MORNING COFFEE

President Obama Reveals New Healthcare Plan. President Obama is expected to propose giving government authorities the ability to limit rate hikes by health insurance companies. A White House official said regulators will be able to deny unfair premium increases, roll back increases already in effect, and demand a rebate for consumers.

Governors Are Not Smiling. In a meeting of the National Governors Association this weekend, state governors were generally downbeat about the economic outlook, warning "the worst probably is yet to come." States are facing a $134billion budget shortfall over the next three years and most governors view job creation as the key to recovery.

Toyota Memo Adds Fire To Recalls. In an internal document from 2009, Toyota (TM) employees celebrated saving the company over $100 million by convincing DOT regulators to end a 2007 investigation into sudden acceleration complaints with a cheap floormat replacement for just 55,000 cars.

Campbell Soup (CPB): Reported FQ2 EPS of $0.74 in-line on revenue of $2.1 billion.

Lowe's (LOW): Reported Q4 EPS of $0.14 beating estimates by +$0.02 on revenue of $10.1 billion. 

Upgrades

PNC Bank (PNC): Bernstein raised their rating from Market Perform to Outperform.

Viacom (VIA.B): Deutsche Bank raised their rating from Hold to Buy and changed their target price from $28.00 to $37.00.

Downgrades

Gilead Sciences (GILD): Morgan Joseph downgraded their rating from Buy to Sell and changed their target price to $37.00.

AXA (AXA): Citigroup downgraded their rating from Buy to Hold.

H & R Block (HRB): Oppenheimer downgraded their rating from Outperform to Hold.

·         Futures: Dow +0.27% to 10406. S&P +0.28% to 1109. Nasdaq +0.44%. Crude flat at to $81.75. Gold -0.26% to $1170.90.

·         Asia, Nikkei +2.7% to 10400. Hang Seng +2.4% to 20377. Shanghai -0.5% to 3003. BSE +0.3% to 16237.

·         Europe London flat at 5360. Paris -0.1% to 3767. Frankfurt -0.3% to 5708.

CLOSING BELL

Dow 10402.35  +9.45, Nasdaq 2243.87  +2.16, S&P 1109.17  +2.42 

The Fed's decision to hike the discount rate from 0.5% to 0.75% caused traders to dump stocks in pursuit of the dollar.  In the early going the dollar rallied as much as +0.5% and stocks fell.  Then calmer minds to hold since the Fed expressed that its decision was not a signal for any change in the economy or monetary policy.  The thought of the Fed was that their action will encourage banks to borrow from the private sector.

A softer-than-expected inflationary reading played a hand in the dollar's downturn. After a much higher than expected Producer Price Index (PPI) reading the CPI was welcome news today. The Consumer Price Index (CPI) for January made a +0.2% monthly gain, which was slightly below the +0.3% increase that economist had expected. The core rate which excludes food and energy, fell -0.1% month-over-month.  This was instead of rising the +0.1% that economists had forecast.  This allowed the dollar to fall and stocks to rally as fears of out of control inflation dissipated.

Some stocks that had a good day include: Berkshire Hathaway (BRKB) 78.74 +2.10, +2.74%, United States Steel Corp. (X) 53.29 +2.33, +4.57%, Sysco Corp. (SYY) 29.14 +0.63, +2.21%, and Teva Pharmaceuticals (TEVA) 58.74 +1.736, +3.05%.

Advancing Sectors: Utilities +1.4%, Financials +0.6%, Industrials +0.5%, Materials +0.5%, Consumer Discretionary +0.4%, Energy +0.2%, Consumer Staples +0.1%

Declining Sectors: Telecom -0.3%, Health Care -0.2%, Tech -0.1%

MIDDAY LUNCH

Dow 10427.90  +35.00, Nasdaq 2248.72  +7.01, S&P 1111.49  +4.74 

Stocks are choppy today but trading to the plus side as the dollar falls.  The dollar is currently down only -0.1%, but had been up +0.5% earlier in the morning.

The S&P 500 has now pushed through its 50-day moving average, which caused technical resistance yesterday. The latest leg up puts stocks at their best level in roughly one month.

The trading strength today has been broad based, but utilities stocks continue to outperform. The sector is now up +1.5%. 

Also doing well today are natural resource stocks, helped by the weaker dollar.  The materials sector is up +0.8%. Steel stocks continue to be a primary source of support for the sector; they are currently up +3.6%.

PG&E Corp (PCG) 42.74 +0.23, +0.54% is trading higher after the company announced better-than-expected adjusted earnings of $0.80 per share. The company also reaffirmed an in-line earnings outlook and boosted its quarterly dividend to $0.455 per share from $0.42 per share.

