James Dicks Daily Digest - February 2, 2009

President Obama promised to establish a review board to oversee the government's $700 billion rescue package aimed at averting a financial meltdown, declaring that some of the nation's banks would have to write down bad debts, while other banks may fail. The president said he was taking full responsibility for rescuing the U.S. economy, in its worst downturn in 80 years.

The Institute for Supply Management’s manufacturing index rose to 35.6 in January from an upwardly revised 32.9 in December. The January reading was above the 32.6 that economists expected. The report covers such indicators as new orders, production, employment, inventories, prices, and export and import orders.

The Commerce Department reported that personal consumption spending dropped by 1 percent in December. That was slightly worse than the 0.9 percent decline economists expected. Incomes fell for a third straight month, but the 0.2 percent drop was slightly better than expected.

Construction spending fell for a third straight month in December. The Commerce Department said that total construction spending dropped by 1.4 percent in December, slightly worse than the 1.2 percent decline economists expected.

Deutsche Bank AG (DB) plans to cut bonuses at the securities unit by an average of 60 percent after reporting a record loss. Business units hardest hit by the financial crisis will face larger reductions than areas including foreign exchange and commodities.

HD Supply said that it will receive a $22 million payment from home improvement retailer Home Depot Inc. (HD) for adjustments related to its August 2007 sale. The deal between the two companies also includes other non-cash considerations.

Science Applications International Corp. (SAI) has received a contract from the U.S. Army Corp of Engineers valued at up to $50 million to design and build energy-savings projects at government facilities.

Scheduled U.S. Economic Reports (Tuesday)

Pending Home Sales (Dec), Motor Vehicle Sales (Jan)

In Earnings News

Mattel Inc. (MAT) reported that its fourth-quarter profit fell 46 percent. The company said quarterly profit fell to $176.4 million, or 49 cents per share, from $328.5 million, or 89 cents per share, a year earlier. Analysts expected a profit of 72 cents per share.

Humana (HUM) said it earned nearly $174.1 million, or $1.03 per share, for the three months ended Dec. 31st. The results came in below an average forecast of $1.07 per share by analysts.

Sysco Corp. (SYY) announced its fiscal second-quarter profit dropped 10 percent, partly hurt by rising food costs and increased operating expenses. The Company said earnings declined to $237.7 million, or 40 cents per share. Analysts predicted net income of 38 cents per share.

BE Aerospace (BEAV) lost $253.6 million, or $2.59 per share, compared with a profit of $42.3 million, or 46 cents per share, in the year-earlier period. On average, analysts expected earnings per share of 46 cents.

Rockwell Automation Inc. (ROK) announced fiscal first-quarter profit fell 24 percent, hurt by a decline in consumer demand in the second half of the quarter. Profit for the quarter ended Dec. 31 fell to $118.4 million, or 83 cents per share. Analysts predicted a profit of 84 cents per share.

Enterprise Products Partners LP (EPD) reported that its fourth-quarter profit jumped 41 percent. The company said net income rose to $228 million, or 44 cents per share. The most-recent quarter's results still beat analysts' average earnings estimate of 41 cents per share.

MicroStrategy Inc. (MSTR) said its fourth-quarter earnings dropped 19 percent. For the quarter ended Dec. 31, earnings fell to $14.3 million, or $1.17 per share. Analysts expected earnings of 97 cents per share.

Scheduled Earnings Reports (Tuesday)

Disney, BP Plc, Merck, Archer Daniels Midland, Schering Plough, UPS, Marathon Oil, DR Horton, Electronic Arts, Avon Products, Bally Technologies, Dow Chemical, Manpower Inc, Yum Brands

Stocks in the News

NYSE Euronext (NYX) traded lower after analysts downgraded their view on the shares and cut their profit estimates for the exchange operator.

Ford Motor Company (F) was downgraded to “underweight” from “equal-weight” by Barclays Capital.

General Motors Corp (GM) is lobbying Congress and the Treasury for relief from a $7B tax, possibly through a provision in the economic stimulus plan expected to pass in mid-February.

Gannett Company’s (GCI) ratings are being reviewed for possible downgrade by Standard & Poor's because the quarterly pace of decline at the publishing segment is accelerating.

Ryanair Holdings Plc, Ireland’s low-cost airline, forecast better-than-expected annual earnings.

Applied Materials Inc (AMAT) lowered its earnings forecast saying it expects sales at the low end of its projected range for the first quarter as it struggles through what it described as “unprecedented business conditions.”

Rio Tinto’s (RTP) is in talks with Aluminum Corp. of China (ACH) which may buy minority interests in the global miner's operating units and invest in convertible securities.

Capital Corp of the West (CCOW) said its County Bank subsidiary expects to report a wider fourth-quarter loss on higher loan-loss provisions and needs to raise about $75 million of new capital.

Tyco Electronics Ltd (TEL) said it notified New York State that the cancellation of a wireless network agreement valued at $2B is a breach of contract.