Thursday, December 15, 2011

Morning Journal Don't let the Fed kid you, QE3 is coming

This Week’s Data

Weekly jobless claims fell 15,000 versus expectations of a 9,000 increase.

The October producer price index rose 0.3% versus estimates of an advance of 0.1%; core PPI was up 0.1% versus forecasts of up 0.2%.

The December New York Fed manufacturing survey came in at 9.5 versus an anticipated reading of 4.5 and 0.61 recorded in November.

The third quarter current account deficit was $110 billion versus expectations of $118 billion.


Exports to China continue to grow (short):

The odds of QE3 (medium):

News on Stocks in Our Portfolios

05:49 PM Chevron (CVX) says it hasn’t received any formal notice of a Brazilian lawsuit against the oil giant and Transocean (RIG) seeking $10.7B in damages from an oil spill last month (earlier). "From the outset, Chevron responded responsibly to the incident at its Frade Field and has dealt transparently with all Brazilian authorities," the company says. Comment!

04:31 PM The Justice Department says Altria (MO) and Reynolds American (RAI) have agreed to improve public availability of internal documents about tobacco industry practices and will pay $6.3M into a fund to do so. The agreement resolves a dispute between tobacco companies and U.S. regulators regarding the accessibility of online document databases. Comment!

03:42 PM Verizon Wireless (VZ, VOD) claims that following the rollout of 4G LTE services in 11 markets tomorrow, the carrier's U.S. LTE network will cover more than 200M people, putting it ahead of a prior, year-end goal of 185M people. AT&T (T), by contrast only expects to cover 70M people with its LTE network by year's end. Comment!

02:51 PM Kinder Morgan (KMP -0.3%) says it's investing $130M to build, own and operate a petroleum condensate processing facility near its Galena Park terminal on the Houston Ship Channel. The company expects the facility to have an initial throughput of 25K bpd, with expansion plans of up to 100K bpd. Comment!

02:00 PM Is Wal-Mart next? The next big retailer to report a margin shock (previous) due to discounting could be Wal-Mart (WMT +0.5%), according to analysts. WMT exec Duncan MacNaughton concedes as much, saying "we continue to invest in price to drive our price separation and our price leadership." Thomson Reuters estimates WMT's gross margin will fall to 24.5% from 25.1% this quarter - a mark that could move lower if WMT keeps discounting right through the end of the year. Comment!

01:05 PM Lowe's (LOW +0.6%) walks into a giant buzzsaw after it pulls its advertising from a reality show about Muslim families due to protests from a conservative group. Politicians have grabbed ahold of the issue to rail against the company from the House floor (video), while celebs take to the media to call for boycotts of the company's stores. Comment!

11:13 AM 3M (MMM -0.9%), which reported weak earnings and slashed its 2011 guidance in October, is offering early retirement packages to about 4,900 employees, or 15% of its workforce. About 1,000 employees are expected to take the offer, which is good until Jan. 31. Comment!

11:03 AM Nu Skin (NUS -1.9%) acquires LifeGen Technologies, a genomics company based in Madison, Wisconsin for $11.7M. The purchase expands Nu Skin's anti-aging research capabilities, giving it access to LifeGen's extensive proprietary tissue bank and gene expression database, plus patents and other intellectual property related to the field. Comment!

10:50 AM Caterpillar (CAT -3.3%) reaffirms its 2011 outlook for $58B in revenue and maintains its current quarterly dividend rate of $0.46/share for shareholders. The company says its 2012 outlook will be released soon, and will include a full-year of Bucyrus-related sales of about $5B. Shares may be taking a dip today because of Joy Global's gloomy warning on near-term production. Comment!

09:28 AM Stonecap Securities' Brad Smith, cuts his outlook on the Canadian banking sector as the big lenders cut loss reserves to near pre-crisis levels even as credit unexpectedly deteriorated in Q3. Smith is reducing the PE multiple he expects the banks to sell for from 11X to 9X. Lowest rated: Bank of Montreal (BMO) and TD Bank. Highest: Scotiabank (BNS). Comment!

09:26 AM Oppenheimer raises its expectations for AT&T (T) smartphone sales but lowers FY2011 and FY2012 EPS estimates to account for higher subsidies. “Positively, we believe subsidy expense growth is peaking,” Oppenheimer says, “and although at best we see flat wireless margins in 2012, we believe there could be upside to our 2013 forecast." Comment!

09:20 AM Stifel Nicolaus cuts its rating on Altria (MO) to Hold after shares hit its $29 price target. Stifel says it is confident in the cigarette maker’s fundamentals into next year, but says shares are pricing in the upside, noting that Altria is trading at an 8% discount to S&P consumer staples and a 10% premium to the S&P 500, "both of which are well above its historical average.” Comment!

09:07 AM November was tough on discount brokers, after volume had been increasing for much of the year on surging market volatility. Charles Schwab (SCHW) lowers Q4 EPS expectations after average daily trading volume plunged 15% in November, and E-Trade (ETFC) says its average trading volume dropped 10%. SCHW -1.6%, ETFC -2.1% premarket. Comment!

08:26 AM Coca-Cola (KO -0.35%) looks to exploit the large non-alcoholic drinks market in the Middle East with the $980M purchase of about half of the equity in the beverage business of Saudi Arabia's Aujan Industries. Aujan Chairman Adel Aujan hopes to double annual revenue in five years from the current 3B riyals ($800M). (PR) Comment!

07:09 AM After Airbus (EADSF.PK) appears to have won the battle for large plane orders in 2011, Boeing (BA) aims to turn the tables in 2012. Buoyed by its new blockbuster deal with Southwest Airlines (LUV), CEO Jim Albaugh optimistically predicts that Boeing will land 1.3K-1.4K firm orders by this time next year as demand stays strong for fuel-efficient planes and trouble plays out in Toulouse with the A350 design. Comment!