James Dicks Daily Digest - January 14, 2009

The Commerce Department reported that retail sales dropped 2.7 percent last month, more than double the 1.2 percent decline that Wall Street expected. The weakness in consumer spending has been a prime contributing factor to the economy's current swoon and analysts say they don't see that turning around soon.

U.S. import and export prices both fell for the fifth consecutive month in December, as costs for oil and many non-petroleum products tumbled. Import prices dropped 4.2 percent after falling by a revised 7.0 percent in November. The December drop was less than the 5.3 percent decline expected by analysts. Export prices fell 3.2 percent in 2008, the largest 12-month drop since December 1998.

Businesses slashed inventories in November by the largest amount in seven years as they scrambled to cope with a record plunge in sales. The Commerce Department says that inventories were reduced by 0.7 percent in November, even worse than the 0.5 percent drop analysts expected. It marked the third straight month that businesses have cut their stockpiles, the longest stretch since four straight months of reductions that ended in August 2003.

Philadelphia Fed president Charles Plosser pointed out a few positions that differ from Fed Chairman Bernanke regarding the conduct of the unconventional monetary policy. In a speech in Wilmington, Plosser said the Fed should set a target for the growth of its balance sheet in measuring its new policy. He also said the Fed's decision to purchase longer-term securities could threaten its independence because it may face political pressure not to sell these assets.

The Mortgage Bankers Association's latest survey showed the recent rush among homeowners to take advantage of lower interest rates are showing no sign of abating during the first week of 2009. For the week ended Jan. 9th, the volume of applications filed to refinance existing mortgages rose to the highest level in more than five years. The group's survey covers about half of all U.S. retail residential mortgage applications.

Chrysler Vice Chairman Tom LaSorda said the number three U.S. automaker would not sell an individual brand like Jeep but said it would pursue deals to sell off tooling for models going out of production, or even licensing production of current models. LaSorda said Chrysler had not had any discussions with Renault, which owns a 44 percent interest in Nissan Motor.

Seagate Technology (STX) announced it would cut about 6% of its worldwide workforce and lower the salaries of its top officers by as much as 25% as part of a restructuring plan by the world's top maker of computer hard-disk drives.

Nortel Networks Corp. (NT), once the largest company in Canada, has filed for bankruptcy protection, victimized by the deepening economic slump. Nortel filed for Chapter 11 bankruptcy protection in the U.S. and is making similar filing in Toronto and Europe. In recent months sales have fallen sharply, especially in North America.

Walgreens (WAG) plans to reduce about 1,000 corporate staff and field management positions in 2009. The job cuts are a part of its effort to reduce capital spending by $1 billion over the next three years. Walgreens is also targeting an additional $1 billion in annual cost reductions by 2011.

Gottschalks Inc. says it put itself up for sale and has filed to reorganize in a Chapter 11 bankruptcy. The regional department store chain has negotiated a $125 million debtor-in-possession financing from a group of lenders led by GE Capital.

The Chicago Tribune will debut as a tabloid Monday for weekday sales at newsstands, newspaper boxes and commuter stations, labeling the move an effort to increase single-copy purchases. In a story in Wednesday's editions of the Tribune, the newspaper said home subscribers would continue to receive its traditional broadsheet edition.

Scheduled U.S. Economic Reports (Thursday)

Initial Jobless Claims (Week of Jan 10th), Producer Price Index (Dec), Empire State Index (Jan), Philadelphia Fed Index (Jan)

In Earnings News

Deutsche Bank AG (DB), Germany's biggest bank, lost an estimated euro4.8 billion ($6.4 billion) in the fourth quarter last year as the global downturn weighed heavily on its bottom line. Deutsche Bank said the loss after taxes, based on preliminary figures, will likely lead to a full-year loss for 2008 of about euro3.9 billion.

Tiffany & Co. (TIF) warned that its fourth-quarter profit would be pulled down by its lackluster holiday same-store sales performance and cut its full-year earnings forecast again. Tiffany now anticipates full-year profit between $2.25 and $2.30 per share on revenue of about $2.85 billion. Analysts predict net income of $2.40 per share.

Linear Technology Corp. (LLTC) posted second-quarter results at the low end of its guidance. The company expects its fiscal third-quarter revenue to be down 15 percent to 20 percent from the second quarter. Analysts expect sales of $235.9 million, which represents a 5 percent decline.

AEP Industries Inc. (AEPI) reported financial results for its fiscal year. Net sales for fiscal 2008 increased $95.9 million, or 14.4%, to $762.2 million from $666.3 million for fiscal 2007. Fiscal 2008 also included $4.4 million of positive impact of foreign exchange relating to the Company's Canadian operations

Scheduled Earnings Reports (Thursday)

Intel, Briggs & Stratton, JP Morgan Chase, Genentech, Bank of the Ozarks, Sealy Corp, Shaw Communications

Stocks in the News

Ford Motor Company (F) and Navistar said they will restructure existing business relationships to settle litigation.

Citigroup (C) agreed to sell 51% of Smith Barney to Morgan Stanley. It also said it will report its fourth-quarter results before the open Friday.

Siemens AG (SI) said first-quarter orders dropped “significantly” after manufacturers ran down stocks of automation equipment and U.S. hospitals postponed purchases of scanners.

HSBC Holdings Plc (HBC) said it needs another $20B to $30B in capital, and the banking giant should halve its dividend.

Yahoo! Inc (YHOO) named Autodesk Inc. Chairman Carol Bartz to replace Jerry Yang as chief executive.

Blackstone Group LP (BX) was cut to “underweight” from “overweight” by Barclays Plc.