James Dicks Daily Digest - February 25, 2009

The Obama administration is getting ready to conduct "stress tests" on the nation's biggest banks to judge whether they can hold up if the recession were to worsen. Banking regulators plan to scrutinize the financial conditions of Citigroup, Bank of America and more than a dozen other financial institutions that have received billions from the Treasury Department's $700 billion bailout bill.

The National Association of Realtors said that existing home sales dropped 5.3%, to a seasonally adjusted annual rate of 4.49 million units from a rate of 4.74 million in December. Economists were expecting a sales rate of 4.79 million units.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended February 20th decreased 15.1 percent to 743.5 after surging 45.7 percent the previous week.

The Labor Department announced that there were fewer mass layoffs in January, with the brunt of the job casualties occurring in the South and in temporary-help services. In January, there were more than 2,200 mass layoffs, which resulted in almost 238,000 job cuts.

U.S. crude inventories rose 700,000 barrels in the week ended Feb. 20th. Analysts surveyed expected a gain of more than 2 million barrels. Meanwhile, gasoline inventories fell by 3.4 million barrels, more than analysts expected.

A General Motors Corp. (GM) bankruptcy might yield a $1.2 billion “bonanza” for bankers, accountants and lawyers, surpassing record fees being made by advisers on the collapse of Lehman Brothers Holdings Inc. (LEH). GM, trying to lower debt and wages out of court, said it must slash $62 billion in liabilities by almost half, excluding government loans.

The United Auto Workers President urged union members to vote for contract concessions to Ford Motor Co. (F), saying the automaker can't survive in the long term without major restructuring.

Scheduled U.S. Economic Reports (Thursday)

Initial Jobless Claims (Week of Feb 21), Durable Goods (Jan), New Home Sales (Jan)

In Earnings News

Merrill Lynch & Co. disclosed that its 2008 losses were about $533 million higher than previously reported. According to an SEC filing, Merrill revised its full-year loss to $27.61 billion from the $27.08 billion it reported last month.

Saks Inc (SKS) said it lost $98.75 million, or 72 cents per share in the quarter ended January 31st. That compares with a profit of $39.47 million, or 26 cents per share, a year ago. Analysts expected a loss of 30 cents.

J.M. Smucker’s (SJM) profit rose to $77.9 million from $42.4 million a year earlier. Earnings per share declined 9 percent to 68 cents from 75 cents because of 20 cents per share for integration and acquisition charges of its purchase of the Folgers coffee brand last November.

Dollar Tree Inc. (DLTR) said its fourth-quarter profit jumped 11 percent as customer traffic and sales increased despite the ongoing recession. Net income for the quarter climbed to $105.2 million, or $1.15 per share. Analysts expected earnings of $1.13.

Kendle International Inc. (KNDL) reported its profit fell 22 percent in the fourth quarter due to problems with a study for one of its customers. Kendle reported a profit of $5 million, or 33 cents per share. Analysts expected a profit of 53 cents per share.

Scheduled Earnings Reports (Thursday)

General Motors, Dell, El Paso Corp, Novell, Kohl’s, Sanderson Farms, Public Storage, Hughes Communication, Limited Brands, Safeway, Vonage Holdings, Cooper Tire & Rubber, Gap

Stocks in the News

AT&T (T) was upgraded to overweight from neutral by J.P. Morgan.

Cadbury’s (CBY) fiscal-year net income declined to 366 million pounds from 407 million pounds a year earlier.

KBR Inc (KBR) fourth-quarter net income rose to $88 million, or 54 cents a share, from $71 million, or 42 cents a share.

Ambac Financial (ABK) narrowed its fourth-quarter loss to $2.34 billion, or $8.14 a share, from $3.27 billion.

U.S. Steel Corp (X) revised down its fourth-quarter net income to $290 million, or $2.50 a share.

Nabors Industries Ltd (NBR) reported a fourth-quarter net loss of $84 million, or 30 cents a share.

SPX (SPW) reported a fourth-quarter net loss of $25.3 million after taking a $123.0 million impairment charge related to its boiler unit.

Papa John’s International (PZZA) reported that fourth-quarter net income rose 65% on 1.5% lower revenue, and it increased its estimate of earnings for full-year 2009.

Wynn Resorts Ltd (WYNN) reported a fourth-quarter loss of $159.6M, or $1.49 a share, a turn from a profit of $65.5M, or 57 cents a share, in the year-ago quarter.