JDfn Daily Digest - August 12, 2008

The Commerce Department said that the U.S. trade gap narrowed by 4.1% to $56.8 billion in June on record exports and a decline in non-oil imports. Exports increased 4% in June to a record $164.4 billion, the biggest gain in four years. Meanwhile, imports rose 1.8% to a record $221.2 billion, largely because of the record $117 price for a barrel of crude oil.

Chain-store sales for the week ended Aug. 9th rose 2.6% from the year-earlier period. On a week-over-week basis, sales dropped 1.1%. Sales in August are expected to increase by about 2%.

Crude-oil futures fell early today, on the news that Russia's president has ordered an end to military operations in Georgia, easing concerns about oil supply disruptions in the region.

The International Energy Agency said oil prices will remain high despite their recent drop and are weighing on demand, especially in developed countries. The global energy watchdog said in its monthly report that it's too early to say whether the recent fall in oil prices is the start of a longer-term trend.

A JP Morgan analyst reports that the nation’s airlines could return to profitability next year thanks to falling oil prices. JP Morgan raised its ratings on AMR Corp, Alaska Air, Delta, Continental, and US Airways to overweight. The firm also raised its rating on Northwest but downgraded Southwest Airlines.

Meantime, JP Morgan (JPM) incurred losses of about $1.5 billion since July, hurt by turmoil in the credit and mortgage markets and by wider credit spreads and lower levels of liquidity. The company said trading conditions have "substantially deteriorated" in the third quarter compared with the second.

General Motors Corp. (GM) is releasing new, more fuel-efficient versions of its full-size pickup trucks and sport utility vehicles later this year. The XFE -- or extra fuel economy -- vehicles will get one mile per gallon more in both city and highway fuel economy than non-XFE versions.

Scheduled U.S. Economic Reports (Wednesday)

Retail Sales (July), Import Prices (July), Inventories (June)

In Earnings News

UBS AG (UBS), one of the hardest hit banks in the subprime mortgage crisis, said that it had further losses and writedown’s of $5.1 billion during the second quarter of 2008. Switzerland's largest bank said its net loss attributable to shareholders for the quarter was 358 Swiss francs ($331 million), compared with a profit of 5.5 billion francs during the year-earlier period.

Fossil Inc. (FOSL) reported its second-quarter profit jumped 71 percent on currency exchange rates and higher international sales. For the quarter, net income rose to $25.1 million, or 36 cents per share. Analysts expected profit of 25 cents per share.

G&K Services Inc. (GKSR) said that its fiscal fourth-quarter profit dropped. G&K, which makes and rents workplace uniforms, earned 10.6 million, or 55 cents per share. Analysts expected a profit of 52 cents per share.

Watson Wyatt Worldwide Inc. (WW) reported its profit rose 32 percent in the fiscal fourth quarter. Watson Wyatt earned $41.7 million, or 95 cents per share. Analysts expected profit of 80 cents per share on revenue of $429.8 million.

Vera Sun Energy Corp. (VSE) announced its second-quarter profit jumped 58 percent on higher production volume and an increase in average per-gallon prices. The company reported net income of $23.9 million, or 15 cents per share. Analysts expected earnings of 2 cents.

Scheduled Earnings Reports (Wednesday)

Deere & Company, Brocade Communications, Macys, Biovail Corp, ING Groep, Tribune, Liz Claiborne

Stocks in the News

McDermott International (MDR) reported second-quarter net income rose to $177.5 million, or 77 cents a share.

Napster Inc (NAPS) said its first-quarter loss was about $4.38 million or 10 cents a share.

Goldman Sachs Group (GS) was downgraded to hold from buy at Deutsche Bank, which cited the firm's high exposure to equities.

Wachovia (WB) revised its second-quarter loss by $500 million pretax to reflect a hit it's likely to take from settlement discussions with securities regulators.

McDonalds (MCD) was downgraded to neutral from buy at UBS, with the broker citing relative valuation and macro headwinds.

Whole Foods Market Inc (WFMI) recalled beef sold between June 2nd and Aug. 6th after seven Massachusetts customers became ill from eating beef tainted with E. coli bacteria.

Flour Corp (FLR) reported its second-quarter net income more than doubled to $209.3 million or $1.13 a share.

Liberty Media Corp (LINTA) aid it is open to discussing a deal to trade its stake in Time Warner (TWX) for the company's AOL dial-up Internet business.