MORNING COFFEE

Debt Talks Stumble. 

Yesterday President Obama went after Republicans saying they proposed tax breaks for the wealthy, when in fact they are only proposing no tax hikes for anyone.  Republicans are standing firm on their insistence that any increase in the national debt limit be accompanied by large spending cuts and no new taxes. The Democrats want tax rate hikes and simplification of the tax code.  Many analysts believe that simplification of the tax code means the elimination of some tax credits and deductions on personal and business taxes.  One of the items up for consideration includes the home mortgage interest deduction that home owners take advantage off.  Many economists believe that any tax increase in this weak economy could stall the recovery and possibly push the U.S. economy into another recession.  The government has until Aug. 2 to raise the $14.3 trillion debt ceiling and there has been no progress on a deal since the deficit-reduction talks collapsed last week.  The rating agency S&P warned yesterday that any missed payment would result in a lowering for the U.S. debt rating from AAA to D (Defult) and the IMF warned that it would cause a “severe shock" to the U.S. economy and world markets.

Upgrades

eBay (EBAY): Citigroup raised their rating from Hold to Buy and raised their target price from $36.00 to $38.00. Pre-market: 32.30 +1.44 (4.67%)

Downgrades

KB Home (KBH): Ticonderoga lowered their rating from Buy to Neutral. Pre-market: 10.07 -0.01 (-0.10%)

TJX (TJX): Nomura raised their rating from Neutral to Buy and placed a target price of $60.00 on the company. Pre-market: 52.60 +0.59 (1.13%)

Coverage Initiated

Silicon Laboratories (SLAB): UBS initiated coverage with a Buy rating and target price of $48.00.

Sotheby's (BID): Merriman initiated coverage with a Buy rating and target price range of $50.00 - $55.00.

Qualcomm (QCOM): Susquehanna initiated coverage with a Positive rating and target price of $70.00.

Coverage Resumed

Yahoo! (YHOO): Needham resumed coverage with a Buy rating and target price of $19.00. Pre-market: 14.99 +0.10 (0.67%)

Coverage Reiterated/Price Target Changed

Marathon Oil (MRO): Oppenheimer reiterated their Outperform rating and lowered their target price from $62.00 to $40.00.

Monsanto (MON): Ticonderoga reiterated their Buy rating and raised their target price from $80.00 to $82.00. Pre-market: 70.00 -0.26 (-0.37%)

Earning Reports

Constellation Brands (STZ): Reported EPS of $0.39 beating estimates by +$0.02.

McCormick (MKC): Reported EPS of $0.55 beating estimates by +$0.01.

·         Futures at 7:00: Dow +0.1%. S&P +0.2%. Nasdaq +0.1%. Crude -0.2% to $94.59. Gold 0.0% at $1510.60.

·         Europe: London +0.4%. Paris +0.2%. Frankfurt -0.1%.

·         Asia: Japan +0.2% to 9816. Hong Kong +1.5% to 22398. China +1.2% to 2762. India +0.8% to 18846.

MORNING COFFEE

BofA Settles for $8.5 Billion. Bank of America (BAC) announced that it will pay an $8.5 billion settlement, the largest in U.S. banking history.  The settlement will go to large investors who lost money on mortgage-backed securities. The bank will also record an additional $5.5 billion provision in Q2 2011 for representations and warranties exposure. Bank of America said they now expect to report a Q2 loss of $0.88-$0.93 a share, including a goodwill impairment charge of $2.6 billion. The investors included in the settlement are Pacific Investment Management, BlackRock (BLK) and the New York Fed. Many analysts had expected the settlement to be much larger. BAC Pre-market: 11.30 +0.48 (4.44%) BLK After Hours: 189.30 +0.04 (0.02%)

Upgrades

Nike (NKE): Capstone raised their rating from Hold to Buy and placed a target price of $105.00 on the company. Pre-market: 90.63 +0.73 (0.81%)

US Steel (X): Deutsche Bank raised their rating from Hold to Buy and placed a target price of $56.00 on the company. Pre-market: 44.54 +1.23 (2.84%)

