MORNING COFFEE

Black Friday Shows Improvement. Holiday shoppers hit the stores with credit cards on hand on Black Friday.  Almost 212 million shoppers visited the malls or retail websites over the weekend which was an +8.7% increase from last year. Although traffic showed a nice increase retail spending only increased +0.3% over last year coming in at $10.69 billion. E-commerce rose +28% over last year.  Amazon’s (AMZN) Black Friday sales jump of +82.3%. On-line retailers should see additional increases today with “Cyber Monday” sales.

Wal-Mart To Buy Massmart. Wal-Mart (WMT) said they made a formal offer to buy a 51% stake in South Africa retailer Massmart (MMRTY) for $2.3 billion. Massmart's board recommended shareholders accept the deal.

Upgrades

American Eagle (AEO): Janney Montgomery Scott raised their rating from Neutral to Buy and placed a target price of $20.00 on the company.

Downgrades

Dollar General (DG): Avondale lowered their rating from Market Outperform to Market Perform and placed a target price of $33.00 on the company.

eBay (EBAY): Stifel Nicolaus  lowered their rating from Buy to Hold.

Coverage Reiterated/Price Target Changed

OmniVision (OVTI): Wedbush reiterated their Outperform rating and raised their target price from $28.00 to $34.00.

Boeing (BA): RBC Capital Markets reiterated their Outperform rating and lowered their target price from $80.00 to $78.00.

·         Futures at 7:00: Dow +0.2%. S&P +0.25%. Nasdaq +0.1%. Crude +0.6% to $84.27. Gold -0.2% to $1359.80.

·         Asia: Japan +0.9% to 10126. Hong Kong +1.3% to 23166. China -0.2% to 2866. India +1.4% to 19405.

·         Europe: London -0.3%. Paris -0.6%. Frankfurt -0.6%.

MORNING COFFEE

EU Contagion Fears Spread. World markets are lower on fears that the EU debt contagion could spread.  Both Greece and Ireland have accepted EU and IMF bailouts and the fear is that Portugal and Spain will be next.  Currently the EU Commission’s official position is that both can get by without having to accept a bailout, but traders are unsure. The EU Commission has suggested that the EU double the size of its €440 billion ($588 billion) bailout fund for eurozone governments, an idea which Germany dismissed. Additionally, there are reports that Portugal’s government is under pressure to accept a bailout, which the government has denied. 

KKR Buys Del Monte Foods.  KKR & Co. (KKR) has agreed to purchase Del Monte Foods (DLM) for $4 billion or $19/share and includes the assumption of $1.3 billion in debt. Del Monte can also solicit alternative proposals through Jan. 8.

The stock market will have an early close today. 1:00 p.m.

·         Futures at 7:00: Dow -0.8%. S&P -0.9%. Nasdaq -0.9%. Crude -1.2% to $82.89. Gold -0.9% to $1360.10.

·         Asia: Japan -0.4% to 10040. Hong Kong -0.8% to 22877. China -0.9% to 2872. India -0.9% to 19137.

·         Europe: London -1.7%. Paris -1.7%. Frankfurt -1.4%.

MORNING COFFEE

SAP TO Pay Oracle $1.3 Billion. A federal jury ruled SAP (SAP) must pay Oracle (ORCL) $1.3 billion for copyright infringement. In a statement Oracle said that the verdict is "the largest amount ever awarded for software piracy," SAP said that they would "pursue all available options, including post-trial motions and appeal if necessary."

Fed Expands Insider Trading Probe. Federal officials are expanding their insider trading probe.  Two Mutual fund companies, Janus Capital (JNS) and Wellington Management have received request for documents and information from the FBI.  In addition Hedge fund Citadel Investment Group received a wide-ranging subpoena from the Justice Department. Other subpoena recipients reportedly include hedge funds Maverick Capital Management and Millennium Capital Management. SAC Capital Advisors has reportedly sent investors a letter confirming it had received “extraordinarily broad” subpoenas which don't "shed much light on whom or what the government may be investigating."

Downgrades

J. Crew (JCG): Robert W. Baird lowered their rating from Outperform to Neutral and lowered their target price from $46.00 to $45.00.

J. Crew (JCG): Wedbush lowered their rating from Outperform to Neutral.

Coverage Reiterated/Price Target Changed

Guess? (GES): Brean Murray reiterated their Buy rating and raised their target price from $50.00 to $60.00.

