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02 December 2010

The Intelligent Investor U.S.
The Economic Monitor Series. Free Edition.

INSIDE THE REPORT

MARKETS AT A GLANCE

Stock recommendations and price targets from top brokerage firms Analysis and views on Fiscal plan draws flak, praise Economic Indicator Watch along with Graphs List of companies earnings which hit and miss the analysts’ expectations Important Events Scheduled on December 03

Wall Street rallied for a second day, as concerns about Europe's sovereign debt crisis waned, giving investors the chance to add to positions among recent winners among banks and retailers. The DJIA was up 106.63 points, or 0.95 percent, at 11,362.41 The benchmark 10-year note last traded down 7/32 in price. Its price had risen as much as 6/32 at midday after falling 18/32 in early trading. Its yield was last 2.99 percent, up from 2.97 percent late Wednesday after touching a session low of 2.94 percent earlier. The dollar was down 0.5 percent against the yen at 83.76, weighed down earlier by a rise in the latest weekly jobless claims. Weaker dollar encouraged buying of riskier assets such as oil and other commodities, while upbeat U.S. economic data added support. On the NYME, crude for January delivery settled up $1.25, or 1.44 percent, at $88 a barrel. Gold turned flat after failing to break above $1,400 an ounce, as safe-haven buying faded after European lenders offered a liquidity safety net for vulnerable banks and as U.S. data showed signs of an improving economy. Spot gold was up less than 0.1 percent at $1,388.60 an ounce at 2:08 p.m. EST.

Economic Events

Federal Reserve Bank of Cleveland President Sandra Pianalto speaks on "Current Economic and Monetary Policy Issues" at Oberlin College

Corporate Events

Big Lots will report its quarterly results.

Top Stories

STOCK INDICES
INDEX DJIA* Nasdaq* S&P 500* NYSE Composite Global Dow * CLOSING VALUES LAST 11362.41 2579.35 1221.53 7712.25 2021.65 CHNG 106.63 29.92 15.46 108.52 35.71 % CHNG 0.95 1.17 1.28 1.43 1.8

Jobless claims rise Pepsi to buy Wimm-Bill-Dann Toll Bros posts profit IAC says CEO Diller steps down JPMorgan accuses Lehman again Bombardier profit falls SEC, banks talk of ending mortgage deal probe: WSJ At least three to bid for AIG Taiwan unit: Sources

CURRENCIES
INDEX Euro (EUR/USD) U.K. Pound (GBP/USD) Japanese Yen (USD/JPY) LAST 1.3223 1.5596 83.87 PRIOR 1.3137 1.562 84.17

All prices are at 03:53 PM EST

FUTURES
LAST Crude Oil Natural Gas Gold, Dec. Copper Wheat 87.96 4.339 1386.2 397.3 747 CHANGE 1.21 0.07 -2.1 2.55 0

All prices are at 03:43 PM EST

The Intelligent Investor - U.S.
STOCK RECOMMENDATIONS BY BROKERAGE HOUSES
BROKERAGE/COMPANY JP Morgan Rowan Cos Fairchild Intersil Piper Jaffray Sprint Nextel Brean Murray Abercombie & Fitch Incyte Corp Goldman Sachs Apache Corp. Principal Financial Barclays CME Group ICE NYSE Euronext Stifel Costco Wholesale Finisar Raymond James Halliburton Co Pioneer Natural Resources Aeropostale S&P Equity HJ Heinz Wedbush ITT Corporation Nomura Motorola UBS Red Hat Symantec Corp American Capital Ares Capital Biomarin Pharmaceutical Blackrock Kelso Wells Fargo Legg Mason Blackrock Credit Suisse Kimco Realty Finisar Raises target price to $17 from $15 Raises target price to $30 from $25 — — Starts with market perform rating Starts with outperform rating Market perform Outperform Raises price target to $50 from $44 Raises price target to $19.50 from $18 Starts with buy rating Starts with buy rating Cuts to neutral from buy Starts with neutral rating Buy Buy Buy Buy Neutral Neutral Starts with reduce rating Reduce Recommends price target of $58 Outperform Cuts to hold from buy on valuation Hold Raises price target to $55 from $45 Raises price target to $107 from $90 Cuts to market perform from outperform — — Market perform Raises target price to $73 from $68 Raises price target to $27 from $25 Buy Buy Raises price target to $312 from $307 Raises price target to $125 from $123 Raises price target to $31 from $30 Equal-weight Overweight Overweight Adds to americas conviction buy list Raises price target to $32 from $31 — — Raises to buy from sell Recommends price target of $22 Buy Buy Raises price target to $4 from $3.50 Neutral Recommends price target of $36 Recommends price target of $18 Recommends price target of $14 Overweight Overweight Neutral ACTIONS RATING

