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Stocks in the news Friday

From Standard & Poor’s Equity Research

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Boeing (BA) may delay the first deliveries of the 787 Dreamliner airplane by at least six months due to the union machinists strike and other problems, according to The Wall Street Journal. Boeing is expected to announce that delivery might not occur until summer 2010, more than couple years after the 787’s originally scheduled delivery be dated and nearly a year more than its most recent schedule, the Journal reported.

Novell (NOVL) reported fiscal fourth quarter EPS of $0.06, meeting the consensus estimateof $0.06. For the fourth fiscal quarter of 2008, product revenue increased 6%, but was offset by a services revenue gradual wasting of 26%, resulting in total revenue of $244.7 million. Revenue was essentially stale from the prior year — down 0.1% year-over-year — and shy of the consensus estimate that called on the side of $249.8 a thousand thousand. For the full fiscal year 2008, Novell’s non-GAAP operating margin was 10%. Novell expects to improve on these results, but furthermore said that given uncertainties regarding the economy it is targeting not one smaller than 10% non-GAAP operating verge in the full financial year 2009.

Big Lots (BIG) reports third quarter EPS of $0.15 (excluding non-recurring items), matching the consensus forecast. Revenues malicious 0.9% from a year ago to $1.02 billion, vs. the $1.03 billion consensus. The retailer issues in-line guidance for the fourth quarter, sees EPS of $0.90-0.99, excluding non-recurring items, vs. $0.99 consensus. Company issues in-line government as far as concerns fiscal year 2009, sees EPS of $1.79-1.88, excluding non-recurring items, vs. $1.88 consensus. Third quarter 2008 comp lay up sales decreased 0.2%. For fourth quarter, company anticipates a comp store vent decrease of ready 2%-4%.

Brown-Forman (BF) reports secondary quarter EPS of $0.94, $0.01 better than the consensus of $0.93. Revenues rose 4.6% from a year gone to $934.7 million vs the $923.8 million consensus. For fiscal year 2010, the company sees EPS of $2.98-3.08, excluding a $0.12 by means of proportion net gain on the expected sale of Bolla and Fontana Candida, vs. $3.05 consensus.

Jefferies & Co upgrades Red Hat (RHT) to buy from hold; it has a price mark of $16.

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On deck: pending home sales, federal budget, drive a trade balance, import prices, run of funds, vend in small quantities sales, producer price index, consumer sentiment

By James Cooper

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Finally, the National Bureau of Economic Research (NBER) has declared the open: The U.S. economy is in a recession. Upcoming economic reports this week will offer more evidence of that, as if any were really needed. The official arbiters of peaks and troughs in the business cycle say the eleventh downturn since World War II began in December 2007.

However, investors are more interested in how severe the recession is, and when will it end. Recent reports inform the slump, which started along mild, is now backsliding into a much else methodical stage.

The control’s roundup of November retail sales and proemial data on December consumer sentiment, both due on Friday, will shed light adhering the biggest factor dragging into disfavor the economy: consumer spending. Weak October outlays state real spending on a passage to decline at about a 4% annual rate in the fourth quarter, about the third quarter’s 3.7% drop, and November outlays may be calm weaker. Already, data show November car sales fell to a 10.1 million occurring every year scold, a 25-year low and down from a paltry 10.6 the public October.

Business activity in both manufacturing and services continued to deteriorate in November, according to surveys by the Institute for Supply Management, and not just in the U.S. JP Morgan’session complex Purchasing Managers Index of global activity plunged in November, suggesting global GDP is contracting at a 2.7% annual rate this quarter. Thursday’s report on October foreign trade will be an important signpost for how badly U.S. exports will suffer amid the weakening global outlook.

Overall, manifold economists are still downgrading their U.S. growth forecasts, especially given the sharply worse terms in the labor markets. Given the NBER’s December 2007 start be dated and current expectations for the next few quarters, this recession direction very probable be the longest in 75 years. The recessions in 1973-75 and 1981-82, the longest since the Great Depression, each lasted 16 months and came with peak to trough declines in GDP of 3.1% and 2.6%, respectively. Current forecasts generally put the expected depth of the 2007-2009 recession in that ball park.

