Gapping Up and Down This Morning

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Last week’s number jumped from 350k to 362k….

In Play ,

On the Wires 

“While some retailers managed to join in Wednesday’s post-fiscal cliff market rally, many big names showed declines even as the broader market gained 2%. I believe this merely foreshadows continued weak performance for retailers through 2013. While Congress managed to avert a disaster for the time being, current U.S. fiscal policy is unlikely to result in meaningful economic growth. Consumer spending will be particularly sluggish in 2013, and retailers dependent on discretionary spending will be hard pressed to maintain profits at 2012 levels, let alone grow them. I think that there are numerous potential short targets in the sector, and few if any stocks worth buying at this point.

The biggest drag on retail spending comes from the expiration of the 2% payroll tax reduction that has been in effect for the past 2 years. Individuals earning $50,000 will take home $1000 less in 2013, and those earning $100,000 will have $2000 less in take home pay. All in all, the government will “save” about $120 billion by ending this tax cut, and most of that amount will come out of consumer spending. Any way you slice it, a flat 2% increase in taxes on income up to $113,700 will impact spending habits for all but the very richest Americans. Meanwhile, the top 1% or so of taxpayers will face a cap on itemized deductions and a significant increase in the top tax bracket to 39.6%.

Additionally, government spending will be cut back over the course of 2013, which will create another drag on the economy. Tuesday’s legislation only delayed the “sequester” (a series of automatic, across the board budget cuts) for two months. Republicans in particular are sure to demand significant cuts to current and future spending, come February, to replace the sequester. These cuts will begin to exert a dampening effect on the economy by the time the 2013 holiday season rolls around.

Moreover, consumers still face rampant uncertainty as Republicans and Democrats appear to be gearing up for another big battle over the next two months…..”

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“Macy’s, Inc. (NYSE:M) today reported total sales of $5.102 billion for the five weeks ended Dec. 29, 2012, an increase of 3.6 percent compared with total sales of $4.923 billion in the five weeks ended Dec. 31, 2011. On a same-store basis, Macy’s, Inc. sales were up 4.1 percent in December as compared to December 2011.

Same-store sales increased by 2.5 percent for November and December 2012 combined as compared to the same period in 2011.

“Last month was our fourth consecutive December with same-store sales growth, which is indicative of the sustainability of our key business strategies,” said Terry J. Lundgren, chairman, president and chief executive officer of Macy’s, Inc. “While the rate of growth was somewhat less than we had expected in the first two months of the fourth quarter, it came amid some significant headwinds from uncertain economic news and the lingering effects of Hurricane Sandy. All said, we are proud of our accomplishments in driving growth this holiday season and we believe we continued to gain market share….”

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“Goldman’s Alec Phillips warns that the upcoming fight over lifting the debt ceiling could be harder than the 2012 fight, which was brutal and confidence crushing.

Phillips writes:

Unfortunately, the upcoming increase may be more difficult to enact than the increase in 2011. Few spending cuts had been enacted before the previous increase, which left lawmakers with several areas of the budget from which to pull potential savings. Congress eventually settled on $2.1 trillion in spending cuts, essentially all coming from a reduction in spending appropriated by Congress (about $900bn from caps on “discretionary” spending, and $1.2 trillion from “sequestration”). While hardly non-controversial, these cuts did not affect specific programs but instead capped overall spending, thus reducing political opposition. The fiscal agreement Congress just passed increases revenues by about $600bn over 10 years (compared with a full extension of expiring income tax cuts), and while this second round of savings was much more controversial than the first, a majority of the public supported the tax increase, which was targeted on high incomes.

More specifically. Suppose the Congress wants to raise the debt ceiling by $1 trillion, then that means an addition $1 trillion in cuts must be found….”