Some stocks that are having a good day include: Berkshire Hathaway (BRKB) 78.66 +2.04, +2.67%, United States Steel Corp. (X) 53.44 +2.46, +4.85%, Sysco Corp. (SYY) 29.14 +0.63, +2.17%, and Teva Pharmaceuticals (TEVA) 58.64 +1.62, +2.85%.

MORNING COFFEE

Fed Raises Discount Rate.  The Fed unexpectedly raised the discount rate to 0.75% from 0.5%, in doing so the Fed hopes will encourage banks to borrow from the private market. The Fed said the increase, the first in the discount rate in over three years, doesn't reflect a change in monetary policy and is "not expected to lead to tighter financial conditions for households and businesses."  The news sent stock futures and bond prices down, and the dollar rose against the euro. 

Microsoft Yahoo Search Deal Approved.  U.S. and European regulators approved Microsoft's (MSFT) plan to buy Yahoo's (YHOO) search business. The deal was approved without any restrictions, allowing the companies to put many of the deal's features in place within days.

Google To Become A Utility Co. The Federal Energy Regulatory Commission approved Google's (GOOG) request to become an electricity marketer, allowing it to buy and sell bulk power like a utility. Google has said it has no plans to sell energy management services or speculate in energy markets.

Dell (DELL): Reported Q4 EPS of $0.28 beating estimates by +$0.01 on revenue of $15 billion.

Intuit (INTU): Reported FQ2 EPS of $0.38 beating estimates by +$0.06, on revenue of $837 million.  

The company sees full-year EPS of $1.97 vs. $1.95.

Upgrades

Infosys (INFY): Kaufman Bros raised their rating from Hold to Buy and raised their target price from $58.00 to $67.00.

Adobe Systems (ADBE): FBR Capital raised their rating from Market Perform to Outperform and raised their target price from $36.00 to $39.00.

Downgrades

Anheuser-Busch InBev (BUD): Stifel Nicolaus lowered their rating from Buy to Hold.

Accenture (ACN): Kaufman Bros lowered their rating from Hold to Sell and lowered their target price from $43.00 to $37.00.

Coverage Initiated

Walt Disney (DIS): Jefferies & Co initiated coverage with a Buy rating and a target price of $36.00.

Best Buy (BBY): JMP Securities initiated coverage with a Market Outperform rating and a target price of $45.00.

·         Stock futures: Dow -0.51% to 10322. S&P -0.72% to 1098. Nasdaq -0.49%.

·         Treasurys: 30-yr +0.13%. 10-yr -0.08%. 5-yr -0.17%.

·         Commodities: Crude 0% to $82.44. Gold -0.26% to $1170.90.

·         Currencies: Euro -0.18% vs. dollar. Yen -0.58%. Pound -0.91%.

·         Asia: Nikkei -2% to 10124. Hang Seng -2.6% to 19894. BSE -0.8% to 16192. Shanghai was closed.

·         

          Europe: London -0.1% to 5317. Paris +0.2% to 3732. Frankfurt -0.2% to 5669.

·          

CLOSING BELL

Dow 10392.90  +83.66, Nasdaq 2241.71  +15.42, S&P 1106.75  +7.24 

Traders broad-based buying helped both the Dow and the Nasdaq close above their 50-day moving averages for the first time in almost one month, yet the S&P 500 was met with resistance as it tried to pass technical 50-day moving average, which stands at 1108.

Although the markets posted gains today there was little conviction as only 1 billion shares traded hands on the NYSE. It was the most thinly traded session in one month.

Materials stocks +1.2% were the best performers of the day as gold stocks +2.5% bounced on better-than-expected earnings from Barrick Gold (ABX) 39.23 +1.37, +3.62% and Kinross Gold (KGC) 18.86 +0.36, +1.95%.

Hewlett-Packard (HPQ ) 50.81 +0.69, +1.38% helped the tech sector make its way to a +0.8% gain, thanks to better-than-expected earnings and upside guidance..

Wal-Mart (WMT) 53.47 -0.59, -1.09%  The retail giant posted better-than-expected earnings for the latest quarter and issued in-line guidance, but its fourth quarter U.S. comparable store sales fell more than expected.

Today we had a flurry of disappointing economic data.

Weekly jobless claims for the week ended Feb. 13 totaled 473,000. That was up 31,000 from the previous week and worse than the 438,000 claims that economist had forecast.

The PPI jumped unexpectedly +1.4% in January after increasing a more moderate +0.4% in December.  Economist had estimated a +0.9% rise in producer prices.  Excluding food and energy, the core PPI increased +0.3%. The consensus expected core prices to rise only +0.1%. This led to worries about inflation occurring in a weak economy.