Guess? (GES): Wedbush reiterated their Neutral rating and raised their target price from $46.00 to $49.00.

TCF Financial (TCB): Collins Stewart reiterated their Hold rating and lowered their target price from $19.00 to $15.00.

Noble Corp (NE): FBR Capital reiterated their Outperform rating and raised their target price from $42.00 to $45.00.

Earning Reports

Guess? (GES): Reported Q3 EPS of $0.75 beating estimates by +$0.16 on revenue of $614 million.  Shares were up +8.7% after hours.

J Crew Group (JCG): Reported Q3 EPS of $0.58 Beating estimates by +$0.04 on revenue of $430 million.

TiVo (TIVO): Reported Q3 EPS of -$0.18 missing estimates by -$0.01 on revenue of $41.3 million.

Deere (DE): reported EPS of $1.07 beating estimates by +$0.12.

·         Futures at 7:00: Dow +0.3%. S&P +0.3%. Nasdaq +0.2%. Crude +0.5% to $81.69. Gold -0.2% to $1375.40.

·         Asia: Japan -0.8% to 10030. Hong Kong +0.6% to 23024. China +1.1% to 2859.94. India -1.2% to 19460.

·         Europe: London +0.6%. Paris +0.2%. Frankfurt +1.1%.

MORNING COFFEE

North Korea Attacks South Korea. North Korea has fired artillery rockets at the South Korean island of Yeonpyeong.  The attack killed two soldiers, and wounded 16 soldiers and 3 civilians. The new sent world markets lower and the dollar rose as traders flocked to safety. China said that the attack was “very unlikely” to turn into full-scale hostilities.

J&J Recalls Children’s Medicine: Johnson & Johnson (JNJ) announced a recall on children's-strength Benadryl and children's Motrin because of manufacturing problems.  The company also said that the medicines in question are safe for consumption.

Medtronic To Buy Ardian. Medtronic (MDT) announced that they have agreed to buy privately-held Ardian for $800 million.  Ardian develops catheter-based therapies to relieve hypertension. Medtronic had priorly owned an 11% stake in the company.

Downgrades

Jack Henry (JKHY): Robert W. Baird lowered their Outperform rating to Neutral and placed a target price of $30.00 on the company.

Coverage Initiated

Old Dominion (ODFL): KeyBanc Capital Markets initiated coverage with a Buy rating and target price of $34.00.

Barrick Gold (ABX): HSBC Securities initiated coverage with an Overweight rating and target price of $64.00.

Newmont Mining (NEM): HSBC Securities initiated coverage with an Overweight rating and target price of $77.00.

Coverage Reiterated/Price Target Changed

Northrop Grumman (NOC): RBC Capital Markets reiterated their Underperform rating and raised their target price from $63.00 to $66.00.

Hewlett-Packard (HPQ):  RBC Capital Markets reiterated their Outperform rating and raised their target price from $55.00 to $56.00.

Pacific Sunwear (PSUN): Oppenheimer reiterated their Outperform rating and raised their target price from $4.75 to $7.50.

Exxon Mobil (XOM): Argus reiterated their Buy rating and raised their target price from $76.00 to $85.00.

Earning Reports

Hormel Foods (HRL): Reported EPS of $0.90 beating estimates by +$0.11.

Medtronic (MDT): Reported EPS of $0.82 beating estimates by +$0.01 on revenue of $3.9 billion.

Analog Devices (ADI): Reported FQ4 EPS of $0.73 beating estimates by +$0.03 on revenue of $770 million. 

Brocade Communications Systems (BRCD): Reported FQ4 EPS of $0.14 beating estimates by +$0.01 on revenue of $550 million. 

Campbell Soup (CPB): Reported EPS of $0.82 missing estimates by -$0.01.

Hewlett-Packard (HPQ): Reported FQ4 EPS of $1.33 beating estimates by +$0.06 on revenue of $33.2 billion.

·         Futures at 7:00: Dow -0.65%. S&P -0.8%. Nasdaq -0.6%. Crude -0.5% to $81.35. Gold +0.4% to $1363.20.

·         Asia: Japan +0.9% to 10115. Hong Kong -2.7% to 22896. China -1.9% to 2828. India -1.3% to 19692.

·         Europe: London -0.6%. Paris -0.9%. Frankfurt -0.2%.