Gilead Sciences (GILD): Piper Jaffray raised their rating from Neutral to Overweight and raised their target price from $42.00 to $53.00. Pre-market: 41.75 +0.80 (1.95%)

Airgas (ARG): KeyBanc raised their rating from Hold to Buy and placed a target price of $85.00 on the company. Pre-market: 70.11 +0.53 (0.76%)

Downgrades

Shaw Group (SHAW): Stifel Nicolaus lowered their rating from Buy to Hold. Pre-market: 28.00 -4.31 (-13.34%)

Earning Reports

Family Dollar Stores (FDO): Reported FQ3 EPS of $0.91 missing estimates by -$0.04 on revenue of $2.15 billion, missing estimates by -$0.02 billion. The company gave FY'11 EPS  guidance of $3.08-3.16. Pre-market: 51.52 -1.50 (-2.83%) 

General Mills (GIS): Reported FQ4 EPS of $0.52 in-line on revenue of $3.63 billion, missing estimates by -$0.04 billion. Pre-market: 36.30 -0.91 (-2.45%)

Shaw Group (SHAW): Reported FQ3 EPS of $0.39 missing estimates by -$0.28 on revenue of $1.5 billion, missing estimates by -$0.2 billion. Pre-market: 28.00 -4.31 (-13.34%)

American Greetings (AM): Reported EPS of $0.78 missing estimates by -$0.02. Pre-market: 25.25 +0.84 (3.44%)

·         Futures at 7:49: Dow +0.52%. S&P +0.58%. Nasdaq +0.66%. Crude +1.16% to $93.96. Gold +0.55% to $1508.60    .

·         Europe: London +1.37%. Paris +1.78%. Frankfurt +1.72%.

·         Asia: Japan +1.54% to 9797. Hong Kong 0.00% at 22061. China -1.11% to 2728. India +1.09% to 18694.

MORNING COFFEE

Microsoft Office to Join Cloud. CEO Steve Ballmer is expected to unveil Microsoft’s (MSFT) online version of Office.   Office 365 is expected to enable customers to use applications such as Word, Outlook, PowerPoint and Excel on a variety of devices over the Internet. The new offering is in direct response to Google’s (GOOG) very successful Google Docs.  Google Docs has attracted over 40 million users, including many corporate customers from Microsoft due to its lower costs and simple implementation. MSFT Pre-market: 25.23 +0.03 (0.12%) GOOG Pre-market: 482.00 -0.80 (-0.17%)

Nike Post Nice Earnings Report. Nike's (NKE) reported FQ4 earnings that beat expectations.  Net profits and revenue jumped 14% to $594M and $5.77B respectively.  The company saw revenues grew in every market except Japan, which was expected due to the earthquake.  Additionally this came as Nike increased prices to offset higher costs.  Futures orders also exceeded estimates, rising 15% to $10.3 billion. Pre-market: 85.19 +3.57 (4.37%)

S&P 500 Index to Add Accenture. Standard & Poor’s announced that after the July 5^th session Accenture (ACN) will join the S&P 500 index. The company will replace Marshall & Ilsley (MI), which is being acquired by Bank of Montreal (BMO). ACN Pre-market: 60.85 +3.06 (5.30%)

Upgrades

Seagate Technologies (STX): FBN Securities raised their rating from Sector Perform to Outperform and raised their target price from $20.00 to $21.00. Pre-market: 15.58 +0.36 (2.37%)

Downgrades

Motorola Mobility (MMI): BMO Capital downgraded their rating from Market Perform to Underperform and lowered their target price from $26.00 to $19.00. Pre-market: 22.54 -0.28 (-1.23%)

Accenture (ACN): Jefferies lowered their rating from Buy to Hold and lowered their target price from $60.00 to $58.00. Pre-market: 60.85 +3.06 (5.30%)

Coverage Initiated

Cree (CREE): KeyBanc Capital Markets initiated coverage with a Buy rating and target price of $41.00. Pre-market: 33.86 +0.33 (0.98%)

MasterCard (MA): Jefferies initiated coverage with a Buy rating and target price of $333.00. Pre-market: 271.50 -1.10 (-0.40%)

Visa (V): Jefferies initiated coverage with a Buy rating and target price of $95.00. Pre-market: 73.90 +0.01 (0.01%)

Paychex (PAYX): Jefferies initiated coverage with a Hold rating and target price of $31.00.

