% 4.12% 3.97% 2.30% 3.36% 3.36% 3.44% 4.09% 4.23% 4.00% 2.37% 3.35% 3.78% 4.11% 4.29% 3.39% 4.38% 4.30% 4.19%
CVX 52,860 52,850 52,539 56,096 8.24% 8.14% 4.15% 4.15% 15.83% 18.94% 18.94% 12.27% 13.37% 27.70% 27.70% 10.91% 19.48% 19.48% 12.63% 8.57% 15.60% 18.78% 18.78% 16.79% 9.05% 12.05% 16.67% 5.83%
MMM 6,791 6,465 6,718 7,203 5.62% 7.10% 7.04% 7.01% 6.74% 7.52% 6.92% 6.37% 9.65% 4.48% 4.39% 4.17% 4.74% 4.46% 3.93% 5.61% NA 6.38% 6.38% 5.08% 5.83% 8.67% 8.72% 7.01%
XOM 97,710 97,932 104,302 106,359 16.36% 19.96% 22.28% 22.28% 23.85% 27.46% 23.87% 18.73% 18.78% 15.95% 15.95% 18.65% 17.38% 13.28% 8.55% 9.01% 18.07% 19.04% 18.65% 16.65% 15.57% 14.59% 16.99% 15.00%
UTX 13,928 14,589 12,832 14,446 2.66% 4.28% 5.15% 5.26% 5.04% 5.19% 4.65% 4.32% 4.14% 4.16% 4.35% 4.50% 4.84% 5.02% 4.71% 3.47% 7.41% 6.55% 6.49% 6.49% 6.13% 5.53% 5.75% 4.00%
MCD 6,156 6,021 5,762 6,200 4.63% 4.63% 3.37% 3.27% 2.93% 2.92% 1.47% 0.37% 1.80% 2.36% 2.13% 1.83% 1.92% 0.61% -0.46% 0.80% 4.33% 3.69% 2.79% 1.29% 2.70% 4.22% 3.58% 4.29%
PG 20,161 21,119 19,765 19,909 4.91% 5.15% 4.81% 4.40% 4.52% 4.46% 2.85% 2.26% 1.79% 3.31% 2.79% 2.65% 2.92% 1.48% 0.79% 0.44% 4.19% 4.42% 2.68% 2.38% 3.06% 3.94% 4.01% 5.19%
JNJ 15,173 16,204 16,072 16,009 5.44% 5.44% 5.88% 5.80% 5.29% 4.35% 3.28% 2.23% 0.61% 1.92% 2.18% 1.87% 0.85% -0.20% -1.26% -2.10% 5.99% 5.36% 4.74% 4.65% 2.82% 5.58% 6.07% 4.43%
CAT 10,427 11,099 10,068 12,434 27.25% 27.25% 25.50% 25.50% 24.87% 38.99% 37.49% 38.67% 42.87% 25.65% 25.65% 24.77% 36.37% 35.39% 38.25% 40.53% 20.89% 17.67% 18.00% 20.17% 22.21% 16.33% 17.83% 19.46%
KO 8,289 7,637 7,920 9,103 6.94% 7.12% 6.19% 6.22% 6.38% 5.44% 4.69% 3.77% 3.04% 3.29% 12.88% 11.02% 4.39% 3.62% 2.50% 1.69% 30.44% 6.41% 5.96% 5.68% 5.26% 6.29% 5.41% 4.94%
TRV 5,402 5,243 5,316 5,759 0.84% 0.77% 0.00% 0.00% -0.01% 0.87% 0.87% 0.93% 1.16% 0.67% 0.67% 0.68% 0.99% 0.99% 1.10% 1.05% 0.67% 0.52% 0.52% 0.50% 1.25% 1.05% 1.47% 1.25%
WMT 103,853 118,704 105,933 112,961 5.69% 6.14% 5.69% 4.94% 4.93% 4.89% 4.41% 4.41% 4.47% 5.17% 4.27% 4.33% 4.33% 3.57% 3.68% 3.66% 6.55% 5.09% 5.54% 2.24% 6.09% 6.22% 7.10% 6.94%
BA 16,423 17,207 16,751 17,635 -2.29% -3.08% -3.47% -4.07% -3.38% -2.50% -2.24% -2.31% -1.59% -6.14% -6.19% -6.10% -3.99% -3.79% -3.62% -4.07% 4.48% 8.49% 8.04% 8.04% 10.09% 7.26% 7.61% 13.24%
HPQ 32,598 32,634 32,189 31,775 3.32% 3.35% 3.47% 4.78% 4.90% 5.53% 5.94% 5.98% 5.92% 4.38% 7.85% 7.96% 8.67% 9.00% 8.86% 8.87% 5.25% 1.90% 4.33% 4.33% 4.34% 5.84% 5.84% 5.36%