CLOSING BELL

Dow 11178.73  -24.82, Nasdaq 2532.02  +13.90,S&P 1197.85  -1.88

News of Ireland’s bailout and FBI raids at several hedge funds left traders on the sidelines for the day.

Over the weekend Ireland announced that they would seek aid from the EU and IMF in an attempt to improve their financial state.  At first the market saw this as a positive, but then the focus turned to Portugal and Spain as traders became worried about a domino effect running through the EU.

This also led to a stronger dollar and the selloff.

Financials were the loser today not only because of the Ireland news, but additional stories of FBI raids at several billion dollar hedge funds for insider trading activities. The Financial sector ended down -1.4%.

The tech sector was the winner today, up +0.66. The most active winners were: Novell  (NOVL) 5.96 +0.37, +6.62, Apple (AAPL) 313.36 +6.63, +2.16%, Hewlett-Packard (HPQ) 43.25, +0.76, +1.76%, Microsoft (MSFT) 25.73 +0.04, +0.16%.

Advancing Sectors: Tech +0.66%, Consumer Discretionary +0.3%, Utilities +0.2%, Materials +0.2%
Declining Sectors: Financials -1.4%, Energy -0.4%, Telecom -0.3%, Industrials -0.3%, Consumer Staples -0.1%
Unchanged: Health Care

MIDDAY LUNCH

Dow 11122.38  -81.41, Nasdaq 2518.96  +0.84, S&P 1192.82  -6.91 

Today’s trading has seen an increase in volatility, as such the Volatility Index also called the Fear Gauge is up +6%.

Some of today’s negative trading and volatility can be blamed on the stronger dollar which is up +0.4% against other currencies.

Financials are the big loser today with the sector off -1.24%.  The selloff in financials could be attributed to a Barclays Capital report which indicated that U.S. Banks will need to raise more capital for Basel III and news that Ireland will be asking for a bailout, putting a spotlight on their financial institutions.  Bank of Ireland ADR (IRE) 2.21 -0.46, -17.23%, Goldman Sachs (GS) 160.50 -6.20, -3.72%, Morgan Stanley (MS) 160.69 -5.98, -3.62%.

After the market close today several companies of interest are due to report earnings. 

Dycom (DY) 11.01 -0.17, -1.52%: Analysts estimates are for the company to report earnings of $0.10 versus +0.15 a year ago.

Hewlett-Packard (HPQ) 42.33 -0.16, -0.38%: Analysts estimates are for the company to report earnings of $1.27 versus +1.14 a year ago.

MORNING COFFEE

U.S. Bank Need More Capital. According to a report by Barclays Capital the largest U.S. banks face a capital shortfall of between $100 billion and $150 billion once Basel III rules go into effect.  Additionally 90% of the shortfall will be concentrated in the top six banks.  To meet the new capital requirements for Basel III banks could increase their capital through retained earnings, issuing new stock or selling off assets.

Ireland Asks For Aid. Ireland is now the second eurozone country to ask for aid from the EU and IMF.  The aid package will be around €80 billion ($110 billion). Reports say that the U.K. government will loan £7 billion, and that Sweden may also extend a loan.

Upgrades

Hewlett-Packard (HPQ): Wedbush raised their rating from Neutral to Outperform and raised their target price from $46.00 to $50.00.

SanDisk (SNDK): Robert W. Baird raised their rating from Neutral to Outperform and raised their target price from $42.00 to $56.00.

Downgrades

Massey Energy (MEE): FBR Capital lowered their rating from Outperform to Market Perform .

Coverage Reiterated/Price Target Changed

Foot Locker (FL): FBR Capital reiterated their Outperform rating and raised their target price from $17.00 to $21.00.

Honeywell (HON): FBR Capital reiterated their Market Perform rating and raised their target price from $47.00 to $57.00.

Earning Reports

Tyson Foods (TSN): Reported EPS of $0.64 beating estimates by +$0.08.

·         Futures at 7:00: Dow +0.1%. S&P +0.1%. Nasdaq +0.3%. Crude +0.8% to $82.64. Gold +0.3% to $1356.60.

·         Asia: Japan +0.9% to 10115. Hong Kong -0.3% to 23524. China -0.1% to 2884. India +1.9% to 19958.

·         Europe: London -0.2%. Paris -0.1%. Frankfurt +0.3%.