MORNING COFFEE

CBO Expects $1.3 Trillion Budget Deficit. The Congressional Budget Office announced in their latest report on the economy that it expects the U.S. deficit to reach $1.34 trillion, which would be the second-largest shortfall in the last 65 years. The 2011 deficit is expected to come in at $1.07 trillion, up from the CBO's previous estimate of $980 billion. The CBO also said that the economic recovery will continue at a "modest pace" over the next few years.

Make Purchases Using Your Cell Phone. Bank of America (BAC) and Visa (V) announced a plan to begin a test program in September that lets customers use their smartphones to make purchases in stores. Visa has plans to conduct a similar test with U.S. Bancorp (USB). AT&T (T), Verizon (VZ) and T-Mobile USA (DTEGY) are also working on a mobile payment system for smartphones; Discover Financial (DFS) and Barclays (BCS) are said to be part of the venture.

Downgrades

Brocade (BRCD): Argus lowered their rating from Buy to Hold.

McAfee (MFE): FBR Capital lowered their rating from Outperform to Market Perform and raised their target price from $44.00 to $48.00.

Coverage Resumed

Amazon.com (AMZN): Kaufman Bros resumed coverage with a Hold rating and target price of $135.00.

Coverage Reiterated/Price Target Changed

Intuit (INTU): Oppenheimer reiterated their Outperform rating and raised their target price of$39.00 to $45.00

Salesforce.com (CRM): Kaufman Bros reiterated their Buy rating and raised their target price of$110.00 to $120.00.

Earning Reports

Aeropostale (ARO): Reported Q2 EPS of $0.46 in-line on revenue of $495 million.

Dell (DELL): Reported Q2 EPS of $0.32 beating estimates by +$0.02 on revenue of $15.5 billion.

Foot Locker (FL): Reported Q2 EPS of $0.04 beating estimates by +$0.01 on revenue of $1.1 billion.

Gap (GPS): Reported Q2 EPS of $0.36 beating estimates by +$0.01 on revenue of $3.3 billion. 

Hewlett-Packard (HPQ): Reported FQ3 EPS of $1.08 in-line on revenue of $30.7 billion.

Intuit (INTU): Reported FQ4 EPS of -$0.05 beating estimates by +$0.05 on revenue of $537 million.

Salesforce.com (CRM): ReportedQ2 EPS of $0.29 beating estimates by +$0.02 on revenue of $394 million.

·         Futures: Dow -0.5%. S&P -0.5%. Nasdaq -0.4%. Crude -1.3% to $73.46. Gold -0.3% to $1231.50.

·         Asia: Japan -2.0% to 9179. Hong Kong -0.4% to 20982. China -1.7% to 2642. India -0.3% to 18402.

·         Europe: London -0.7%. Paris -1.4%. Frankfurt -1.0%.