MORNING COFFEE

Moody’s Warns About US Debt. Moody's released a statement yesterday that unless the U.S. works to lower its budget deficit or the economy grows more than expected, the government's triple-A bond rating will eventually come under pressure. Moody's said "the deficits projected in the budget do not stabilize debt levels in relation to GDP, and the portion of government expenditures going to pay interest on the debt shows a steady rise."

PNC Pays Money Back. PNC Financial (PNC) said yesterday that it will repay $7.6 billion of TARP funds. PNC will use $2.3 billion from the sale of its Global Investment Servicing to Bank of New York Mellon (BK).  The company will also offer $3 billion in common shares and will offer $1.5 billion-2 billion in senior notes.PNC is down -1.6% the premarket.

Auto Sale Give Hope. U.S. auto companies saw sales rebound in January from the previous year, with the notable exception of Toyota (TM). Overall, sales increased 6% from Jan. 2009. Companies reported the following: Ford (F): +24% to 112,406 vehicles, Chrysler: -8% to 57,143 vehicles. GM: +14% to 146,825 vehicles, Honda (HMC): -5% to 67,479 vehicles, Toyota (TM): -8.7% to 98,796 vehicles, Nissan (NSANY): +16.1% to 62,572 vehicles.

Homes Sales Rise. Pending home sales rose +1% in December to 96.6 month-on-month, better than the 0% expected by economist and November's -16% drop to 96. Sales were up +10.9% year-over-year.

Retail Sales Rise. ICSC reported retail sales inched up +0.1% from the previous week, vs. -2.5% prior. Sales rose +0.4% from the previous year, vs. +1.9% prior. According to Redbook, chain store sales were up +0.8% from the previous year, vs. +1% prior.

Comcast (CMCSA): Reported Q4 EPS of $0.33 that beat estimates by +0.06 on revenue of $9 billion.

Time Warner (TWX): Reported Q4 EPS of $0.55 beating estimates by +0.03 on revenue of $7.3 billion.

AFLAC (AFL): Reported Q4 operating earnings of $1.18 beating estimates by +0.03 on revenue of $4.6 billion.

News Corp. (NWS):  Reported FQ2 EPS of $0.25 beating earnings estimates by +0.05 on revenue of $8.7 billion.

Other Earnings to be reported today:  International Paper (IP), Microchip Tech Corp (MCHP), Pfizer (PFE), Polo Ralph Lauren (RL),Silicon Labs (SLAB), ITT Corp (ITT), National Oilwell (NOV), Cysco Systems (CSCO)

Upgrades

Wal-Mart (WMT): Stifel Nicolaus upgraded the company from Hold to Buy with a target price of $62.00.

Genzyme (GENZ):  UBS upgraded the company from Neutral to Buy.

Coverage Reiterated/Price Target Changed 

America Movil SA (AMX): Stifel Nicolaus reiterated they Buy rating and changed their target price from $52.00 to $53.00.

·         Futures: Dow +0.15%. S&P +0.15%. Nasdaq +0.2%. Crude +0.7% to $77.75. Gold +0.3% to $1,120.50.

·         Asia, Nikkei +0.3% to 10,404. Hang Seng +2.2% to 20,722. Shanghai+2.4% to 3,004. BSE +2.1% to 16,496.

·         Europe at midday, London +0.3%. Paris +0.3%. Frankfurt +0.2%.

CLOSING BELL

Dow 10296.85  +111.32, Nasdaq 2190.06  +18.86, S&P 1103.32  +14.13 

Despite a sluggish start the stock market made its way back above 1100 as the bulls offered broad-based support for the second straight session.

Though the S&P 500 was able to make its way back above the 1100 resistance level, it remains -4% below its January high. All 10 major sectors finished the today higher.  Seven of them gained in excess of +1%.

The CRB Commodity Index made its best single-session percentage gain in nearly one month with a +1.9% gain. Oil closed with +3.7% higher at $77.17 per barrel.

Energy names topped this today’s most actively traded stocks by volume.  Overall volume was slightly above average as almost 1.2 billion shares exchanged hands on the NSYE this session.

Treasury Secretary Geithner testified before the Senate Finance Committee this morning on the government's fiscal 2011 budget. Part of the testimony was an appeal for a bipartisan effort to lower down deficits that he blamed on the Bush administration.

In economic news, pending home sales in December increased +1.0% month-over-month, which is in-line with expectations. Pending sales for November were downwardly revised to show a -16.4% month-over-month decline.