JPM 24,695 24,724 25,740 26,224 -6.47% -6.97% -9.31% -9.07% -9.23% -9.63% -9.63% -10.06% -14.19% 4.49% 4.84% 4.27% 2.50% 2.50% 2.91% -2.03% -6.96% -5.06% -5.06% -3.88% -8.63% 2.66% 6.74% 2.38%
AXP 6,797 7,128 6,827 7,207 3.72% 6.77% 9.64% 9.92% 9.18% 13.38% 13.40% 13.57% 12.98% 7.91% 8.24% 7.43% 10.14% 10.35% 10.45% 9.85% 1.92% 3.20% 3.63% 4.32% 3.34% 5.26% 5.31% 5.09%
DD 6,725 6,712 8,993 9,189 N/A 12.41% 10.67% 10.67% 10.25% 10.38% 9.27% 8.58% 12.81% 5.27% 5.27% 4.44% 3.13% 3.01% 2.06% 4.56% NA NA NA NA 6.00% NA NA 6.65%
MRK 11,239 11,555 11,187 11,121 91.69% 90.10% 84.26% 87.97% 88.60% 88.47% 87.61% 86.54% 85.77% 22.07% 24.67% 25.77% 25.02% 24.35% 23.47% 23.21% -1.28% -6.76% -0.63% -0.63% -2.06% 0.59% 0.77% -1.99%
VZ 26,339 26,404 26,531 26,769 -0.18% -0.08% -0.46% -0.59% -0.66% -0.69% -0.11% -2.83% -3.40% 0.61% 0.42% 0.36% 0.18% 0.66% -1.89% -2.54% 1.67% 1.04% 1.47% -0.51% -1.42% 2.78% 0.57% -0.01%
DIS 10,260 10,235 9,022 9,890 -0.58% -0.52% 3.48% 3.85% 4.08% 4.44% 4.00% 3.92% 3.98% 2.86% 2.86% 3.52% 3.85% 5.02% 4.75% 5.10% 6.72% 4.40% 5.44% 5.06% 5.15% 5.03% 5.63% 5.36%
MSFT 15,945 19,111 16,087 17,209 17.62% 17.76% 19.50% 19.61% 19.86% 20.85% 21.01% 20.72% 23.42% -2.09% -2.07% -1.35% -0.12% 0.09% 0.20% 0.47% 9.80% 9.75% 10.17% 10.14% 10.92% 9.24% 8.96% 7.29%
HD 16,939 14,914 17,379 20,435 2.26% 2.21% 2.41% 3.87% 3.80% 3.97% 4.33% 3.80% 3.53% 3.37% 7.81% 7.57% 7.81% 7.25% 6.71% 6.35% 3.94% 0.30% 3.73% 3.27% 3.06% 4.38% 4.28% 3.92%
KFT 12,077 13,285 12,497 12,868 4.83% 4.37% 12.68% 16.13% 21.80% 22.22% 24.92% 24.82% 23.19% 11.59% 12.90% 18.66% 18.92% 20.62% 20.55% 20.04% 9.29% 5.46% 8.96% 8.99% 10.42% 4.14% 4.25% 5.02%
T 31,195 31,297 31,164 31,310 1.08% 1.16% 1.05% 1.08% 0.96% 0.99% 1.04% 1.22% 1.10% 1.26% 1.28% 1.19% 1.29% 1.42% 1.60% 1.42% 2.32% 2.71% 2.44% 2.47% 1.68% 1.82% 1.71% 1.63%
CSCO 10,946 11,280 11,631 12,198 10.41% 10.62% 17.22% 17.22% 17.57% 18.94% 20.91% 20.89% 21.34% 19.03% 19.03% 19.29% 20.53% 22.58% 22.53% 22.81% 10.82% 10.31% 11.88% 12.05% 12.18% 12.07% 12.09% 12.18%
INTC 11,617 12,240 11,323 11,168 5.02% 5.98% 10.31% 10.82% 11.02% 16.53% 16.46% 16.25% 23.73% 4.58% 5.11% 5.26% 9.75% 9.74% 9.44% 15.81% 5.58% 4.92% 4.97% 4.87% 9.94% 4.13% 4.14% 3.74%
PFE 16,638 17,068 16,115 16,262 47.11% 45.17% 47.31% 47.34% 47.12% 46.44% 45.18% 43.94% 43.39% 6.39% 6.97% 6.96% 6.03% 4.91% 3.93% 3.32% -4.90% -6.17% -6.17% -4.17% -3.75% -3.63% -4.93% -6.11%
