NVIDIA Corporation (NDAQ: NVDA) shares tumbled today after the graphics processor maker warned that its second quarter may suffer. Shares plunged more than 30 percent after the company issued revenue and gross margin warnings and blamed the problems on weak demand, delayed production of new products and price cuts. The news comes ahead of its quarterly earnings along with that of many other companies operating in the sector.

NVIDIA said that it now expects its second quarter revenues to range between $875 million and $950 million with gross margins also expected to be lower than internal expectations. This compares to a prior revenue forecast of $1.01 billion by analysts. The company also said that it would take a charge of $150 million to $200 million in the second quarter to cover anticipated warranty, repair, and return costs associated with a defect on some of its chips.

Shares of NVIDIA rival Advanced Micro Devices, which owns ATI, fell 3.7 percent on the forecast. Others weren't safe either as the Philadelphia semiconductor index fell as much as 2.7 percent in early trading before recovering to trade down just 0.5 percent right now. The industry as a whole has been experiencing problems as consumer spending has weakened - particularly on high-end computers and graphics cards needed for gaming and graphics design purposes.

Shares of NVIDIA Corporation fell $5.52, or 30.12%, to $12.60 per share on the news.

Related Companies
Intel Corporation (INTC)
Broadcom Corporation (BRCM)
Pixelworks, Inc. (PXLWD)
Microsoft Corporation (MSFT)
Silicon Image, Inc. (SIMG)

Northstar Neuroscience, Inc. (NDAQ: NSTR) shares are up sharply today after a large shareholder offered to purchase the company. Tang Capital Partners announced its offer to acquire the company at $2.25 per share in cash today, sending shares more than 22 percent higher on the day. The announcement was revealed in a Schedule 13D/A filing with the SEC.

"As Northstar's largest shareholder, holding approximately 18% of Northstar's outstanding common stock, we have spent considerable time analyzing Northstar and its options. We strongly believe that the best course of action for Northstar and its shareholders is for Northstar to be acquired in a transaction that represents a significant premium to its current market price," said the hedge fund.

"However, the window for consummating any such transaction is limited; if the Board is to prevent further erosion of Northstar's value, it must act quickly. Accordingly, this non-binding proposal is contingent on our receipt of a positive response on or before July 9, 2008 and Northstar entering into a binding definitive merger agreement on or before July 23, 2008.

"Our proposal provides Northstar shareholders an immediate and certain path to a premium, all-cash transaction that will eliminate future market risk as well as the risk of future erosion in value. We believe that the vast majority of other Northstar shareholders will agree and expect this proposal to be readily approved by them. We encourage Northstar's Board to work with us to finalize a definitive merger agreement and bring the transaction to a shareholder vote as quickly as possible.

"We value the input of the Board and management when considering Northstar's strategic alternatives and have tried on several occasions to have constructive, confidential discussions with management regarding these alternatives. So far, management has been unwilling to entertain such discussions except under conditions that would make it impossible for us to protect the value of our significant investment in Northstar. We have made this proposal now because of our belief that this is the only remaining path to protect that investment."

This is great news for shareholders as the buyout price represents a substantial 50% premium to the going market price before the announcement was made. Whether or not the company agrees remains to be seen, but it appears that shareholders are bullish on the prospects at this point. Still, shares are trading substantially below the buyout premium at just $1.84 per share.

Related Companies
Cyberonics, Inc. (CYBX)
EnteroMedics Inc. (ETRM)
St. Jude Medical, Inc. (STJ)
Medtronic, Inc. (MDT)
Somanetics Corporation (SMTS)

H&R Block Inc. (NYSE: HRB) announced that it swung to a quarterly profit and surpassed analyst estimates. The tax preparer sold off its Option One mortgage servicing business to billionaire Wilbur Ross in April and forecast a full-year profit that was also higher than the market was expecting by a long shot.

Many traders had positioned themselves for poor results earlier this month, sending the stock some 10% lower on June 20th. Specifically, they expressed concerns about the company's guidance, saying the cash-poor households may start doing their own taxes rather than paying H&R Block to do them.

However, many contrarians were able to make a mint from this trade. There have been many economic slowdowns in the past, but professional filing of taxes has tended to be recession resistant. After all, many filers use professional tax preparers in order to access their refunds more quickly than otherwise possible.

