Monday, February 01, 2010

Exxon announces earnings of $1.27 vs estimates of $1.19. The largest US Company with a market cap of
~$305 b, posted a fifth straight drop in profit after slumping demand for diesel and gasoline undermined
gains from increased oil prices. Stock is trading up ~2% in pre-market.

• White House paints bleak deficit view – the White House, in its budget out Mon, indicated that the
deficit for the fiscal year ending Sept will be $1.6T+, much higher than the $1.35B forecast by the CBO
just last week. The deficit would fall to $1.3T in F11 and then to $700B in each of F13 and F14. Obama’s
proposed $100 billion stimulus package, which includes tax credits for small businesses that make new
hires and money for infrastructure projects, is less than a $154 billion package that the House approved
in December but more than a measure the Senate is drafting Reuters/WSJ/NYT
• Autos – more recall headlines – Toyota received clearance from U.S. regulators for a repair to sticky
accelerator pedals that caused the company to recall 2.3 million vehicles; Toyota Motor Corp.’s head of
U.S. sales plans to make U.S. television appearances today, starting with NBC Universal’s “Today Show,”
(DJ/Reuters); separately, Honda shares fell ~4% after announcing its largest recall in 7 years.

Toyota Motor Corp – daily chart

• Banks support a single global tax that would create a resolution fund to wind down future failed
institutions - Coming away from the Davos conf this past week there have been a lot of articles talking
about how banks are coming to a consensus to back a plan that would impose an int’l insurance levy on
the industry, creating a fund that would be responsible for administering any future bailouts. The more
cynical papers argue that this is a ploy by banks to preempt any future regulatory actions, such as the
Volcker plan to separate proprietary trading from traditional commercial banking
• We consider the recent sell off as largely a correction in a medium-term bull market in risky assets,
but nevertheless a correction that is probably not over and that could easily last another month. We
thus retain bullish medium-term forecasts for all risky assets, and bearish ones for government bonds,
while advising a tactical short on the riskier asset classes. JPMorgan’s Jan Loeys
• Economics – Kasman - A central risk is that policies designed to ease social pain and fill budget holes
produce regulatory and tax changes that damage medium-term growth prospects. There is also a near-
term risk that policy uncertainty weighs on sentiment and tempers the shift away from retrenchment
now under way. Recent developments have seen these policy uncertainties rise in both the US and
Western Europe.• The shift in administration rhetoric points to an increased willingness to risk the
vitality of the recovery for social objectives. The main support for economic growth in the coming
quarters should come from profit-rich corporates that are poised to expand as margins move up toward
their 40-year peak. The potential for actions that sap this strength to deal with persistently high
unemployment and budget deficits is a risk that is weighing on markets and possibly business decisions
– Kasman
• Earnings - 78 percent of the Standard & Poor's 500 Index companies' quarterly reports so far this
earnings cycle have beaten analysts' profit estimates, while 56 percent topped sales projections. The
positive surprises are just short of the 80 percent mark of the third quarter, the highest since at least
1992 (Bloomberg)
• Fed’s Bullard says the risk of deflation has passed in an interview to the FT; he also says the Fed will
be looking at factors other than employment and inflation when determining when to raise rates – FT