James Dicks Daily Digest - February 3, 2009

The National Association of Realtors reported that the number of new sales contracts on existing homes increased a seasonally adjusted 6.3% in December as buyers took advantage of lower mortgage rates and falling prices.

Chrysler LLC says U.S. industry sales could drop as much as 35 percent in January to the lowest rate in 25 years. The annualized sales rate for the month could drop below 10 million for the first time in a quarter century, led by a large drop in fleet sales.

Ford (F) and General Motors (GM) have both trimmed their forecasts for 2009 sales from the depressed levels they were projecting in December when they submitted turnaround plans to Congress.

The stimulus plan before the Senate would increase the deficit over 10 years by $885 billion. That's about $64 billion more than the bill passed by the House last week. The cost difference is due in large part to a provision in the Senate bill that would "patch" for one year the Alternative Minimum Tax so that it doesn't start to hit middle- and upper-middle-income families.

Citigroup (C) says it will spend $36.5 billion to issue mortgages, make credit card loans and buy distressed assets in the coming months. The bank said it approved $36.5 billion. That includes $25.7 billion in U.S. residential mortgage activities; $5.8 billion in credit card lending; $2.5 billion in personal and business loans; $1.5 billion in corporate loan activity; and $1 billion in student loans.

JPMorgan Chase & Co. (JPM) announced that it has been selected by the Federal Reserve to serve as custodian of the government's program to buy mortgage-backed securities. The program will see the Federal Reserve buy up to $500 billion in mortgage-backed securities backed by Fannie Mae, Freddie Mac and Ginnie Mae.

The Federal Reserve said it would extend five of its liquidity programs for an extra six months, citing "continuing substantial strains in many financial markets." The programs were scheduled to end on April 30th.

Liz Claiborne Inc. (LIZ) said that it will eliminate about 725 jobs, or 8 percent of its U.S. work force, as it looks to cut costs amid tightened consumer discretionary spending. The job cuts will occur at all levels and are set to be finished by the end of the first quarter.

Scheduled U.S. Economic Reports (Wednesday)

ADP Employment Index, ISM Services Index

In Earnings News

BP Plc (BP) said replacement cost net profit fell 24% in the fourth quarter to $2.6 billion, undershooting forecasts amid a collapse in oil prices and as its Russian unit reported a big loss. BP's full year replacement cost profit, which strips out unrealized gains or losses related to changes in the value of inventories, was $25.6 billion, up 39% compared to 2007.

Motorola (MOT) lost $3.6 billion, or $1.57 per share, in the fourth quarter as it took $1.56 per share in charges for goodwill impairment and an increase in a deferred tax reserves. The company is struggling both with a loss of market share and a decline in the overall market, as the economic decline weakens consumer appetites around the globe.

Archer Daniels Midland Co. (ADM) said its second-quarter profit rose by 24 percent even as the price of crops and commodities plunged on global markets. The company reported profit for the quarter rose to $585 million, or 91 cents per share.

UPS Inc. (UPS) reported a fourth-quarter profit of $254 million. UPS said its October-December profit was equivalent to 25 cents a share, which is short of analyst’s consensus estimates.

D.R. Horton (DHI), the biggest U.S. homebuilder, reported its fiscal first-quarter loss narrowed. The company posted a loss of $62.6 million, or 20 cents per share, for the quarter ended Dec. 31st. That compares with a loss of $128.8 million, or 41 cents per share, a year earlier. Analysts predicted a larger quarterly loss of 52 cents a share.

Dow Chemical Co. (DOW) lost $1.55 billion in the fourth quarter, due in large part to restructuring costs. The loss was larger than expected and revenue came in below Wall Street expectations.

Merck & Co. (MRK) reported a sizable fourth-quarter profit. The company reported a profit of $1.64 billion, or 78 cents per share. Analysts were expecting, on average, earnings per share of 74 cents.

Northrop Grumman Corp. (NOC) posted a fourth-quarter loss, hurt by a large charge from past acquisitions in its shipbuilding and space operations. The builder of military aircraft and ships said it posted a loss of $2.54 billion, or $7.76 per share.

Automatic Data Processing’s (ADP) net income was $300.5 million, or 59 cents per share in the period ended Dec. 31st. Analysts expected earnings per share for the quarter of 59 cents on revenue of $2.2 billion.

GMAC Financial Services, the financing arm of General Motors (GM) said it had a fourth-quarter profit. GMAC said it posted a profit of $7.5 billion in the fourth quarter, compared with a loss of $724 million in the same quarter last year.

Scheduled Earnings Reports (Wednesday)

Visa, Cisco Systems, Time Warner, Prudential Financial, Kraft Foods, Pulte Homes, Alcatel-Lucent, Goodrich, Philip Morris International, Ryder System, Brinks

Stocks in the News

Schering-Plough (SGP) reported fourth-quarter net income of $442 million, or 27 cents a share, compared to a net loss of $3.4 billion, or $2.08 a share, in the year-earlier period.

Emerson (EMR) profit fell 19% to $458 million, or 60 cents a share.

Tyco International (TYC) said fiscal first-quarter net income dropped 24% to $277 million, or 58 cents a share.

Avon Products’ (AVP) fiscal fourth-quarter profit rose to $232M, or 54 cents a share.

Huntington Bancshares (HBAN) announced plans to end executive bonuses and halt matching 401(k) contributions in an effort to save $100 million this year.

Aflac Inc (AFL) reported fourth-quarter net income came in at $197 million or 42 cents a share.

SanDisk Corp (SNDK) reported a fourth-quarter net loss of $1.86 billion, or $8.25 a share, compared with net income of $106 million, or 45 cents, for the year-earlier period.