Advancing Sectors: Health Care +1.9%, Industrials +1.9%, Consumer Discretionary +1.5%, Energy +1.4%, Telecom +1.3%, Consumer Staples +1.3%, Financials +1.1%, Tech +0.8%, Utilities +0.8%, Materials +0.4%

Declining Sectors: (None)

MIDDAY LUNCH

Dow 10274.33  +88.80, Nasdaq 2182.65  +11.45, S&P 1100.10  +10.91 

The stock market just barely topped the psychologically significant 1100 level, which has become a source of resistance.

While weakness remains in large-cap tech issues like Microsoft (MSFT) 28.36, -0.05, Google (GOOG) 530.18, -2.84, and Apple (AAPL) 195.20, +0.47.

An upside surprises from UPS (UPS) 58.98, +0.59 has won its shares favor, while Dow Chemical (DOW) 28.15, -0.48 eked out a beat, but it has failed to find support.

The CRB Commodity Index is at a fresh session high with a +1.7% gain. The move has been caused by a +1.1% gain in gold prices to $1116.50 per ounce and a +3.4% rise in oil prices to $76.95 per barrel.

Treasury Secretary Geithner testified before the Senate Finance Committee this morning on the government's fiscal 2011 budget. Part of the testimony was an appeal for a bipartisan effort to lower down deficits that he blamed on the Bush administration.

In economic news, pending home sales in December increased +1.0% month-over-month, which is in-line with expectations. Pending sales for November were downwardly revised to show a -16.4% month-over-month decline.

MORNING COFFEE

Burkle Request To Buy More Barnes & Noble. In a letter disclosed yesterday in an SEC filing, activist investor Ron Burkle asked the board of Barnes & Noble (BKS) to let him acquire up to 37% of the company's shares without triggering "poison pill" provisions that kick in at 20%. Burkle, currently holds a 19% stake, blasted the company for having two sets of anti-takeover rules: one for insiders and one for outsiders. News of the filing sent Barnes & Noble shares up 18% in after-hours trading.

Moody’s Warns About Debt Risk. In Moody's annual report on risks, warned nearly 1,000 companies with a junk rating will face significant refinancing needs over the next several years.  There is around $700 billion of debt coming due between 2012 and 2014. "Longer-term maturities are vulnerable if the economic recovery doesn't continue to take hold," said Kevin Cassidy, a senior credit officer at Moody's. If economic conditions worsen, "things could get tough pretty quick for some companies."

Google Store Plan Online Store.  Google (GOOG) will announce soon that it will launch a store that will sell online business software designed by outside developers and meant to integrate and add capabilities to Google Apps.

President Obama’s Budget Revealed. President Obama unveiled his $3.8Trillion budget proposal for the coming fiscal year.  The proposal contained no meaningful deficit-reduction measures and seeks to borrow another $1.3 trillion in 2011. The plan includes a $970 billion tax increase over the next decade on high-income earners, and a $400 billion tax increase on large businesses.  US business already have one of the largest tax burdens in the world. Other groups hurt by the proposal include hedge-fund and private equity employees, and fossil-fuel companies. The budget proposal assumes the U.S. economy will experience six years of above-average growth with no complications from high inflation or interest rates.

Earnings:

Archer Daniels Midland (ADM): FQ2 EPS of $0.88 beating estimates by +0.16 on revenue of $15.9 billion.

BP (BP): Q4 EPS of $1.37 missed estimates by -0.14.  Shares  are down -4.7% in the premarket.

Dow Chemical (DOW): Q4 EPS of $0.18 beat estimates by +0.07 on revenue of $12.4billion.

Coverage Initiated

MasterCard (MA): Bernstein initiated coverage with an Outperform and a target price of $329.00

·         Futures: Dow +0.3%. S&P +0.3%. Nasdaq +0.2%. Crude +1.1% to $75.27. Gold +0.8% to $1,113.40.

·         Asia, Nikkei +1.6% to 10,371. Hang Seng +0.1% to 20,272. Shanghai -0.2% to 2,935. BSE -1.2% to 16,163.

·         Europe at midday, London +0.4%. Paris +0.7%. Frankfurt +0.8%.

CLOSING BELL

Dow 10185.53 +118.20, Nasdaq 2181.20 +23.85, S&P 1089.19  +15.32 

Strength in the natural resource sector helped the stock market put together a low-volume gain that concluded at session highs with all 10 major sectors in positive ground.

Materials stocks rose +3.7% as precious metals headed higher after posting sizable losses in recent weeks, gold prices closed +1.9% higher at $1105 per ounce, while silver prices were +2.9% higher at $16.66 per ounce. 