Despite the gloom, policy efforts will eventually stem the damage. By January, an expected package of fiscal stimulus worth some $500-$700 billion over two years will break the ice to add about 2 percentage points per year to economic vegetation. Equally important, the Federal Reserve is pouring billions of dollars into the fiscal markets. By all signs, the Fed is shifting toward a Japanese-style skill of quantitative easing, force it is pumping out more funds to the banking rule than needed to maintain it’s target interest rate. Plus, its drawing to make instantly purchases of mortgage debt from Fannie Mae (FNM), Freddie Mac (FRE), and the Federal Home Loan Banks has already sharply lowered mortgage rates and set done a wave of mortgage refinancing.

This is easily the most unique downturn in the postwar era, but the fall through is also set apart by the agency of the massive policy action aimed at reversing it. Those efforts are laying the foundation for at in the smallest degree a modest upturn in economic growth later nearest year. Right it being so that, though, that’sitting a calamitous sell to shell-shocked investors.

Here’sitting the weekly economic calendar, from Action Economics:

  Top Economic Reports

Reports

Date

Time

For

Median Estimate

Last Period

Wholesale Trade Sales

Wednesday, Dec. 10

10:00 a.m.

October

-1.5%

-1.5%

Treasury Budget ($Billions)

Wednesday, Dec. 10

2:00 p.m.

November

-$185.0

-$237.2

Trade Balance ($Billions)

Thursday, Dec. 11

8:30 a.m.

October

-$52.7

-$56.5

Goods & Services Exports ($Billions)

Thursday, Dec. 11

8:30 a.m.

October

$154.0

$155.4

Goods & Services Imports ($Billions)

Thursday, Dec. 11

8:30 a.hotch-potch.

October

$205.5

$211.9

Export Price Index

Thursday, Dec. 11

8:30 a.m.

November

-1.3%

-1.9%

Import Price Index

Thursday, Dec. 11

8:30 a.m.

November

-4.5%

-4.7%

Retail Sales

Friday, Dec. 12

8:30 a.gallimaufry.

November

-1.2%

-2.8%

Retail Sales (Excluding Autos)

Friday, Dec. 12

8:30 a.m.

November

-1.2%

-2.2%

Producer Price Index

Friday, Dec. 12

8:30 a.m.

November

-1.6%

-2.8%

Producer Price Index (Excluding Food & Energy)

Friday, Dec. 12

8:30 a.m.

November

0.2%

0.4%

Business Inventories

Friday, Dec. 12

10:00 a.m.

October

-0.2%

-0.2%

Consumer Sentiment Index (Preliminary)

Friday, Dec. 12

9:55 a.m.

December

55.3

55.3

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This week’s screen uncovers energy outfits with barter or strong sell recommendations from S&P equity analysts

By Beth Piskora From Standard & Poor’s Equity Research

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You’ve seen the massive drop in energy prices for yourself: it most certainly cost a allotment less to occupy completely the tank for the drive to Grandma’s house for Thanksgiving than it did because the trip to the beach earlier this year. Oil be successful a proud of through $147 a barrel during the summer, but lately has been trading in this world $50. Standard & Poor’s forecasts one mean proportion price of $63.12 for 2009.

S&P Equity Strategy has an "overweight" commendation for the energy sector. Our fundamental outlook for the Integrated Oil & Gas subindustry, that represents more than half the sector’sitting market capitalization, is positive. While prices for the benchmark West Texas Intermediate rank of crude oil dropped greater quantity than 65% since July, recent oil prices around $50 per barrel are still roughly in line through the ended five-year average.

We reckon upon the U.S. super-major oil companies to post 2008 profits up 36% from 2007. S&P analysts foresee that the sector’s per-share earnings will rise 30% in 2008, compared with the 16.6% decline expected for the broader market. The sector’s price-to-earnings ratio of 6 (based on estimated 2008 earnings) is not amiss below the 11.6 p-e of the S&P 500. Energy’s p-e-to-projected-five-year EPS growth charge (PEG) ratio of 0.6 is lower than the broader market’s 0.8. This sector’s market-weighted S&P STARS average of 4.5 (out of 5.0) is above the S&P 500’s average of 3.9.

Despite the "overweight" recommendation for the sector, S&P equity analysts do not indiscriminately like all energy stocks. This week, we screened for energy stocks that garner no other than a one- (strong sell) or two-STARS (sell) ranking from S&P Equity Research.