BAC 27,444 27,376 28,191 28,655 9.89% 8.69% 9.21% 10.22% 9.98% 12.47% 13.12% 11.72% 5.41% 15.34% 16.35% 15.88% 16.89% 17.60% 15.99% 9.17% 8.63% -6.24% -4.46% -4.48% -11.82% 3.70% 3.53% -1.71%
GE 38,031 41,279 35,204 36,572 0.00% 1.29% 2.62% 2.62% 2.90% 2.63% 2.75% 2.09% 0.61% 1.29% 1.25% 2.15% 2.06% 2.01% 1.65% -0.38% NA 0.21% 0.21% -2.73% -3.83% NA NA -2.33%
AA 4,878 5,279 5,323 5,725 8.08% 15.95% 23.99% 23.99% 21.06% 17.37% 15.91% 11.48% 5.70% 2.71% 3.63% 1.50% -0.22% -0.31% -1.63% -2.84% 1.53% 8.88% 7.03% 7.72% 8.93% 7.78% 13.00% 10.38%
Average: 9.89% 10.46% 11.27% 11.62% 12.13% 13.23% 12.91% 11.95% 11.92% 6.76% 7.55% 7.12% 7.82% 7.63% 6.88% 6.47% 6.53% 4.66% 5.19% 4.87% 4.60% 5.78% 6.34% 5.09%
Average Ex-Financials*: 11.62% 12.13% 13.04% 13.40% 14.04% 15.09% 14.68% 13.61% 14.07% 6.93% 7.81% 7.33% 8.09% 7.82% 6.97% 7.06% 7.48% 5.93% 6.49% 6.14% 6.30% 6.22% 6.68% 5.92%
*Financials include AXP, BAC, GE, JPM and TRV.
**WMT, HPQ, DIS, HD and CSCO have not yet reported Q2 '10 revenue.
Source: ThomsonOne
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Expected Y/Y Revenue Growth: Q2 2010 (Aug # is Actual*) Expected Y/Y Revenue Growth: Q3 2010
19% 17.6% 17.8% 17%
16.6% 17.5% 15.1%
17% 14.7%
15.6%16.0% 16.8%
15% 14.0%
14.8%14.8% 14.8% 13.4% 13.6% 14.1%
15% 14.0% 14.2% 13.2%12.9% 13.0%
13.7% 13.4%13.6%
12.9% 13.2% 13% 12.1% 12.0% 12.1%
13% 11.6% 11.6%
11.6% 11.3% 11.9%
11.0%
10.8% 10.5%
11% 11% 9.9%
9% 9%
7%
7%
5%
All Ex-Fin 5%
All Ex-Fin
Nov Dec Jan Feb Mar April May June July Aug
*Except WMT, HPQ, DIS, HD and CSCO
Dec Jan Feb Mar April May June July Aug
Expected Y/Y Revenue Growth: Q4 2010 Expected Y/Y Revenue Growth: Q1 2011
9% 8% 7.5%
8.1%
7.8% 7.8% 7.8% 7% 6.5% 6.6% 6.5%
8% 7.6% 6.1% 6.3%
7.6%
7.3% 6% 5.2%
8% 5.2%
4.9%
7.1%
6.9% 6.9% 7.0% 7.1% 5% 4.6%
7% 6.8%
6.5% 4%
7%
3%
6%
2%
6% 1%
5% 0%
All Ex-Fin All Ex-Fin
Feb Mar April May June July Aug April May June July Aug
4
Expected Y/Y Revenue Growth: Q2 2011 Expected Y/Y Revenue Growth: Full Year 2010
12.8%
8% 14% 13.0%
11.7% 12.7%
6.7% 11.5% 12.1%
7% 6.3% 6.2% 12% 11.0% 10.9%
11.3%
5.9% 11.0% 10.6% 11.1%
5.8% 9.3% 9.8%
6% 9.4% 9.8% 10.4%
5.1% 10% 8.8% 9.6%
5% 8.1%
8% 6.8%
4% 5.6%
6.0%
6% 4.8%
3%
4%
2%
1% 2%
0% 0%
All Ex-Fin All Ex-Fin
June July Aug Sept Oct Nov Dec Jan Feb Mar April May June July Aug
Actual and Expected Y/Y Quarterly Revenue Growth