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“…Senator Dianne Feinstein,

I will not register my weapons should this bill be passed, as I do not believe it is the government’s right to know what I own. Nor do I think it prudent to tell you what I own so that it may be taken from me by a group of people who enjoy armed protection yet decry me having the same a crime. You ma’am have overstepped a line that is not your domain. I am a Marine Corps Veteran of 8 years, and I will not have some woman who proclaims the evil of an inanimate object, yet carries one, tell me I may not have one.

I am not your subject. I am the man who keeps you free. I am not your servant. I am the person whom you serve. I am not your peasant. I am the flesh and blood of America.
I am the man who fought for my country. I am the man who learned. I am an American. You will not tell me that I must register my semi-automatic AR-15 because of the actions of some evil man.

I will not be disarmed to suit the fear that has been established by the media and your misinformation campaign against the American public.

We, the people, deserve better than you.

Respectfully Submitted,
Joshua Boston
Cpl, United States Marine Corps
2004-2012”

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“Biogen Idec Inc. (BIIB) declined as much as 8 percent in early trading after the third-biggest biotechnology company said its experimental drug for amyotrophic lateral sclerosis failed to help patients in a clinical trial.

Biogen sank $11.95 to $138.05 at 7:34 a.m. New York time after saying it will end development of the medicine. The shares of the Weston, Massachusetts-based drugmaker gained 36 percent in the 12 months through yesterday.

Biogen’s drug, dexpramipexole, was in the third and final stages of clinical trials generally required for approval. It didn’t show any efficacy in improving patients’ function or survival, Biogen said in a statement today…”

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“Jan 3 (Reuters) – U.S. retailer Costco Wholesale Corp has posted a better-than-expected 9 percent rise in December sales at stores open at least a year, mainly helped by an additional sales day in the reporting period.

“This year’s December retail month had one additional day compared to last year … As a result, December total and comparable sales results benefited by approximately 2 percent,” said David Sherwood, director offinance and investor relations.

Costco’s January sales period will include 34 selling days, as opposed to 35 days last year, he also said on Thursday….”

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“(Reuters) – Consumers continued to pay down debt in the third quarter of 2012, but slow job growth and the expiration of a tax cut could mean it will become more difficult to repay loans, the American Bankers Association said on Thursday.

Delinquencies on bank card payments fell to an 18-year low during the quarter, and a composite ratio covering late payments in eight loan categories also fell, the group said.

But delinquencies rose in five of those eight categories, the ABA said.

And consumers could see lower income because Congress did not extend a temporary reduction in the Social Security payroll tax, which could hurt consumers’ ability to repay loans in the future,James Chessen, ABA’s chief economist, said in a statement.

“The conservative approach consumers have taken to credit over the last several years has allowed them to better manage their debt and better position themselves for the future,” Chessen said.

“Changes in payroll withholding will decrease disposable income, reducing retail sales and making it more difficult for some people to meet their financial obligations,” he said.

He said low consumer confidence in the economy also could indicate more delinquencies are on the way. A recent measure of U.S. consumer attitudes showed confidence at a four-month low.

The ABA tracks late payments for bank-provided credit cards, auto loans and other consumer loans. It does not track delinquency rates for traditional mortgage payments.

The bank association defines a delinquency as a late payment that is 30 days or more overdue.

The composite ratio’s delinquency rate fell to 2.16 percent of all accounts in the third quarter from 2.24 percent in the second quarter, the ABA said.

Bank card delinquencies, which are not part of the composite, fell to 2.75 percent during the quarter, the lowest level since 1994, the group said….”

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“(Reuters) – Applications for home mortgages fell last week for the third consecutive week asrefinancings fell to the lowest level since last April, an industry group said on Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, fell 10.4 percent in the week ended December 28.

The MBA’s seasonally adjusted index of refinancing applications also fell 10.4 percent, while the gauge of loan requests for home purchases, a leading indicator of home sales, fell 10.5 percent. Both indexes dipped for a third straight week….”