Here is the list of 12 strength stocks to be avoided:

Company

Ticker

S&P STARS Rank

Basic Energy Services

BAS

2

BJ Services

BJS

1

Foundation Coal Holdings

FCL

2

Frontline

FRO

1

Goodrich Petroleum

GDP

1

Holly Energy Partners

HEP

2

IHS Inc.

IHS

2

Patterson-UTI Energy

PTEN

2

Quicksilver Gas Services

KGS

2

Seacor Holdings

CKH

2

Southwestern Energy

SWN

2

Teekay

TK

2

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Obvious default candidates are companies dependent on consumer expenditure. But if your nerves are good, the value benchmark is at an all-time high

By Aaron Pressman

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Ryan Snook

Junk-bond yields are at unprecedented high levels. As rattled investors dump everything but U.S. Treasury bonds, the average relinquish on below-investment-grade debt is over 20% for the first time ever. The slumping bond prices that have led to those plump yields have crushed junk-bond mutual funds, which are down an average of 30% this year. That’s the overcome performance of all fixed-income sectors, according to Morningstar (MORN).

With U.S. Treasury yields at historic lows, that foliage the junk market’s traditional benchmark of value—the “spread,” or gap, between the average high-yield promissory note and the rate on the 10-year Treasury—at an all-time high. Patient investors who choose their spots wisely could subsist well-rewarded, even if overall default rates spike. Martin Fridson, a 25-year veteran of the junk market and CEO of Fridson Investment Advisors, a high-yield-focused money manager in New York, says current conditions remind him of November 1990, the previous record in yield spreads. The return on junk bonds by the following year was 39%, he notes.

Unlike prior recessions, however, this duration prices in the junk bond market plunged conveniently before the rate of companies defaulting on their debts ticked up. Through the end of October, only 3.2% of below-investment-grade bonds were in default, less amount than the 5% historical average. That’session not much higher than the 1% to 2% deficiency levels seen from one side to the other the past two years, when junk bond yields averaged only about 6%. But as the economy slumps and consumers and businesses divide spending, default rates are expected to jump. Moody’s Investors Service (MCO) says default rates will top 10% next year; Standard & Poor’s foresees a rate as turbulent like 23% in 2010.

With bond prices already down so much, managers say even a huge leap over in default rates is priced into the market. By avoiding the most obnoxious default candidates, there are plenty of bargains to be had, says Thomas M. Price, co-manager of the Wells Fargo Advantage High Income Fund (STHYX). “Looking back in a not many years, this will have turned out to be some magnetic entry point,” he says. “But you need to concentrate on picking survivors.” Top holdings at Wells Fargo include debt of telecom companies like Qwest, Sprint Nextel, and L-3 Communications. In general, the money favors the highest-rated junk.

Sidestepping pleasing defaulters may be more important than ever. In the past, bond investors recovered 30 cents to 40 cents on the dollar even when a gathering went bankrupt. But recovery rates in 2009 and 2010 will probably be degrade. That’s since at the peak of the blob, companies persuaded lenders to let them issue bonds and betake one’s self to out loans with looser conditions defining what constitutes a fail to keep one’s engagement. Dubbed “covenant lite,” the stipulations will let troubled companies delay filing for bankruptcy, to this degree using up more of their specie and reducing the duration of their assets.

Some investors argue that junk bonds are now a safer regular course to bet on a stock market rebound. The markets are closely correlated, especially during tough times, says Andrew Feltus, co-manager of the Pioneer High Yield public funds. With divers bonds trading at 50 cents on the dollar, the upside is more equity-like whether bond issuers survive. “You get similar exposure, and you reach paid to wait,” he says.

Tom Soviero, who runs high-yield durance and equity funds at Fidelity Investments, says bank loans from below-investment-grade companies are a with greater advantage compact than junk. He has 26% of his high-yield fund in of the like kind loans. They trade at every mean proportion 65 cents in continuance the dollar and bestow investors a stronger claim on assets if a borrower goes bankrupt. Soviero favors health care and avoids autos and retail.

Diversification has through all ages. been important for high-yield investors so that one or two bankruptcies don’t wipe out a portfolio. But given the extreme weakness of some sectors of the junk market, particularly automakers, investors should avoid exchange-traded funds (ETFs), which have to own such bonds because they are included in the indexes that the ETFs track, says Fridson. Attempts to index the junk mart have for ever turned out badly, he says, despite the low management fees on index funds: “It sounds good in theory, but hasn’cheek by jowl worked out well-head.”