Energy giant Exxon Mobil (XOM) 66.18, +1.75, +2.72% was a primary leader in the group, due to its better-than-expected earnings and a +2.1% rise in crude oil prices, which closed at $74.13 per barrel.

Economic data today was generally mixed. ISM Manufacturing Index exceeded expectations with a multiyear high of 58.4 for January and Construction Spending during December fell a steeper-than-expected -1.2% decline, which is worse than the -0.5% forecast.

Personal income during December was up +0.4% in a slightly sharper increase than had been expected, but spending during increased at a softer-than-expected pace of +0.2%. Core personal consumption expenditures increased just +0.1% month-over-month, in-line with expectations.

Advancing Sectors: Materials +3.7%, Energy +3.0%, Financials +1.6%, Tech +1.5%, Industrials +1.5%, Consumer Discretionary +1.1%, Consumer Staples +0.8%, Utilities +0.7%, Health Care +0.5%, Telecom +0.4%

Declining Sectors: (None)

MIDDAY LUNCH

Dow 10167.84  +100.51, Nasdaq 2164.27  +16.92,S&P 1086.10  +12.23 

The Natural resource sector has led stocks to a strong rebound from last week's losses.  Exxon Mobil (XOM) 66.26, +1.83, +2.84% and BP PLC (BP) 56.98 +0.86, +1.54% are showing nice gains. One top of Exxon Mobil’s better than expected earnings oil is higher at 73.75 +0.86, after a pipeline attack.

Materials stocks +2.5% are also up today. That has gold stocks up +5.0% and steel stocks up +4.3%. Diversified metals and mining stocks are up +5.4%.

Boston Scientific (BSX) 8.54, -0.09 will pay $1.725 billion to Johnson & Johnson (JNJ) 62.90, +0.04 in order to settle three patent disputes that date back to 2003.

Amazon.com(AMZN) 115.13, -9.93, is down today after posting better than expected earnings on Friday.  The weakness can be attributed to its dispute with publishers offering digital books on the new Apple 194.37 +2.30, +1.20% Ipad.

ISM Manufacturing Index exceeded expectations with a multiyear high of 58.4 for January and Construction Spending during December fell a steeper-than-expected -1.2%.

Personal income during December was up +0.4% in a slightly sharper increase than had been expected, but spending during increased at a softer-than-expected pace of +0.2%. Core personal consumption expenditures increased just +0.1% month-over-month, in-line with expectations.

MORNING COFFEE

Deficit To Reach New High.  President Obama plans to propose a $3.8 trillion dollar budget today for 2011, with deficit projections hitting a record $1.6 trillion this year. The 2011 deficit will surpass the current fiscal year's deficit of $1.4 trillion, in part because of new spending for a proposed jobs package "somewhere in the $100 billion range."

Toyota To Fix Pedals.  Toyota (TM) announced its plans to begin fixing accelerator pedals this week after last week's recall. U.S. regulators have approved the repair, and parts will ship as soon as February 8. The recall affects eight different models and comes just after a Lexus recall that was caused by floor mats causing pedals to stick.  Over the weekend PSA Peugeot Citroen recalled 90,000 cars that may have the same gas-pedal flaw and that were made in a factory where Toyota and Peugeot jointly manufacture small cars.

Disney To Sell Miramax.  Reports say Disney (DIS) is looking to sell of its Miramax film unit as it seeks to focus on big-budget, branded movies. Up to ten bidders have expressed interest in purchasing the Miramax name and its 700-film library.  The sale could bring in over $700 million.

Earning Releases Scheduled for today include the following:

Humana (HUM): Reported Q4 EPS of $1.48 which was in-line with estimates on revenue of $7.6 billion.

Sysco (SYY): Reported earnings of $0.45 which was better than the $0.42 street estimate.  Revenue fell 3 percent to $8.87 billion from $9.15 billion last year

ExxonMobil (XOM):  Reported earnings of $1.27 which was better than the $1.19 street estimate.  Revenue in the quarter rose 6 percent to $89.84 billion.

Todays economic reports include: Personal Income, Personal Spending, Construction Spending and the ISM Index.

·         Futures: Dow +0.4%. S&P +0.4%. Nasdaq +0.3%. Crude +0.4% to $73.18. Gold -0.15% to $1,081.40.

·         Asia, Nikkei +0.1% to 10,205. Hang Seng +0.6% to 20,244. Shanghai -1.6% to 2,941. BSE flat at 16,356.

·         Europe at midday, London +0.15%. Paris -0.15%. Frankfurt flat.