Disclaimer: The views and investment tips expressed by investment experts are their own, and not that of IBTimes or its management. We advise users to check with certified experts before taking any investment decisions.

The Intelligent Investor - U.S.
TOP STORIES

Jobless claims rise
Initial claims for state unemployment benefits increased 26,000 to a seasonally adjusted 436,000, said the Labor Department. There was drop in the four-week moving average of new jobless claims. The four-week average of new jobless claims, considered a better measure of underlying labor market trends, fell 5,750 to 431,000, the lowest since early August 2008. The number of people still receiving benefits under regular state programs after an initial week of aid rose 53,000 to 4.27 million in the week ended November 20. The number of people on emergency unemployment benefits increased 142,874 to 3.94 million in the week ended November 13.

Pepsi to buy Wimm-Bill-Dann
In its biggest-ever international acquisition, PepsiCo is set to pay $3.8 billion for a 66 percent stake in Russian juice and dairy producer, Wimm-Bill-Dann. The deal will give Wimm-Bill-Dann an enterprise value of $5.4 billion. PepsiCo will offer to buy the remaining shares following completion of its controlling stake. Pepsi has offered the price of $33 per American depositary receipt, which represents a 32 percent premium to the 30-day average trading price of Wimm-Bill-Dann's U.S.-listed shares. The deal will raise PepsiCo's annual global revenues from nutritious and functional foods to nearly $13 billion from around $10 billion.

Toll Bros posts profit
Toll Bros reported profit for its fourth quarter helped mainly by cost cuts and an income tax benefit. Earnings for the quarter stood at of $50.5 million, or 30 cents per share, compared with a year-earlier loss of $111.4 million, or 68 cents per share. But the number of net signed contracts fell 27 percent to 558 units. Its revenue fell 17 percent to $402.6 million, but ahead of analysts' average estimate of $393.8 million.

IAC says CEO Diller steps down
Barry Diller is stepping down as chief executive of InterActiveCorp, the company confirmed today. IAC said it had bought out one of its largest shareholders; John Malone's Liberty Media Corp. IAC said on Liberty had sold its entire equity stake in IAC in exchange for $220 million in cash and the Evite and Gifts.com businesses.

JPMorgan accuses Lehman again
JPMorgan Chase hits back Lehman Brothers Holdings saying it was misled into lending more than $70 billion to the bankrupt U.S. investment bank in the belief it would be repaid in full. JPMorgan said in court papers that it loaned the money believing it would be paid back in full after British bank Barclays' purchase of Lehman's U.S. brokerage business.

Bombardier profit falls
Bombardier Inc reported a 15 per cent drop in third-quarter profit. The world's No. 3 civil aircraft maker after Airbus and Boeing, said the commercial aircraft market was still tough and resulted in huge percentage drop. For the August-October quarter, it reported net income of $143 million, or 8 cents a share, below analysts' average expectation of 9 cents a share. Its revenue fell 13 per cent to $4 billion. The company said order backlog in aerospace fell to $16.2 billion as of October 31, from $16.7 billion on January 31. The aerospace division received 23 net orders during the quarter.

