James Dicks Daily Digest - January 13, 2009

Federal Chairman Bernanke told a London audience that the stimulus package being modeled by President-elect Obama and Congress could provide a "significant boost" to the struggling U.S. economy. But he warned that such a recovery won't last unless other steps are taken to stabilize the shaky financial system. But he said there will be no lasting recovery without further government action and funds to strengthen the financial system. The timing and strength of economic recovery "are highly uncertain.”

The Commerce Department reported that the trade deficit narrowed to $40.4 billion in November, a 28.7 percent decline from October's deficit of $56.7 billion. The bigger-than-expected decrease left the deficit at its lowest level since November 2003.

Chain store sales fell 2.3 percent for the week ended Jan. 10th, as lower post-holiday traffic, fewer gift-cards and bad weather brought the largest weekly sales drop in two years. The week's decrease was the largest since Dec. 2, 2006.

The National Federation of Independent Business (NFIB) said that small business sentiment deteriorated in December, posting its second lowest reading in 35 years, highlighting the worst post-war economic climate that has seen a dramatic cut back in consumer spending. The small business optimism index fell 2.6 points to 85.2 in December, the second lowest reading in the survey's 35-year history.

Billionaire oil tycoon Boone Pickens, chairman of BP Capital, predicts oil will reach $75 a barrel within a year and will rise to $140 a barrel when the global economy finally turns around. Pickens told interviewers that importing 70 percent of our oil poses a significant threat to the U.S. economy, and he anticipates energy independence more likely under the Obama administration.

Citigroup (C) confirmed that it is in talks with Morgan Stanley (MS) about "a possible combination of [its] retail brokerage business operated under the Smith Barney name and the wealth management business operated by Morgan Stanley." Citi added that no agreement had been reached.

Bank of Montreal (BMO) will buy the Canadian life insurance business of U.S. insurer American International Group (AIG) for about C$375 million ($305 million). AIG is selling assets to raise funds to repay U.S. government loans.

Cummins Inc. (CMI) announced it will cut 800 employees worldwide by the end of February and freeze salaries for the rest of the year in response to lower sales. The company said the cuts will be accomplished through buyout offers for certain employees and layoffs.

Wendy's/Arby's Group Inc (WEN) is cutting the number of Wendy's restaurants selling breakfast and hopes to re-launch breakfast across the United States in 2011. The company is also working on improving margins at its Wendy's restaurants.

Scheduled U.S. Economic Reports (Wednesday)

Retail Sales (Dec), Import Prices (Dec), Inventories (Nov), Beige Book

In Earnings News

Alcoa Inc. (AA) reported a quarterly loss of $1.19 billion, days after the company announced cuts due to sinking prices and demand for the metal. Alcoa's loss equaled $1.49 cents per share in the quarter. One-time charges in the 2008 fourth-quarter totaled $920 million, or $1.15 per share. Analysts, on average, expected the company to lose 10 cents per share.

Marathon Oil Corp. (MRO) estimated it will record fourth-quarter production volume near the low end of its previous guidance range. The company also said its refined products fourth-quarter sales volumes fell to 1.4 million barrels of oil equivalent per day, compared with 1.43 million barrels of oil equivalent per day in the prior-year period.

Nvidia Corp (NVDA) warned that its fourth-quarter revenue will come in lower than it previously expected. The company now sees revenue declining 40% to 50% sequentially, blaming weak end-user demand and inventory reductions by its channel partners. On average, analysts were looking for revenue of $805.3 million for the quarter.

Liz Claiborne Inc. (LIZ) expects fourth-quarter earnings per share from continuing operations to fall between zero and a loss of 15 cents per share, down from a previously expected profit of 19 cents to 24 cents per share. Analysts forecast a profit of 19 cents per share, on average.

Prestige Brand Holdings (PBH) reported profit will probably come in a penny to 2 cents per share below the 17 cents per share it reported a year earlier, or 15 cents to 16 cents per share. Analysts predict net income of 20 cents per share.

Lexmark International Inc. (LXK) lowered its fourth-quarter guidance steeply and announced restructuring moves that will affect 375 jobs, saying the weakening economy has hurt sales of its hardware. The company expects its fourth-quarter earnings per share of 19 to 24 cents, down from October guidance of 40 to 50 cents per share.

Scheduled Earnings Reports (Wednesday)

Mercantile Bank, Xilinx, Novastar Financial, Quest Energy Partners, Global Entertainment Corp

Stocks in the News

Health Management Associates (HMA) expects to report fourth-quarter adjusted earnings from continuing operations of 6 cents a share on revenue of around $1.1 billion. Analysts were expecting profit of 9 cents a share.

Cigna Corp. (CI) was downgraded by Citigroup to "Sell" from "Hold" despite the stock's rally since November.

Boeing Co. (BA) was downgraded by Credit Suisse from Outperform to Neutral.

Targanta Therapeutics Corp (TARG) rallied after it agreed to be acquired by Medicines Co. (MDCO).

CSX Corp (CSX) expects fourth-quarter earnings of about 63 cents a share, including a non-cash impairment charge of 27 cents a share to write down its investment in the Greenbrier, a resort in West Virginia.

Elan Corp’s (ELN) board hired Citigroup Global Markets to help advise the company as it reviews strategic alternatives.