Notably, H&R Block even managed to increase its U.S. retail client base by 3.8 percent while its number of international clients grew by 6.1 percent with particularly strong growth in Canada. The company said it was confident that it would realize significant gains in earnings per share through 2011.

In the end, however, it was the value of the dollar that helped the most. More than half of the revenue increase and a third of the profit increases from the international business resulted from favorable exchange rates when compared to the U.S. dollar. However, with continued weakness in the United States, this disparity should continue to grow.

Related Companies
Jackson Hewitt Tax Service (JTX)
Pre-Paid Legal Services, Inc. (PPD)
PRG-Schultz International, Inc. (PRGX)
Intuit Inc. (INTU)

KB Home (NYSE: KBH) shares dropped after the nation's largest homebuilder announced that its losses widened in the second quarter. Weaker sales and falling home prices led to a 55 percent drop in revenues as the company also booked charges related to the lower value of unsold homes, joint venture deals and land option contracts.

KB Home reported a net loss of $255.9 million, or $3.30 per share, compared to a loss of $148.7 million during the same time a year ago. Meanwhile, revenues plunged to $639.1 million from $1.41 billion a year ago, driven down by lower housing and land sale revenues.

"Despite substantially lower home prices, relatively low interest rates and an abundance of choices, potential new home buyers remain reluctant to purchase a home," Mezger said in a statement. "But as housing affordability continues to improve, we expect todays hesitant buyers to become a healthy source of demand for new homes, fueling the eventual housing market recovery."

The problem is so large at this point that some rental rates are higher than mortgage rates for like-kind properties! Still, people prefer to pay rent instead in order to avoid paying money on a property that is going to decline in value. This simply emotional fear has been causing a very real decline as inventories continue to rise.

Foreclosures have risen substantially over the past few months, and very few buyers are stepping in to purchase houses on the cheap. This environment of high supply and low demand has forced down prices for simple economic reasons. The problems won't be resolved either until buyers start to step in and purchase inventory.

When will buyers step in? That's the million dollar question for home buyers and companies like KB Home alike...

Related Companies
Centex Corporation (CTX)
D.R. Horton (DHI)
Pulte Homes, Inc. (PHM)
M.D.C. Holdings, Inc. (MDC)
Lennar Corporation (LEN)
NVR, Inc. (NVR)
Orleans Homebuilders (OHB)

View SEC Filings
View Annual Report
View Insider Trading

Goldman Sachs (NYSE: GS) advised selling shares of the financial services firm Citigroup, which sent shares sharply lower on the day. Goldman cut its recommendation for US Brokers to neutral from attractive and strongly recommended that investors sell shares of Citigroup, citing multiple problems, including more asset write-downs, higher loss provisions for consumer credit and the potential for more capital raises, dividend cuts or asset sales.

Shares of Citigroup fell more than 6% on the news, reaching a brand new 52-week low. Goldman's recommendation marks a sharp reversal from the positive stance that it took following the near collapse of Bear Stearns. The news also comes just days after Goldman Sachs itself was downgraded to market perform by analysts at Wachovia "in light of renewed economic fears" despite being the strongest investment bank in the U.S.

Goldman Sachs cut its second quarter and fully year forecasts for several brokers. The largest cuts were made on Citigroup and Merrill Lynch where it now sees the firms posting losses in both the second quarter and full year. Goldman expects Citigroup to take a $9 billion writedown and Merrill to take a $4.2 billion writedown in the most recent quarter. Both firms are expected to report their second quarter earnings in mid-July.

In the end, the brokers and investment bankers are still in big trouble and face large future writedowns. Goldman Sachs remains one of the few large investment banks that has been faring well against the problems, but even they have seen a downgrade. It will be very interesting to see where things head from here now that the negative sentiment is now out in the open with even analysts beginning to downgrade the sector...