20% 17.8% 17.8%
15.2% 14.8%
14.1%
15% 11.9%
9.6%
10% 8.2%
6.5% 7.1%
5.1% 5.6% 5.9% 6.2%
4.6% 6.3%
5%
0%
-5% ALL EX-FIN
-7.1% -6.4%
-10%
-10.4% -10.9%
-15% -13.2%
-14.6%
Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11
5
U.S. EQUITIES
MCD (+1.6%) said sales at U.S. stores open at least 13 months gained 5.7% in July, the biggest monthly increase since April 2009. The company reported
that sales were boosted by its new fruit smoothies and frappes, as global revenue was up 7% for the month. Homebuilders advanced after Deutsche
Bank upgraded DHI (+4.3%), saying the housing market is “near the point from which it can sustainably recover.” Shares of HPQ fell 8.0% on news that
former CEO Mark Hurd could receive a total severance package in excess of $40 million. Meanwhile, SLE (-0.1%) announced that CEO Brenda Barnes, who
has been on temporary medical leave since May, will step down permanently.
Important Earnings Today (with Estimates) From…

AIT: $0.39 MBI: $-1.02 S&P Futures
CREE: $0.48 DIS: $0.59 One Day (High –1126.75; Low – 1116.50):
FOSL: $0.33 Source: Bloomberg
GBE: $-0.21
Important Conferences/Corporate Meetings Today:

