JDfn Daily Digest - September 9, 2008

The Commerce Department reported that inventories at U.S. wholesalers rose 1.4 percent in July, twice what analysts had forecast, while sales were down 0.3 percent. Analysts expected inventories to rise 0.7 percent, compared with a 0.9 percent gain in June, previously reported as 1.1 percent.

The Congressional Budget Office estimates that with the economy weakening and spending on the war rising, the federal government's budget deficit is expected to more than double this year compared with last year. The federal deficit is projected to hit $407 billion in the fiscal year that ends Sept. 30th, compared with $161 billion in 2007.

The National Association of Realtors reported that sales contracts on previously owned U.S. homes fell 3.2% in July from the prior month. The index, which is considered a leading indicator of existing home sales, was down 6.8% from the prior year. The June pending home sales index was revised to a gain of 5.8% from a prior estimate of a 5.3% increase.

The U.S. government takeover of Fannie Mae and Freddie Mac may provide relief for homeowners who want to refinance mortgages and prospective buyers shopping for a loan. Thirty-year fixed rates dropped about a quarter of a percentage point by Monday and may head lower.

Treasury Secretary Henry Paulson said Congress should view the next few months as a "time out" in the highly charged debate over what to do with mortgage giants Fannie Mae (FNM) and Freddie Mac (FRE).

The National Federation of Independent Business said U.S. small business owners in August grew more optimistic about business conditions improving over the next six months. The group said its small business index last month rose 2.9 points to 91.2 as more owners also planned to create new jobs. Over the next three months, 9 percent of the owners plan to create new jobs, four points more than July.

The Manpower Employment Quarterly Survey of hiring plans found that a net 9% of firms expect to hire in the fourth quarter, down from 12% in the previous quarter, and 18% for the fourth quarter a year ago. This fourth quarter outlook is the tenth consecutive quarter of declining employer sentiment in the survey -- the longest such retreat in more than 20 years.

Oil prices fell as Hurricane Ike appeared less like to strike Gulf of Mexico energy installations and Saudi Arabia suggested OPEC will not cut output later in the day. In Vienna, Austria, oil ministers from the Organization of Petroleum Exporting Countries were preparing to meet later in the day to decide whether to hold production levels steady despite crude's steep decline in recent months.

Kuwait's oil minister said there is no need for OPEC to cut production, despite crude prices that have fallen nearly 30 percent since July.

Economists believe that if the Boeing (BA) strike drags on for more than three months, there could be long-lasting harm to the country's exports. By dollar value, Boeing ranks among nation's top industrial exporters. Exports are one of the few bright spots in the nation's economy.

A former U.S. antitrust chief and top U.S. litigator has been asked by the U.S. Justice Department to review evidence in what could become an antitrust case against Google (GOOG) in its proposed search-advertising deal with Yahoo (YHOO). Sanford Litvack was President Jimmy Carter's antitrust chief and is also a former vice chairman of Walt Disney Co.

Reynolds American Inc. (RAI) and its subsidiary R.J. Reynolds Tobacco Co. said they plan to cut about 10% of their American work force as the company restructures its portfolio. The nation's second-largest tobacco company said it plans to lay off about 570 workers in Winston-Salem, N.C, where the two companies are based, or about 16% of the work force there.

Scheduled U.S. Economic Reports (Wednesday)

None Scheduled

In Earnings News

John Wiley & Sons, Inc. (JW-A) reported revenue of $402 million for the first quarter of fiscal year 2009 ended July 31, 2008, a 3% increase over the same period of fiscal year 2008.

Korn/Ferry International (KFY) reported its first-quarter profit fell 7 percent due to increased operating expenses, but the results still beat analysts' estimates. For the quarter, net income dropped to $15.9 million, or 36 cents per share. Analysts predicted earnings of 30 cents per share.

The Pep Boys - Manny, Moe & Jack (PBY) said that its fiscal second-quarter profit rose 29 percent, helped by a tax benefit. Net income for the quarter rose 29 percent to $5.4 million, or 10 cents per share. Analysts predicted a profit of 7 cents per share.

K12 Inc. (LRN) reported a fiscal fourth-quarter profit on a hefty tax benefit and higher enrollment, easily topping Wall Street's expectations. The company reported earnings after preferred dividends of $17.1 million, or 59 cents per share. Analysts predicted a loss of 5 cents on sales of $47.8 million.

Scheduled Earnings Reports (Wednesday)

Bakers Footwear Group, Hooker Furniture, Stewart Enterprises, Sunrise Senior Living, Eon Communications

Stocks in the News

McDonalds Corp (MCD) said U.S. comparable sales rose 4.5% in August.

H.B. Fuller (FUL) lowered its earnings outlook to adjusted net income of $1.55 to $1.60 a share in fiscal 2008 due to the negative impact from rapidly rising raw material costs.

Kimberly-Clark (KMB) was upgraded to buy from hold at Citigroup, with the broker saying its fortunes have turned up.

Procter & Gamble (PG) traded higher after Merrill Lynch downgraded the consumer-goods giant to neutral from outperform, citing valuation.

Wells Fargo (WFC) said it will take a non-cash charge to third-quarter earnings for its investments in perpetual preferred securities issued by Fannie Mae and Freddie Mac.

Cigna Corp (CI) expects to affirm its earnings outlook for 2008 in calls and meetings with investors and analysts.

United Rentals (URI) agreed to settle an SEC inquiry into its accounting practices from 2002 and the years preceding.

Pfizer Inc (PFE) traded higher after a panel of medical experts gave a limited endorsement to Pfizer's proposed osteoporosis drug, Fablyn.