James Dicks Daily Digest - January 9, 2009

U.S. employers cut payrolls by 524,000 in December, driving the unemployment rate to its highest level in almost 16 years, suggesting that the year-long recession continued to deepen. The Labor Department said the national unemployment rate rose to 7.2 percent in December, the highest level since January 1993.

The Commerce Department reported that wholesale inventories dropped 0.6 percent in November while sales were down a record 7.1 percent. Businesses are expected to keep trimming inventories in coming months as sales weaken further due to recessionary pressure.

Boston Federal Reserve Bank President Eric Rosengren said that the U.S. economic recession is set to deepen in the first half of the year, but could begin to show signs of improvement later in the year. It's clear that many retailers saw disappointing holiday sales and that despite deep discounts, consumers curtailed spending.

Lawmakers are tasked to complete action on President-elect Obama's nearly $800 billion economic recovery plan by mid-February. But already it is plan that a set of serious fissures need to be bridged if the bill is to be completed within five weeks. Obama urged Congress on this week to "act boldly and act now" to repair the U.S. economy which is growing weaker day by day.

Senate Democrats reached an agreement with Citigroup Inc. (C) on a key bill to give bankruptcy judges the authority to eliminate some mortgage debt and help reduce foreclosures. Citi has agreed not to oppose legislation that would allow bankruptcy judges the authority to modify mortgages that were set up prior to the enactment of the bill.

The United Auto Workers union can not strike or threaten to strike at General Motors Corp. (GM) before Feb. 17th as part of a federal loan package. The stipulation is part of the U.S. Treasury Department's $13.4 billion loan to GM. Both the UAW and GM reportedly must agree to key labor concessions by Feb. 17 as part of the loan agreement.

Fannie Mae (FNM) and Freddie Mac (FRE) have extended a moratorium on foreclosure suspensions for another three weeks, directing the mortgage servicers they work with to postpone any foreclosure or eviction proceedings through January 31st. The extension should give servicers more time to help these at-risk homeowners enroll in the companies' Streamlined Modification Program.

Circuit City Stores (CCTYQ) is in talks with "two highly motivated and interested parties" to help finance the bankrupt retailer or possibly purchase it or its assets. Circuit City said in a statement, saying it had filed a motion to allow the sale of the company. The motion allows for an auction of the company and its assets on Jan. 13th and a sale hearing on Jan. 16th. Meanwhile, the company said that over the past two months, it completed the closure or liquidation of 155 U.S. stores, as planned.

World Wrestling Entertainment (WWE) said it plans to lay off 10% of its staff as part of an effort to implement stronger cost controls. With a net income of about $52 million in 2007, the company said the cuts will result in annual savings of about $8 million. WWE added it will take on a one-time restructuring charge of $3 million for the move in the first quarter.

Scheduled U.S. Economic Reports (Next Week)

International Trade (Nov), Monthly Budget Statement (Dec), Beige Book, Import Prices (Dec), Retail Sales (Dec), Business Inventories (Nov), Producer Price Index (Nov), Empire State Manufacturing Index (Jan), Philly Fed Index (Jan), Consumer Price Index (Dec), Industrial Production (Dec), University of Michigan Consumer Sentiment (Jan)

In Earnings News

KB Home (KBH) posted a quarterly loss, citing unprecedented pressures on the industry and the economy, and said conditions in 2009 would remain difficult or worsen. The homebuilder posted a net loss of $307.3 million, or $3.96 per share, compared with $9.99 per share last year.

CVS Caremark Corp. (CVS) expects a profit of $2.53 to $2.61 per share in 2009, which includes costs of 6 to 7 cents per share for the buyout and integration of Longs Drugs Stores. The 2009 outlook was less than analysts expected.

R.R. Donnelley & Sons Co. (RRD) lowered its 2008 adjusted earnings outlook, citing tight credit markets and uncertain economic conditions. The company now expects adjusted profit between $2.80 and $2.90 per share. Analysts predict 2008 net income of $3.07 per share.

Scheduled Earnings Reports (Next Week)

Alcoa (AA) will start fourth quarter earnings season on Monday of next week. Other companies scheduled to report earnings next week include Intel Corp., Mercantile Bank Corp, Infosys Technologies, Xilinx, Bank of the Ozarks, Genentech, Briggs & Stratton, Sealy, Johnson Controls, and Shuffle Master.

Stocks in the News

UBS AG (UBS) is closing the offshore accounts of U.S. customers and offering to transfer the assets to other banks or another division within UBS, potentially creating a paper-trail for prosecutors who are investigating alleged tax evasion.

Apollo Group (APOL) said fiscal first-quarter profit rose to $180.4 million, or $1.12 a share, from $139.9 million, or 83 cents a share, last year.

General Mills (GIS) is hosting an analyst day and may provide a mid-year update on its 2009 results.

Lawson Software (LWSN) reported its second-quarter net income rose to $4.2M, or 3 cents a share, from $3.7M, or 2 cents a share, in the same quarter in 2007.

Coach Inc (COH) said it will fall short of its fiscal second-quarter guidance because of poor holiday sales.

Stryker Corp (SYK) expects 2008 adjusted earnings of $2.82 to $2.84 a share.

Chevron Corp (CVX) warned that its fourth-quarter earnings will likely be “significantly lower” than in the third quarter. The company cited the drop on falling crude-oil and natural gas prices.