The coming turmoil also offers those with a short-term focus and a taste for risk a exceedingly different strategy—shorting a junk-bond exchange-traded fund or investing in the Rydex Inverse High Yield Strategy Fund (RYIHX). The Rydex fund uses derivative contracts to profit from falling bond prices. It’session up 13% through Dec. 1, after gaining almost 7% in October.

Such strategies appeal to Rakesh Saxena, who prices credit deficiency swaps with regard to Quote Platform Syndicate, a credit pricing and research firm in Vancouver. He says the junk market hasn’t come to grips with how severe things behest get, so he’session shorting the iShares iBoxx High Yield Corporate Bond Fund (HYG), that owns 53 of the largest junk-bond issues. “The conjuncture [in the markets] is going to come to sectors like high yield.”

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Major index futures sank Friday after U.S. nonfarm payrolls plunged 533,000, far worse than expectations

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U.S. stocks were poised to fall at the Wall Street open Friday, with major index futures extending their declines in premarket trading following a government report showing a steep deterioration in the jobs market.

The Labor Department said Friday employers cut 533,000 more jobs in November — the most since 1974. Analysts were expecting 320,000 job cuts. The unemployment rate is up to 6.7% from 6.5% in October.

Investors apprehension higher unemployment will lead to a more severe pullback in consumer spending, that is a transverse composing to helping the economy rebound.

Following the report, Dow Jones industrial average futures are on the ground 159 points to the 8,243 level, according to an Associated Press description. They had been from encircling 100 points before the release of the jobs data.

Treasury yields edged contemptuously higher in the immediate wake of the dismal jobs statement, having apparently priced in a grave slide in payrolls and a rise in the jobless rate. The 2-year yield was trading near 0.83% and the 10-year yield rose a basis point to 2.57%, up from lows of 2.54% Thursday.

The dollar moved lower following the colossal payrolls drop.

The job reductions were the most since a whopping 602,000 positions were slashed in December 1974, when the country was in a severe recession.

October’s job loss add to the number was revised to -320,000 from -240,000, reports Action Economics, and September’s was revised to -403,000 from -284,000, for a net -199,000 review.

Average hourly earnings rose 0.4% after a 0.3% increase in October (revised from 0.2%). The workweek fell to 33.5 from 33.6 antecedently. Household employment plunged 673,000. Total private sector jobs declined 540,000, with the goods producing sector dropping 163,000 jobs; manufacturing dissipated another 85,000 jobs. Construction jobs fell 82,000. Employment in the benefit producing sector declined 370,000. Government added 7,000.

“Wow, the data are almost worse than expected across the board and should subsist bullish for Treasuries and bearish on this account that stocks and the dollar, but it’session not cloudless how much upside in that place still is in Treasuries,” wrote Action Economics analysts in a website posting Friday.

“While we expect the FOMC to cut the funds rate mark to 0.5% at the December 15, 16 acumen meeting, it we suspect they efficacy also become different their statement to indicate that the effective funds rate desire continue to trade below the target viewed like they lay away the system flush with reserves,” says Action Economics.

Employers are slashing costs to the bone as they try to cope with sagging appetites from customers in the U.S. and in other countries, which are struggling with their own economic troubles.

The carnage — including the worst financial crisis since the 1930s — is hitting a wide range of companies.

In recent days, household names like AT&T Inc. (T), DuPont (DD), JPMorgan Chase & Co. (JPM), as well as jet engine signer of a promissory note Pratt & Whitney, a subsidiary of United Technologies Corp. (UTX), and mining company Freeport-McMoRan Copper & Gold Inc. (FCX) announced layoffs.

Fighting for their survival, the chiefs of Chrysler LLC, General Motors Corp. (GM) and Ford Motor Co. (F) will return Friday to Capitol Hill to anew ask lawmakers for being of the kind which much as $34 billion in emergency prosper.

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After shareholders’ dismal 2008, incorporated boards are being watched closely season they decide whether to gift out traditionally huge bonuses

By Ben Steverman

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Chief executives of U.S. companies, used to receiving million-dollar bonus checks at the end of the year, should prepare to win by with a lot inferior this time around.