Commodities had a good day as the CRB Commodity Index advanced +0.8% to a fresh three-week high. It closed at its 50-day moving average.  Crude oil was a primary source of support.  Prices settled pit trade +2.2% higher at $79.06 per barrel, 

MIDDAY LUNCH

Dow 10328.21  +18.97, Nasdaq 2229.04  +2.75, S&P 1100.75  +1.24 

Stocks have traded in a narrow range today with the gains being broad based.  Eight of the ten major sectors are posting gains. Energy -0.3% and Telecom -0.4% are the only two lagging sectors.

Treasuries prices are under pressure today.  The benchmark 10-year Note's yield has run up to 3.80% for the first time in more than one month.  The pressure on treasuries is coming from the PPI report, leading some to become worried about inflation.

The PPI jumped unexpectedly +1.4% in January after increasing a more moderate +0.4% in December.  Economist had estimated a +0.9% rise in producer prices.  Excluding food and energy, the core PPI increased +0.3%. The consensus expected core prices to rise only +0.1%.

Philadelphia Fed Index for February came in at 17.6, which is better than the 17.0 that had been expected.

Leading indicators for January showed a +0.3% increase, which was not as strong as the +0.5% increase that was expected.  It was also a sharp decline from the +1.2% increase that was posted in the prior month.

Shares of food processing players HJ Heinz (HNZ) 45.58 +0.56, +1.24% and Hormel (HRL) 42.15 +1.56, 3.86% are among this session's better performers. Heinz has announced upside guidance, while Hormel raised its guidance for fiscal 2010 after it announced earnings that topped Wall Street's expectations.

Retail giant Wal-Mart (WMT) 53.23  -0.83, -1.54% The company posted better-than-expected earnings for the latest quarter and issued in-line guidance, but announced that its fourth quarter U.S. comparable store sales fell more than expected.

MORNING COFFEE

Possible Toyota Corolla Recall. U.S. regulators began investigating the power steering on Toyota's (TM) Corolla, prompting Toyota to say it may recall the world's top-selling car. With the addition of the Corolla 15 of Toyota’s 20 models are currently under a safety investigation or recall.

PepsiCo Merger Approved. Shareholders of both Pepsi Bottling Group (PBG) and PepsiAmericas (PAS) approved a merger with PepsiCo (PEP), with 81% and 86.5% of voters in favor of the $7.8 billion deal. The merger consolidates PepsiCo's control over North American sales.

Blockbuster Downgraded.  S&P downgraded Blockbuster (BBI) CCC yesterday, calling the company "vulnerable to default. S&P assigned the company a negative outlook, indicating another rating cut is possible in the next 12-18 months, on their view that "performance will remain very challenged and our concern that Blockbuster will not be able to transform its business model over the near term, as we had expected."

Barrick Gold (ABX): Reported Q4 EPS of $0.61 beating estimates by +$0.04 on revenue of $2.3 billion which was in-line with estimates.

Applied Materials (AMAT): Reported FQ1 EPS of $0.13 which was in-line with estimates on revenue of $1.85 billion.  The company sees Q2 EPS of $0.17 vs. $0.15. 

Hewlett-Packard (HPQ): Reported FQ1 EPS of $1.10 beating estimates by +$0.04 on revenue of $31.2 billion vs. $30 billion.  The company also raised its 2010 EPS outlook to $4.37 and sees Q2 EPS of $1.03, on revenue of $29.4 billion. CEO Mark Hurd said "The strength of our portfolio, leaner cost structure and accelerating market momentum give us the confidence to raise our full-year outlook." 

Upgrades

Deere (DE): JP Morgan upgraded their rating from Neutral to  Overweight and raised their target price from $52.00 to $65.00.

Coverage Reiterated/Price Target Changed

Deere (DE): Credit Suisse reiterated their rating of Outperform and raised their target price from $60.00 to $70.00.

Hewlett-Packard (HPQ): Credit Suisse reiterated their rating of Outperform and raised their target price from $60.00 to $65.00.

·         Futures: Dow -0.09% to 10287. S&P -0.16% to 1098. Nasdaq +0.1%. Crude flat at $81.20. Gold -0.26% to $1170.90.

·         Asia, Nikkei +0.3% to 10336. Hang Seng -0.5% to 20422. Shanghai +1.1% to 3018. BSE -0.6% to 16328.

·         Europe at midday, London +0.5% to 5303. Paris +0.3% to 3737. Frankfurt +0.3% to 5664.