Canaccord Adams Global Growth Conference – Boston, MA
Jefferies Global Industrial and A&D Conference – New York, NY
JP Morgan Auto Conference – Detroit, MI
Oppenheimer & Co. Telecommunication, Media & Tech Conference – Boston, MA
Pacific Crest Securities Technology Leadership Forum – Vail, CO
Susquehanna Summer Energy Conference – Houston, TX
Prior Day SPX (High – 1129.24; Low – 1120.91; Close – 1127.79): Three Day (High – 1127.75; Low – 1103.75):
Source: Thomson ONE

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FIXED INCOME
Treasury data released Monday for the month of May showed that, for the first time since the recession began, U.S. investors owned more Treasuries
than foreign holders. The share of domestic tradable debt owned by mutual funds, households and banks rose to $8.2 trillion, or 50.2% of the total
amount outstanding worldwide. This week the Treasury will auction $74 billion total of 3-, 10- and 30-year securities, up from a total of $69 billion when
the same combination of debt was sold last month.
Source: Bloomberg Source: Bloomberg
Today’s Important Economic Indicators/Events:

Nonfarm Productivity (Q/Q SAAR): 0.0%
Unit Labor Costs (Q/Q SAAR): 1.5%
Wholesale Trade
FOMC Meeting Announcement
7
U.S. EQUITY
OPTIONS
SPX – The index traded in a fairly tight range (-0.1% to +0.7%) with a modest upside bias. This trading pattern would typically be associated with a decline in implied volatility,
but the VIX was higher much of the day and ended up 1.8%. This was likely due to a perceived level of uncertainty about the outcome of the upcoming FOMC Meeting
Announcement tomorrow which was behind the price movement expressed in the underlying index activity Monday. There were a couple of SPX option trades which were
indicative of this sort of nervousness. The August 1080 puts and the October 1000 puts were both bought outright over 4,000 times each. The September 1000 puts were also
bought vs. Selling the August 1025 puts several thousand times.
ETF – Although the market trended higher and option volume was roughly 70% of that expected, we noticed premium levels holding strong. This could be indicative of
trepidation prior to the economic releases coming out this week. In XRT (Retail) we saw a buyer of roughly 10,000 Jan 34 puts delta neutral. In FXI (China) investors bought 6,000
Sep 45 calls. In DBA one player bought 10,000 Jan 30 calls. We noticed protective plays in GLD and EEM. In GLD one player financed the purchase of 2,000 Jan 120 puts through
selling 4,000 Jan 170 calls. In EEM an investor bought the Mar 34/50 risk reversal for .65, most likely hedging a long position. We also noticed broad market protection being
purchased through roughly 8,000 SPY Dec 112 puts.
CURRENT IMPLIED VOLATILITY / CURRENT HISTORICAL VOLATILITY