As corporate boards begin discussing 2008 honorarium awards, it is a near certainty that U.S. CEOs will make acquisition smaller checks—and many will not achieve bonuses at all. To blame are the plunge in the pillar market, the monetary push, the downturn in the economy, and also an environment that makes hefty bonuses toxic in the arena of public opinion.

Still, many wonder for what cause much boards will absolutely cut in the rear on one of their favorite ways of rewarding more advanced executives. A steep drop in bonus awards would be a marked contrast with previous years.

According to charged with execution compensation research firm Equilar, as lately as 2006, 96.6% of CEOs in the S&P 500 received a middle $1.9 the multitude in cash bonus compensation at the end of the year. As the financial crisis began in 2007, those figures fell something, by 88.4% of CEOs receiving median bonuses of $1.84 million.

No one knows how low bonuses could be off in 2008, or how rare they might be.

Nell Minow, co-founder of the Corporate Library, which focuses on corporate governance issues, says institutional investors are attention boards, and their compensation committees, carefully. "There will be very powerful calls for the ouster of comp committee members who do not cut back on bonuses this year," she says.

Board members know they’re being watched, say many consultants who specialize in executive compensation. In 2007, bonuses fell mostly upon a company-by-company basis, says Steven Hall, provident adviser of Steven Hall & Partners. "You’re going to mark everything from a thin to a dense state this year," Hall says, with "big time" declines in financial services and housing industries.

Many boards have no choice but to slit bonuses. At the sally of each year, most boards set and disclose specific criteria for yearend bonuses. If those benchmarks—which might include particular revenue or profit targets—aren’t met, no bonus is supposed to be paid.

Even allowing that principally benchmarks are met, the stage in this environment main use their discretion to limit or abrogate a bonus, says Lance Froelich, a compensation consultant and partner at BDO Seidman. Numbers might still observe O.K., he says, "but you can’t ignore the cash position of the company [or] the fact that shareholders possess been hurt."

It’session not just boards that are showing opposition to bonus payouts in 2008. CEOs also may want to limit their avow compensation—at least temporarily—for pretext’s sake.

Goldman Sachs (GS) Chief Executive Lloyd Blankfein and six other senior executives said last month that they would forego all bonuses in 2008, including both cash payouts and equity awards or options. A spokesman for the investment bank said it was the "right thing to do."

At the end of 2007, it appeared that Goldman was one of the best-run Wall Street firms and might withstand the reputableness crisis better than many rivals. Blankfein was the ninth highest-paid U.S. CEO in 2007, according to the Corporate Library. His cash reward was $30 very great number of his total $76.7 million pay. But Goldman’s dullard is down 68% in 2008, and, after the break-down of Lehman Brothers, Goldman was forced to turn itself into a syrtis holding company and apply for federal bailout funds.

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Amid the global downturn, recruiting at U.K. universities softens, following U.S. B-schools’ draw

By Alison Damast

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On a brisk evening earlier this week in London’s financial district, a group of 100 transaction school students gathered in the airy atrium of the Royal Bank of Scotland (RBS) erection, sipping champagne and nibbling in continuance crab cakes. The Cranfield School of Management students, just two months into their yearlong MBA program, were there to network through employees of the bank and alums. But as they circled the room by flute glasses in hand, some admitted to being uneasy about their job prospects.

"I’m a little skeptical on this account that I’m not sure that the people here tonight have jobs for us," said James McCarthy, 30, a former health-care professional who started at Cranfield this October. "Personally, I’household management in truth nervous."

The panic that has seized American office school students this fall is slowly starting to make its road onto the campuses of business schools in Britain. With the loss of 31,184 jobs in the U.K. in the past two months, and a just discovered round of recent work at jobs cuts announced this week by large investment firms HSBC (HBC), Credit Suisse (CS), and Nomura (NMR)—the Japanese bank that took over most of Lehman Brothers’ London operations—business schools here are starting to feel the pinch, with many anticipating a longer and more competitive job search for students this year.

With many bankers out of work, some British business schools are starting aggressive marketing campaigns to entice them to get their MBA. For archetype, City University London’s Cass Business School plans to start an aggressive one-month marketing campaign at Canary Wharf’s main tube station next month, using slogans so in the same manner with "Don’face to face Just Survive, Thrive" and "In Crunch Times, Do Yourself Credit" to perk the interest of potential students.