Related Companies
Merrill Lynch & Co., Inc. (MER)
Morgan Stanley (MS)
UBS AG (UBS)
Credit Suisse Group AG (CS)
Malaysia Fund Inc. (MAY)
JPMorgan Chase & Co. (JPM)
Interactive Brokers Group, INc. (IBKR)
Citigroup Inc. (C)
Jefferies Group, Inc. (JEF)

MBIA Inc. (NYSE: MBI) shares are trading higher on the day in a continued recovery from its recent lows as some investors are beginning to find themselves bullish on the bond insurer. This sentiment is apparent in the price of the July $5 options, which are trading at a high $0.75 per contract. The price implies that some investors are betting that MBIA will rise above $5.75 during the next 23 days before the July options expiration.

Investors who are neutral to bullish may be interested in purchasing a covered call on MBIA to take advantage of this premium. The return on investment for this position would be approximately 15.31% for a 23-day period assuming that the stock doesn't plummet below $4.90 during that time.

Shares of MBIA have plummeted in recent weeks after an analyst from UBS noted that the company could face an additional $6.8 billion to $7.5 billion in losses on its mortgage-backed securities and structured finance portfolio. Brian Meredith noted that these calculations were based on UBS' mortgage research team's cumulative mortgage-securities and credit loss expectations.

Recently, MBIA's credit rating was cut to "AA" from "AAA", which means that the insurer may face difficulty generating new business. After all, who is going to insure their bonds with someone who has a less than perfect credit rating.

Related Companies
Ambac Financial Group (ABK)
Assured Guaranty Ltd. (AGO)
Radian Group Inc. (RDN)
The PMI Group, Inc. (PMI)
W.R. Berkley Corporation (WRB)

Dow Chemical Company (NYSE: DOW) has raised its prices once again in an effort to counteract rising commodity prices. The move represents the second price hike this month alone while the company also noted that it would trim its capacity for several products and add on new freight surcharges to certain orders.

The move also underscores the problem the Federal Reserve faces as it modifies its interest rate policy to address the rising threat of inflation amid weak economic growth. The Fed has already aggressively cut rates from last September through April, but the result has been a dramatic decline in the value of the dollar.

Dow Chemical also noted that things weren't going to improve anytime soon. The company said it will raise prices as much as 25% starting on July 1st, which would come on top of the up to 20% increase that took effect June 1st and led several others to make similar price adjustments of their own.

The company made its first dramatic move back in December when it announced that it would cut 1,000 jobs and shut a number of underperforming plants in order to put the savings to work in higher-growth opportunities. It also unveiled a joint venture with Kuwait Petroleum, which allowed it to sell a big piece of its less profitable assets by selling a 50% stake for $9.5B.

It appears that for the next few months, consumer prices will continue to rise unless the Fed takes action.

Related Companies
Albemarle Corporation (ALB)
Westlake Chemical Corporation (WLK)
Rohm and Haas Company (ROH)
Eastman Chemical Company (EMN)
Ashland Inc. (ASH)
Hercules Incorporated (HPC)

CME Group Inc. (NYSE: CME) announced plans today for a share buyback and special dividend that effectively sweetens its bid for Nymex Holdings Inc. (NYSE: NMX). The world's largest futures exachange said it would institute a $1.1 billion buyback plan over the next 18 months and pay a $5 per share cash dividend if its bid for the energy and metals exchange succeeds.

The proposed acquisition hit some snags due to a slump in CME Group's share price, which has lowered the takeover price by as much as $3 billion to just $8 billion. The buyback and dividend tactic worked wonders the last time CME Group used it during its acquisition of rival Chicago Board of Trade last year. After all, they are great for shareholders!

The original deal calls for Nymex shareholders to receive $36 and 0.1323 shares of CME for each NMX share. The proposed dividend would raise the purchase price for Nymex stock to $97.11 per share, which represents a $9.27 billion overall valuation. However, some investors are still concerned that the deal may fall through.

Many believe that the CME Group may be forced to tweak the cash portion of the deal slightly higher in order to sway the remaining opposition. This is the cause behind the recent rally in the differential between Nymex and CME Group shares that arbitrageurs have been trading for some time now.

Related Companies
NASDAQ OMX Group, Inc. (NDAQ)
NYMEX Holdings, Inc. (NMX)
NYSE Euronext (NYX)
IntercontinentalExchange, Inc. (ICE)
MarketAxess Holdings Inc. (MKTX)
IDACORP, Inc. (IDA)
Arbinet-thexchange, Inc. (ARBX)