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.