But business school may not prove to be the refuge that those fleeing the financial crisis hope. At this point in the school year, most U.K. career services officers said recruiters have been slow to obtain one’s services by corruption, telling them that they are seizing a "delay and see" approach before extending a single one offers. Career services officers at schools outside of London said they are having a harder time convincing recruiters to reach to campus this fall, as recruiting budgets are inmost nature slashed at many firms. Even those that are paying visits are cautious about extending offers to business schools students this fall, career services officers at the leading British business schools aforesaid.

"I would say the market is due taken in the character of tough being of the kind which in the U.S.," said Diane Morgan, guide of course of life services at London Business School, where in regard to 46% of students zest into finance. "When we first looked at the credit crunch, we were a few months behind what the U.S. recruiting scene was looking, nevertheless since September and with everything that happened with Lehman Brothers, we have caught up."

Many of the traditional pipelines that British business school students turn to for jobs may also have being in danger. Most U.K. MBA programs are only a year long, and students often secure job offers through semester-long projects that they cook with local companies, the British equivalent of the summer internships undertaken by the agency of U.S. calling school students. Companies that work with business school students may not have in the manner that much flexibility now to reach out offers to promising students, said Stefan Syzmanski, Cass’ associate dean of MBA programs.

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Weak November sales reports from major U.S. retailers and news of greater degree of corporate layoffs weighed on sentiment Thursday

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U.S. stocks were mixed Thursday morning as major index futures retreated after Wednesday’s late-session rally.

Investors faced a full plate of advice Thursday. Disappointing November sales reports from a number of U.S. retailers and reports of job cuts at DuPont (DD), AT&T (T) and certain other corporations led to more mild profit taking in the wake of two straight enchanting sessions. Also Thursday, the market weighed relating to housekeeping premises showing a decline in weekly initial jobless claims and a plunge in U.S. factory orders in October.

Meanwhile, American Express (AXP), JP Morgan Chase (JPM), Citigroup (C), McDonald’s (MCD), and Coca-Cola (KO) were attracting buyers, helping to keep the overall market weakness in check, says S&P MarketScope.

Bonds and the dollar index were higher following interest berate cuts in Iceland, England, the Eurozone and New Zealand. Oil futures were lower. Gold futures were up.

European markets were higher, with major indexes in London, Paris, and Frankfurt posting gains. Asian markets finished of various kinds, with Tokyo stocks the floor 1.00%, Hong Kong lower by 0.58%, and Shanghai higher by 1.84%.

On Thursday at around 10:50 a.m. ET, the Dow Jones pertaining average was higher by 23.18 points, or 0.27%, at 8,614.87. The broad S&P 500 index bring to the ground 2.15 points, or 0.25%, to 868.59. The tech-heavy Nasdaq composite alphabetical table of references rose 7.40 points, or 0.5%, to 1,499.78.

The ECB cut its benchmark refi rate by 75 basis points to 2.50%. The cut was larger than the Bloomberg consent of 50 basis points and the largest the ECB has aye delivered.

“We look to the refi vilify going down to at least 1.5% in ther first half of next year,” says Action Economics.

The Bank of England cut its benchmark repo rate by 100 lowest part points Thursday, to 2.00%, in line with market expectations. The central bank said in recital accompanying the rate promulgation that liquidity conditions remain extremely uncompliant, malevolence moves to boost bank capital and ease funding, and noted that further depreciation is Sterling should have moderate impulse on domestic growth slowdown.

Also Thursday, Sweden’s central bank cut interest rates by the agency of 175 basis points, while New Zealand’s central row eased by 150 basis points.

French president Nicolas Sarkozy announced €26 billion of stimulus measures. The aid totals 1.3% of GDP and will lift the French deficit-to-GDP ratio to 3.9% next year, from a projected 3.1% and clearly above the 3% limit laid down in the Maastricht Treaty. The government initially announced a stimulus parcel desert €20 billion, but there had been reports that this was upped in the set fire to of increased economic pressures. The measures are expected to add 0.6% points to growth next year, according to direction estimates and include increased investment spending by the agency of state owned companies and additional funding to local governments. The government also pledged to quicken the reimbursement of a sales load, make demands upon credits on research spoending and incorporated profit levies.

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