Western Union (WU): Jefferies initiated coverage with a Buy rating and target price of $24.00.

Earning Reports

Nike (NKE): Reported FQ4 EPS of $1.24 Beating estimates by +$0.08 on revenue of $5.77 billion, beating estimates by +$0.24 billion. Pre-market: 85.19 +3.57 (4.37%) 

·         Futures at 8:10: Dow -0.13%. S&P -0.08%. Nasdaq -0.17%. Crude +0.76% to $91.29. Gold +0.47% to $1503.40.

·         Europe: London +0.78%. Paris +0.65%. Frankfurt -0.13%.

·         Asia: Japan +0.74% to 9649. Hong Kong +0.09% to 22062. China +0.04% to 2760. India +0.43% to 18492.

MORNING COFFEE

Trading Suspended In Italian Bank Stocks. Trading in Italian bank stocks has been suspended after bank shares saw sudden price declines.  Bank stock shares fell after Moody’s (MCO) put the banks on negative outlook.  Additionally, there were rumors that Italy’s banks need to raise more capital after going through the European stress text.  Shares of Unicredit SpA (IT:UCG) fell -8.9%, Intesa Sanpaolo SpA (IT: ISP) dropped -7.2%.   A spokeswoman for Borsa Italiana said the trading suspension was temporary and triggered by "technical problems about volatility." Other European bank stocks are trading lower on the news.

Upgrades

Diamond Offshore (DO): FBR Capital raised their rating from Market Perform to Outperform and placed a target price of $85.00 on the company.

Constellation Energy (CEG): Wunderlich raised their rating from Hold to Buy and placed a target price of $43.50 on the company.

Comcast (CMCSA): Goldman Sachs raised their rating from Buy to Conviction Buy and placed a target price of $31.00 on the company. Pre-market: 24.20 +0.49 (2.07%)

Raymond James (RJF): Ticonderoga raised their rating from Neutral to Buy and placed a target price of $37.00 on the company.

Downgrades

Boston Scientific (BSX): UBS lowered their rating from Buy to Neutral and lowered their target price from $7.91 to $7.66.

Coach (COH): HSBC Securities lowered their rating from Overweight to Neutral. Pre-market: 59.96 -0.93 (-1.53%)

Tiffany & Co (TIF): HSBC Securities lowered their rating from Overweight to Neutral. Pre-market: 74.83 -1.44 (-1.89%)

Coverage Initiated

AT&T (T): Kaufman Bros initiated coverage with a Hold rating and target price of $31.00. Pre-market: 30.75 +0.03 (0.10%)

Coverage Reiterated/Price Target Changed

Discover Financial Services (DFS): FBR Capital reiterated their Outperform rating and raised their target price from $25.00 to $30.00. Pre-market: 24.16 +0.27 (1.13%)

Earning Reports

Accenture (ACN): Reported FQ3 EPS of $0.93 beating estimates by +$0.04 on revenue of $6.7 billion, beating estimates by +$0.3 billion.

H&R Block (HRB): Reported FQ4 EPS of $2.14 beating estimates by +$0.02 on revenue of $2.32 billion, beating estimates by +$0.01 billion.

Micron Technology (MU): Reported FQ3 EPS of $0.07 missing estimates by -$0.10 on revenue of $2.13 billion, missing estimates by -$0.24 billion. Pre-market: 7.62 -0.81 (-9.61%)

Oracle (ORCL): Reported FQ4 EPS of $0.75 beating estimates by +$0.04 on revenue of $10.78 billion, beating estimates by +$0.04 billion. Pre-market: 31.25 -1.21 (-3.72%) 

·         Futures at 7:00: Dow +0.2%. S&P +0.1%. Nasdaq +0.4%. Crude+0.5% to $91.48. Gold -0.2% to $1518.10.

·         Europe: London +0.8%. Paris +1.0%. Frankfurt +0.9%.