SEC, banks talk of ending mortgage deal probe: WSJ
U.S. securities regulators are in preliminary talks with several banks to resolve probes involving sales of complex mortgage bond deals that led to the financial crisis, the Wall Street Journal said. The investigation by the Securities and Exchange Commission (SEC) involves mortgages and other loans known as collateralized debt obligations, or CDOs, that were sold to different investors, citing people familiar with the matter, the paper said.

At least three to bid for AIG Taiwan unit: Sources
Taiwan's Fubon Financial, Chinatrust and the chairman of conglomerate Ruentex will bid for AIG's Taiwan unit after completing due diligence, four sources with direct knowledge of the situation revealed to Reuters. A fourth party to the due diligence, Cathay Financial, will make a decision on whether to bid on Friday, one of the sources said. AIG said in November it aims to sell Nan Shan for around $2 billion within two months.

The Intelligent Investor - U.S.
ANALYSIS AND VIEWS

Fiscal plan draws flak, praise
By Joseph Picard
Sen. Judd Gregg, R-NH, stated the obvious today regarding a plan to deal with the nation's long-term fiscal well-being. He said, "There are no easy fixes here." He may just as well have said that there are no easy ways to move forward even when you have a plan full of uneasy fixes. The National Commission on Fiscal Responsibility and Reform today unveiled its plan for cutting the nation's $13.8 trillion budget deficit down to manageable size and immediately triggered the kind of opposition and criticism commission co-chair Alan Simpson predicted. Simpson, former Republican senator from Idaho, said critics from both sides of the political spectrum would "rip the plan to shreds." He said the plan would be buried "in an unmarked grave." "But this baby ain't going away," Simpson added at today's press briefing. When lawmakers are forced to deal with the national budget this spring, the commission's plan "will rise from the crypt." The commissioners themselves may have begun digging the plan's grave. Of the panel's 18 members, 14 must vote to approve the plan for it to go to Congress as a proposal. The commissioners will vote on Friday. Three commissioners - Rep. Jan Schakowsky, D-IL, Rep. Paul Ryan, R-WI and Rep. Jeb Hensarling, R-TX -- said today that they would vote against it. Seven commissioners - Simpson, co-chair Erskine Bowles, Sen. Gregg, Sen. Kent Conrad, D-ND, Alice Rivlin, White House budget director in the Clinton administration, David Cote, CEO of Honeywell International and Ann Fudge, former chief executive of Young & Rubicam - have pledged to vote for the plan. Sen. Tom Coburn, R-OK and Rep. John Spratt, D-SC said they were leaning in favor of the plan. That leaves six commissioners on the fence -- Sen. Max Baucus, D-MT, Sen. Mike Crapo, R-ID, Sen. Dick Durbin, D-IL, Rep. Xavier Becerra, D-CA, Rep. Dave Camp, R-MI and Andrew Stern, president of the Service Employees International Union. Bowles has already said that if the supermajority of commissioners fails to approve the plan, it will still be a valuable document because Congress can use it to spur debate on the issue. "The era of deficit denial is over in Washington," Bowles said. The commissioners opposing the plan agreed with Bowles that the deficit is a problem that must be dealt with. Hensarling said the most significant result of the commission's work was producing a plan, which lawmakers may now use to develop a better plan. Schakowsky said the nation is "on an unsustainable fiscal course," but she could not support the plan because it did not share the burden, as professed, but leans too heavily on the nation's more vulnerable populations. "To reduce our deficit and debt by asking Medicare recipients to pay higher fees is not sharing the sacrifice," she said. Hensarling and Ryan objected to the plan's call for ending tax breaks. The plan intends to reduce the national debt by $4 trillion by 2020, by cutting discretionary spending and eliminating tax breaks. It would eliminate earmarks, cut farm subsidies, freeze the defense budget and eliminate 200,000 federal jobs by attrition. The plan would also gradually raise the Social Security retirement age to 68 by 2050 and 70 by 2075. The plans also proposes cuts to Medicare and Medicaid. According to the plan, over $1.4 trillion of the savings would come from discretionary spending, over $700 billion from mandatory spending, over $700 billion from tax reforms, and over $600 billion from paying less interest on debt. Under this proposal, in 2020, the budget deficit is projected to be to just $382 billion, or 1.6 percent of the projected 2020 GDP. By 2037, the budget would be balanced and then turned into surpluses in subsequent years. The spending cuts would start gradually in 2012 in order to not disturb the fragile economic recovery, the commission said. Maya MacGuineas, president of the Committee for a Responsible Federal Budget, which group backs the plan as a mature way forward in dealing with the nation's fiscal problems, said that the plan will find supporters even if it doesn't get the 14 votes on Friday. "I think the plan is great and it will get support ," MacGuineas said. "It does a lot on every area, which unfortunately is necessary." AFL-CIO President Richard Trumka issued a statement denouncing the plan. "No proposal on fiscal issues is serious that leaves the Bush tax cuts for the rich in place while raising taxes on the middle class and slashing Social Security and Medicare," Trumka said. "All commission members should vote no on this misguided plan. All members of Congress should also oppose these job-killing policies if they are raised in future legislation or budgets." Trumka said the plan "reeks of hypocrisy." "The faux deficit hawks on the commission - and Senators who claim unemployment insurance must be paid for -- have no problem clamoring for more unpaid Bush tax cuts for millionaires," Trumka said. Trumka said lawmakers should be focused on "the jobs deficit." "Fifteen million people are out of work, and another eleven million have given up looking or are working part-time involuntarily," he said. "We need to invest in jobs by rebuilding our crumbling infrastructure and green technologies and end tax breaks that send American jobs overseas." John Irons, research and policy director for Economic Policy Institute, said "it is becoming increasingly clear that the Bowles-Simpson plan will not receive the required 14 votes to send the report to the President and Congress. The rejection of the proposal should not be seen as a failure to take deficit reduction seriously, but rather that the policy approach adopted by the co-chairs is flawed." Irons said the plan "fails to fully acknowledge the current economic crisis." The plan calls for "serious belt-tightening" beginning in just 10 months, even though the nation's unemployment rate will still likely be between 9 and 10 percent, Irons said. "The plan includes no concrete, immediate action to create jobs or to spur economic growth in the near term," Irons said.

