Thursday, November 21, 2013

Wall Street Breakfast: Must-Know News


Wall Street Breakfast pictureTop Stories
Eurozone business activity losing momentum. Eurozone composite output PMI has declined to 51.5 in November from 51.9 and fallen short of forecasts, with a slowing of services growth offsetting an increase in manufacturing PMI to a 29-month high of 51.5. While Germany powered ahead, France slipped back into contraction and the country could be on course for a return to recession. "Deflationary forces may be gathering," says Markit of the eurozone, while growth outside the "big two" of Germany and France "slowed to near-stagnation."
Green Mountain gains altitude following earnings beat. Green Mountain's (GMCR) shares climbed 4.8% premarket after the company's FQ4 results topped expectations, boosted by increased sales of the firm's single-serve coffee packs and demand for its Keurig brewers. Net profit jumped 38% to $127M as Green Mountain's gross margin widened to 36% from 33.4%, adjusted EPS came in at $0.89, and revenue grew 22% to $1B. Green Mountain also announced a new stock buyback of up to $1B.
Asian, European stocks lower after FOMC, weak PMIs. Asian and European equities were mostly lower at the time of writing following weak eurozone and Chinese PMI data, and after the FOMC minutes showed that the Fed could start turning down the money printing presses in the coming months. Japanese shares, though, bucked the trend and jumped 1.9% as tapering means a stronger dollar and a weaker yen. Some at the Fed are "itching" to taper, says Pantheon's Ian Shepherdson. Janet Yellen "is not persuaded of this view, but it will be hard for the doves if November payrolls are strong."
Top Stock News
Chrysler eyes December IPO. Chrysler could reportedly carry out its IPO next month, with the carmaker adding Barclays (BCS), Goldman Sachs (GS), Morgan Stanley (MS) and UBS (UBS) as bookrunners for the listing. The firms join lead underwriters JPMorgan (JPM) and Bank of America (BAC). Chrysler has been reporting strong SUV and pickup sales ahead of the IPO, which is the result of the failure of majority owner Fiat (OTC:FIATY) to buy out the UAW retiree healthcare trust's 41.5% stake.
SABMiller net profit +8.5% but warns of forex headwinds. SABMiller's (OTC:SBMRF) FH1 net profit climbed 8.5% to $1.71B as gains in Africa, Latin America and Asia-Pacific helped to outweigh volume declines in Europe and North America. Net producer revenue, which includes sales from joint ventures, increased to $13.79B from $13.67B, in line with market expectations. However, the world's second-largest brewer warned that a strengthening dollar will hurt FY results. Shares were +0.8% in London.
Cliffs to suspend $3.3B Canadian mining project indefinitely. Cliffs Natural Resources (CLF) will indefinitely halt its $3.3B chromite-mining Black Thor project in Canada's Ring of Fire region by the year-end. The miner had wanted to build a highway that could be used to transport the chromite, which is refined into ferrochrome for use in stainless steel, but was blocked by regulators in September due to a dispute over land claims.
Top Economic & Other News
Senate panel seen approving Yellen as next Fed chief. The Senate Banking Committee is expected to back the nomination of Janet Yellen as the next Chairperson of the Federal Reserve in a vote that is scheduled for this morning. The full vote in the Senate is likely to take place in December. Yellen needs 60 votes for her appointment to avoid procedural hurdles. All 55 Democrats will probably back her, while four Republicans have already expressed their support as well.
Chinese manufacturing growth softens slightly. The HSBC Chinese flash manufacturing PMI has slipped to 50.4 in November from 50.9 and missed consensus. Citigroup economist Ding Shuang says the recent growth rebound may have peaked. "Tighter credit conditions and reform measures will continue to weigh on investment and growth through next year," Ding says. The much-heralded reforms could be slowed down if the risk of GDP growth falling below 7% "becomes material."
Bank of Japan keeps ultra-loose policy unchanged. As expected, the Bank of Japan has left its key interest rate at 0.1%, and maintained its program of expanding the monetary base at an annual rate of ¥60-70T ($611-713B) a year. "Japan's economy is recovering moderately," the BOJ reiterated, with Governor Haruhiko Kuroda saying that it is moving in line with forecasts. "Inflation expectations appear to be rising on the whole," the bank said. Still, Kuroda declared that he won't hesitate to change policy if necessary.
Activist investors seek to paint coal as the new tobacco. Coal (KOL) may become the new tobacco if activist investors have their way; growing numbers of them, concerned about carbon emissions, are calling for the divestment of holdings in companies that mine and burn the fuel. What galls the activists, though, is that global demand for coal is not in retreat. Like tobacco companies, producers may move to pay high dividends to attract investors amid an uncertain longer-term future for the fuel.
President Obama's health-insurance fix not such a fix. President Barack Obama might have said that consumers will be allowed to keep canceled health-insurance policies for another year, but at least five states - including New York and Washington - won't let plans be reinstated, as they believe it would harm their exchanges. Many carriers are also not allowing their customers to extend their old policies, due to time constraints and other obstacles. And firms that do reverse the cancellations could increase premiums.

Alpha-Rich Stock Movers and Great Calls
1) On November 11, Helix Investment Research wrote that Pericom Semiconductor (PSEM) was at a turning point and poised to return to growth. Shares are +10.7% since. Read article »
2) On September 18, Money Trees argued that Costar Technologies (OTC:CSTI) was trading at an unwarranted discount to its book value and its peers. The stock is +82.9% to date. Read article »

Alpha-Rich Stocks To Watch
1) Och-Ziff (OZM) has an impressive track record and multiple catalysts to drive 35% upside, writes Alpha Gen Capital. Read article »
2) Charm Communications (CHRM) is a net-net with a buyout offer on the table and a potential dividend payment looming as well, says Ruerd Heeg.Read article »

Alpha-Rich articles are the best long and short ideas on Seeking Alpha. SA PRO subscribers receive early access to these Alpha-Rich articles, which often move markets. For more information about SA PRO and becoming a subscriber, click here.

Today's Markets:
In Asia, Japan +1.9% to 15365.6. Hong Kong -0.5% to 23580. China flat at 2206. India -2% to 20229.
In Europe, at midday, London +0.1%. Paris -0.3%. Frankfurt -0.3%.
Futures at 6:20: Dow +0.25%. S&P +0.2%. Nasdaq +0.3%. Crude flat at $93.35. Gold -0.9% to $1246.60.
Ten-year Treasury Yield flat at 2.8%.
Notable earnings before today's open: ANF, BKE, BONT, CYBX, DCI,DLTR, GIL, GME, LQDT, PDCO, SPB, TGT
Notable earnings after today's close: ADSK, ARUN, ASYS, BERY,GEOS, GPS, INTU, MENT, MRVL, NGVC, P, ROST, SPLK, TFM, VMEM
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