Rank 8/3/2010 8/4/2010 8/5/2010 8/6/2010 8/9/2010 30-Day Implied Vol
1 FIS MIL Q ARG Q 43.46
2 PTV XTO ARG Q ARG 18.65
BIGGEST MOVERS
3 ARG Q PTV PTV PTV 51.87 Top 10 30-Day Implied Vol Bottom 10 30-Day Implied Vol
4 Q PTV NOVL NOVL NOVL 34.90 NU 96.01% 31.48 TSN -23.38% 30.77
5 NOVL ARG CFN EL NU 31.48
6 MJN NOVL EL CFN CFN 37.69 Q 80.83% 43.46 NI -20.30% 19.02
7 CFN BIG KR MJN FLIR 26.75 EFX 25.34% 30.87 MYL -16.65% 27.40
SWN MJN SWN KR EL 31.41
8
PNW 16.86% 18.63 HPQ -16.50% 31.58
9 EL EL MJN FLIR KR 25.20
10 CLX CFN FLIR AMAT MJN 33.58 DPS 14.26% 25.92 SNI -12.03% 26.08
11 SAI SAI AMAT SAI SAI 21.98 PBCT 13.75% 23.81 USB -11.42% 27.33
12 KR FLIR SAI SWN AMAT 34.36
13 FLIR PCS SJM SJM CPB 18.12
RAI 13.08% 17.38 IVZ -10.80% 35.64
14 AIG SWN PLL FRX INTU 27.06 GENZ 12.56% 45.85 UNM -9.99% 29.53
15 AMAT KR INTU MRK SWN 34.61 CF 11.98% 40.92 TEG -9.34% 19.05
16 SLE AMAT AIG PLL SLE 24.35
17 ROST SLE MRK SLE CRM 43.99 WEC 11.49% 16.97 XEL -9.28% 14.98
18 BIG TSN CLX CPB SJM 24.29
19 PCS FRX TGT INTU PLL 32.95
20 MCK CPB TGT NSM 33.64
21 FRX AIG FRX TSN FRX 26.70 We ranked the S&P 500 companies from the highest to lowest 30 day implied to
22 PBI ROST NSM CRM MCK 24.32 historical volatility ratio. Above we identify the 10 most positive and negative
23 TSN SJM MCK NSM MDT 25.72 movers.
24 CAH MRK SLE MCK RDC 38.32
25 PCLN CLX AZO CLX BIG 40.62 The table to the left represents the 25 highest 30 day implied to historical
SJM PCLN CLX AZO CLX volatility ratios within the S&P 500 companies. The green represents names
ADM CAH MRK AIG TSN new to the list while the red represents names that have fallen out.
MIL PBI ROST TGT
DF MCK PPL MRK
FIS TSN
BIG
MIL 8
Exchange-Traded Funds/Indexes
Prior Day Peformance of Largest ETFs by Assets S&P 500 Sector ETFs
Name (Net Assets*) Ticker Category Daily Return Sector Ticker 1-Day Perf YTD Perf Sector Ticker 1-Day Perf YTD Perf
SPDRs SPY Large Blend 0.55% Energy XLE 0.41% -2.00% Telecomm IYZ 0.73% 3.05%
SPDR Gold Shares GLD N/A -0.37% Health XLV 0.27% -4.12% Technology XLK 0.67% -2.18%
iShares MSCI Emerging Markets Index EEM Diversified Emerging Mkts 0.43% Industrials XLI 0.52% 11.59% Consumer Discretionary XLY 0.97% 8.63%
iShares MSCI EAFE Index EFA Foreign Large Blend 0.11% Utilities XLU 0.35% 0.26% Financials XLF 0.54% 3.19%
iShares S&P 500 Index IVV Large Blend 0.54% Consumer Staples XLP 0.52% 2.87% Materials XLB 0.62% -0.91%
Prior Day Top Volume ETFs Currency ETFs
Name Ticker Category Shares Traded Currency Ticker 1-Day Perf YTD Perf Currency Ticker 1-Day Perf YTD Perf
SPDRs SPY Large Blend 111,374,289 Australian Dollar FXA -0.25% 1.87% Mexican Peso FXM 0.44% 3.12%
Financial Select SPDR XLF Specialty - Financial 37,241,995 British Pound Sterling FXB -0.37% -1.72% Swedish Krona FXS -0.23% 0.74%
iShares Russell 2000 Index IWM Small Blend 35,730,125 Canadian Dollar FXC 0.09% 2.13% Swiss Franc FXF -1.08% -1.50%
United States Natural Gas UNG N/A 31,949,127 Euro FXE -0.49% -7.75% USD Index Bearish UDN -0.45% -4.32%
iShares MSCI Emerging Markets Index EEM Diversified Emerging Mkts 26,022,109 Japanese Yen FXY -0.58% 8.14% USD Index Bullish UUP 0.51% 1.69%
Prior Day Top Performers VIX ETNs Fixed Income ETFs
Name Ticker Category Daily Return Name Ticker 1-Day Perf YTD Perf Bonds Ticker 1-Day Perf YTD Perf
ProShares Ultra KBW Regional Banking KRU N/A 5.64% iPath S&P 500 VIX VXX -1.50% -38.13% Aggregate AGG 0.00% 4.30%
ProShares Ultra Nasdaq Biotechnology BIB N/A 4.39% Short-Term Futures ETN Investment Grade LQD 0.33% 6.34%
ProShares Ultra MSCI Pacific ex-Japan UXJ N/A 4.13% High Yield HYG -0.18% 0.42%
Direxion Daily Retail Bull 2X Shares RETL N/A 3.70% iPath S&P 500 VIX VXZ -0.82% 8.65% 1-3 Year Treasuries SHY -0.06% 1.47%
Direxion Daily Real Estate Bull 3X Shares DRN Specialy - Real Estate 3.67% Mid-Term Futures ETN 7-10 Year Treasuries IEF -0.02% 9.31%
20+ Year Treasuries TLT -0.37% 10.95%
Others
ETF Ticker 1-Day Perf YTD Perf ETF Ticker 1-Day Perf YTD Perf
Gold GLD -0.37% 9.40% Crude Oil USO 0.91% -7.00%
Silver SLV -0.61% 8.59% EAFE Index EFA 0.11% -2.66%
Natural Gas UNG -3.57% -27.58% Emerging Markets EEM 0.43% 1.83%
SPDRs SPY 0.55% 1.41%
Major Index Changes:

None
ETFs in the Headlines and Blogs:

Brazil Sector ETFs Start to Hit Market - http://www.thestreet.com/story/10829884/1/brazil-sector-etfs-start-to-hit-market.html?cm_ven=GOOGLEFI
Homebuilder, Consumer ETFs Rebound - http://www.thestreet.com/story/10830913/1/homebuilder-consumer-etfs-rebound.html?cm_ven=GOOGLEFI
9
Top Online Social Networking Stories
Latest Popular Digg.com Business Stories:

Economists React: ‘The Great Stall’ Takes Hold - http://blogs.wsj.com/economics/2010/08/06/economists-react-the-great-stall-takes-hold/
Warren Buffett’s billionaire donors club: By the numbers - http://theweek.com/article/index/205802/warren-buffetts-billionaire-donors-club-by-the-
numbers
You Call This a Recovery? - http://www.newsweek.com/2010/08/07/you-call-this-a-recovery.html
The Worst Examples of Inflation Ever - http://roadtickle.com/the-worst-examples-of-inflation-ever/
Salons concerned about tan tax’s effect on business - http://articles.sfgate.com/2010-07-08/news/21941931_1_tan-tax-tanning-salon-beds
Calculated Risk
Fannie, Freddie, FHA REO Inventory Increases 13% in Q2 from Q1 2010 - http://www.calculatedriskblog.com/2010/08/fannie-freddie-fha-reo-inventory.html
East of San Francisco: 20% Unemployment, House Prices off Sharply - http://www.calculatedriskblog.com/2010/08/east-of-san-francisco-20-
unemployment.html
Duration of Unemployment - http://www.calculatedriskblog.com/2010/08/duration-of-unemployment.html
NMHC Quarterly Survey: Apartment Market Conditions Tighten - http://www.calculatedriskblog.com/2010/08/nmhc-quarterly-survey-apartment-
market.html
CoStar: Commercial Real Estate Prices decline sharply in June - http://www.calculatedriskblog.com/2010/08/costar-commercial-real-estate-prices.html
The Big Picture

Economic “Do Not Fly” List - http://www.ritholtz.com/blog/2010/08/economic-do-not-fly-list/
“Terrorist Handbook” for bankers - http://www.ritholtz.com/blog/2010/08/terrorist-handbook-for-bankers/
FT: Goodbye Middle Class - http://www.ritholtz.com/blog/2010/08/ft-goodbye-middle-class/
Follow Up On Temp Services Hiring - http://www.ritholtz.com/blog/2010/08/follow-up-on-temp-services-hiring/
Economic Purgatory: 2% GDP - http://www.ritholtz.com/blog/2010/08/economic-purgatory-2-gdp/
The Baseline Scenario

It’s Hard to Take the fiscal Hawks Seriously: Testimony to the Senate Budget Committee - http://baselinescenario.com/2010/08/05/its-hard-to-take-the-
fiscal-hawks-seriously/
Bespoke Investment Group

The Return of the Monday Bull Market - http://www.bespokeinvest.com/thinkbig/2010/8/9/the-return-of-the-monday-bull-market.html
Zero Hedge
Goldman Explains Why It Is “QE2 or Bust” for Stocks Tomorrow - http://www.zerohedge.com/article/goldman-explains-why-it-qe2-or-bust-stocks-tomorrow
10
GENERAL DISCLOSURES
This presentation discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions. It is
provided for general informational purposes only and should not be relied on for any other purpose. It is not, and is not intended to be, research, a
recommendation or investment advice, nor an offer to sell or the solicitation of offers to buy any BNY ConvergEx Execution Solutions LLC (“ConvergEx”)
product or service in any jurisdiction. It does not take into account the particular investment objectives, restrictions, tax and financial situations or other
needs of any specific client or potential client. Please consult with your financial and other advisors before buying or selling any securities or other
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Please be advised that options carry a high level of risk and are not suitable for all investors. To receive a copy of the Options Disclosure Document
please contact the ConvergEx Compliance Department at (800) 367-8998.
The opinions and information herein are current only as of the date appearing on the cover. ConvergEx has no obligation to provide any updates or
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Revenue Expectations for the Dow 30 – Companies Beat, Analysts Shrug

Actual and Expected Y/Y Quarterly Revenue Growth

-5% ALL EX-FIN

Important Earnings Today (with Estimates) From…

Important Conferences/Corporate Meetings Today:

Source: Thomson ONE

Source: Bloomberg Source: Bloomberg

Today’s Important Economic Indicators/Events:

CURRENT IMPLIED VOLATILITY / CURRENT HISTORICAL VOLATILITY

Major Index Changes:

ETFs in the Headlines and Blogs:

Top Online Social Networking Stories

Latest Popular Digg.com Business Stories:

The Big Picture

The Baseline Scenario

Bespoke Investment Group

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