The Intelligent Investor - U.S.
ECONOMIC INDICATOR WATCH ON 03 DECEMBER 2010

Non-farm Payrolls (MoM)
Forecast: 140k Prior: 151k

Manufacturing Payrolls
Forecast: 5k Prior: -7k

Private Payrolls
Forecast: 153k Prior: 159k

Unemployment
Forecast: 9.6pct Prior: 9.6pct

Average Hourly Earnings
Forecast: 0.2pct Prior: 0.2pct

Average Work Week
Forecast: 34.3Hrs Prior: 34.3Hrs
The Labor Department will release its report on various payrolls for the month of November at 0830 EST. Nonfarm payrolls increased 151,000 in October, the first increase since May, as a 159,000 jump in private employment more than offset a 8,000 drop in government payrolls. In addition, the government revised payrolls for August and September to show 110,000 fewer jobs lost. The department will release other macro-economic data like unemployment, average hourly earnings and average work week etc.

ISM Non-manufacturing index (MoM)
Forecast: 54.8 Prior: 54.3

ISM Non-manufacturing business activity (MoM)
Forecast: 57.2 Prior: 58.4
The Institute for Supply Management will report its data for non-manufacturing activity in November at 1000 EST. In its last report, the Institute for Supply Management said its index of non-manufacturing activity rose to 54.3 in October from 53.2 in September. A reading above 50 indicates expansion in the nonmanufacturing sector, which comprises mostly service sector firms and accounts for two-thirds of U.S. economic activity. In the same report ISM said Non-manufacturing business activity was 58.4 in the month of October. The Data from October had showed acceleration in manufacturing activity allaying fears of a sharp slowdown in the sector, which has been leading the recovery. Many economists suggest although the pick-up in services industries was not as robust as the manufacturing sector, the combined picture certainly points to an improvement in the pace of overall economic activity in the fourth quarter of the year.