·         Asia: Japan +0.8% to 9679. Hong Kong +1.9% to 22172. China +2.2% to 2746. India +2.9% to 18241.

MORNING COFFEE

U.S. Economy Slowing.  Yesterday the FOMC released their latest decision on interest rates and it was no surprise that the kept rates unchanged at 0.0% - 0.25%.  The Fed also lowered their 2011 GDP forecast to 2.7%-2.9% from the previous 3.1%-3.3%.  What the market didn’t like was when Ben Bernanke said the Fed doesn't "have a precise read on why this slower pace of growth is persisting," and that weak housing and problems in the banking system might be "more persistent than we thought." Also unnerving the market was the fact that the Fed also increased its unemployment and core inflation projections.  Initial jobless released this morning once again came in well above economists’ estimates at 429,000.

Upgrades

FedEx (FDX): Argus raised their rating from Hold to Buy and placed a target price of $111.00 on the company. Pre-market: 91.10 -0.34 (-0.37%)

Lumber Liquidators (LL): Stifel Nicolaus raised their rating from Hold to Buy and placed a target price of $31.00 on the company.

Deckers Outdoors (DECK): BBT raised their rating from Hold to Buy and placed a target price of $105.00 on the company. Pre-market: 81.00 -1.09 (-1.33%)

BP PLC (BP): Evolution raised their rating from Add to Buy. Pre-market: 42.06 -1.05 (-2.44%)

Downgrades

CSX (CSX): Sterne Agee lowered their rating from Buy to Neutral and placed a target price of $26.00 on the company. Pre-market: 25.00 -0.55 (-2.15%)

Coverage Initiated

KeyCorp (KEY): Rochdale initiated coverage with a Neutral rating and target price of $9.50. Pre-market: 8.06 -0.12 (-1.47%)

Coverage Reiterated/Price Target Changed

Ulta Salon (ULTA): Oppenheimer reiterated their Outperform rating and raised their target price from $62.00 to $67.00. Pre-market: 60.31 -1.18 (-1.92%)

Bed Bath & Beyond (BBBY): Wedbush reiterated their Outperform rating and raised their target price from $63.00 to $67.00. Pre-market: 55.20 +1.14 (2.11%)

Bed Bath & Beyond (BBBY): Argus reiterated their Buy rating and raised their target price from $60.00 to $63.00. Pre-market: 55.20 +1.14 (2.11%)

Earning Reports

Lennar (LEN): Reported FQ2 EPS of $0.07 beating estimates by +$0.02 on revenue of $764.5 million, beating estimates by $96.9 million. Pre-market: 18.30 +0.20 (1.10%)

ConAgra (CAG): Reported EPS of $0.47 missing estimates by -$0.01. Pre-market: 24.60 -0.82 (-3.23%)

Rite Aid (RAD): Reported EPS of -$0.07 beating estimates by +$0.05. Pre-market: 1.13 +0.03 (2.73%)

Discover Financial Services (DFS): Reported EPS of -$1.09 beating estimates by +$0.34. Pre-market: 23.95 +0.36 (1.53%)

Bed Bath & Beyond (BBBY): Reported Q1 EPS of $0.72 beating estimates by +$0.10 on revenue of $2.11 billion, beating estimates by +$0.04 billion. Pre-market: 55.20 +1.14 (2.11%)

Paychex (PAYX): Reported FQ4 EPS of $0.33 in-line with estimates on revenue of $523 million, beating estimates by +$8 million. Pre-market: 29.49 -0.22 (-0.74%)

Red Hat (RHT): Reported Q1 EPS of $0.24 beating estimates by +$0.02 on revenue of $265 million, beating estimates by +$11 million. Pre-market: 45.30 +1.58 (3.61%)

·         Futures at 8:55: Dow -1.03%. S&P -1.20%. Nasdaq -1.05%. Crude -4.32% to $91.25. Gold -2.12% to $1520.60.

·         Europe: London -1.46%. Paris -2.12%. Frankfurt -1.67%.

·         Asia: Japan -0.34% to 9597. Hong Kong -0.46% to 21759. China+1.47% to 2688. India +1.01% to 17727.