EST/GMT 0940/1440 1000/1500

INDICATOR ECRI Inflation Factory Orders Durable goods Ex-Transportation Ex-Defense Nondefense ex-air

PERIOD Nov Oct Oct-Rev

UNIT -pct pct pct pct pct

FORECAST --1 ------

PRIOR 97.4 2.1 -3.3 -2.7 -2.1 -4.5 126.4

1030/1530

ECRI Weekly Index

weekly

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The Intelligent Investor - U.S.
DAILY EARNINGS HITS & MISSES AS ON 02 DECEMBER, 2010
Company Name BOMBARDIER CONN'S CORESITE REALTY DEL MONTE FOODS FIFTH STREET FINANCE GILDAN ACTIVEWEAR GILDAN ACTIVEWEAR ISLE OF CAPRIS CASINOS KROGER CO MET-PRO MOVADO GROUP TOLL BROTHERS TOYOTA MOTOR UTI WORLDWIDE VIMPELCOM Qtr Q3 Q3 Q3 Q2 Q4 Q4 Q4 Q2 Q3 Q3 Q3 Q4 Q2 Q3 Q3 Curr USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD EPS Est 0.09 -0.26 -0.35 0.22 0.46 0.45 -0.07 0.32 0.12 0.32 -0.08 0.67 0.25 0.39 EPS Act 0.08 -0.14 -0.41 0.21 0.48 0.48 -0.06 0.32 0.1 0.5 0.24 0.73 0.26 0.39 Diff EPS -0.01 0.12 -0.07 -0.01 0.02 0.03 0.01 0 -0.02 0.18 0.32 0.06 0.01 0 Rev Est 4525.8 167.1 22.9 957 19.6 370.1 371.5 248.8 18529.7 22.6 128.8 393.8 59862.4 1217.2 2846.2 Rev Act 4015 169.9 14.1 940.9 20 368.9 368.9 246.7 18697.9 21.4 123 402.6 56038.6 1198.4 2824.4 Rev Diff -510.8 2.8 -8.7 -16.1 0.5 -1.2 -2.6 -2.1 168.2 -1.2 -5.8 8.8 -3823.8 -18.8 -21.8

THE NEXT TRADING DAY

Economic Events

Federal Reserve Bank of Cleveland President Sandra Pianalto speaks on "Current Economic and Monetary Policy Issues" at Oberlin College - 0100 GMT

"Responding to inflationary and disinflationary pressures gets to the heart of what a central bank can and must do," Pianalto told an audience at Case Western Reserve University. "Ensuring price stability is our job. My belief is that by promoting price stability, the Federal Reserve is following the best course for supporting the economic recovery," she said. "Given the momentum toward lower inflation rates and sizable amounts of labor market slack already evident in today's pricing decisions, I expect core inflation to remain quite subdued through 2013," "Although I do not expect an outright decline in the general level of prices, with demand in the economy still weak and unemployment so high, further disinflation remains a risk to my outlook, Pianalto added. "I take this risk seriously, because in periods of significant economic slack, very low inflation risks tipping into deflation." Our economy is digging itself out of a deep hole and continues to perform far below its potential, Pianalto said, adding that she did not expect the U.S. jobless rate to fall below 8 percent before 2013.

Company Events

Big Lots will release its third quarter results. Analysts expect the company to report an EPS of 24 cents, up from 27 cents in the year ago quarter. Net sales for the second quarter increased 5.1% to $1.14 billion from $1.09 billion last year, but missed market projections of $1.15 billion. Comparable store sales for stores open at least two years at the beginning of the fiscal year increased 3.8% for the quarter. Gross margin for the second quarter was up by 50 basis points due mainly to lower markdowns as a percent of sales and a favorable merchandise mix, while operating profit rate improved by 110 basis points compared to last year.

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