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“(Reuters) – Family Dollar Stores Inc posted a lower-than-expected quarterly profit on Thursday as its emphasis on selling more everyday items like cigarettes and soft drinks put pressure on margins.

The company also said that December sales, which came in after the quarter ended, were hurt as people cut back on discretionary spending.

The discount chain added cigarettes and other tobacco products, Pepsi drinks, gift cards, magazines and some other goods to its assortment in recent months in an attempt to better compete against chains such as Dollar General Corp .

Its profit was $80.3 million, or 69 cents a share, in the fiscal first-quarter that ended November 24, compared with a profit of $80.4 percent, or 68 cents, a year earlier.

Analysts on average forecast 75 cents a share, according to Thomson Reuters I/B/E/S.”

“Highlights
Layoff announcements were very limited in December which hints at strength for tomorrow’s employment report. Challenger’s count totals 32,556 vs 57,081 in November. December’s total is the lowest since August and is the third lowest of the whole recovery!

Announcements in December were heaviest in the financial sector reflecting an 11,000 announcement from Citigroup. For 2012 as a whole, layoff announcements total 523,362, down from 606,082 in 2011 for the lowest annual total since 1997…”

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“Rambus Inc. (RMBS), the designer of high- speed memory chips, was barred by a judge from using 12 of its patents to demand royalties from Micron Technology Inc. because it improperly destroyed documents tied to intellectual-property litigation.

U.S. District Judge Sue Robinson in Wilmington, Delaware, said yesterday the patents are unenforceable as a sanction against Rambus officials who engaged in a document-destruction campaign designed to “gain a litigation advantage” in a patent-infringement lawsuit over technology for high-speed memory chips. Robinson made her ruling after an appeals court sent the case back for her consideration.

“Rambus’s destruction of evidence was of the worst type: intentional, widespread, advantage-seeking and concealed,” Robinson concluded in a 46-page ruling. The judge said the “only appropriate sanction” was to find the patents unenforceable.

The ruling comes after a California judge found in September that Rambus should be sanctioned for destroying documents in a patent case involving SK Hynix Inc. (000660), a South Korean company that is the world’s second-largest maker of computer memory chips….”

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“Google Inc. (GOOG) will resolve a 20-month antitrust probe by U.S. regulators today with a voluntary agreement and a consent decree on the company’s alleged misuse of patents, three people familiar with the matter said.

The U.S. Federal Trade Commission is poised to announce that Google has agreed to voluntarily change some business practices and settle allegations it misused patents to thwart competitors in smartphone technology, said the people, who asked not to be named because the decision isn’t public.

The FTC is expected to close its investigation into whether Google, operator of the world’s most popular search engine, skews its search results to favor its own services without enforcement action, the people said. The FTC’s decision not to take action is a blow to competitors including Microsoft Corp. (MSFT), Yelp Inc. (YELP) and Expedia Inc. (EXPE) and comes at a time when the European Union is seeking a “detailed commitment” on search to end its probe into allegations that Google discriminates against rivals….”

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“The dollar rose to its strongest level in almost three weeks against the euro on speculation U.S. policy makers will struggle to reach agreement on raising the nation’s debt limit, underpinning demand for the safest assets.

Japan’s yen appreciated at least 0.3 percent against all its 16 major counterparts amid concern the U.S. Treasury will exhaust what it called “extraordinary” measures to keep funding the government by late February or early March after the nation hit its $16.4 trillion debt ceiling on Dec. 31. The dollar rose the most versus the higher-yielding South African rand after the International Monetary Fund said yesterday the U.S. ought to raise the debt ceiling “expeditiously.”

“All the way through the first few months of the year it will be fiscal policy and monetary policy which are at the forefront of people’s minds,” said Paul Robson, a senior currency strategist at Royal Bank of Scotland Group Plc in London. “There was a risk of some pullback” after the dollar initially weakened yesterday, he said.

The dollar advanced 0.7 percent to $1.3089 per euro at 7:21 a.m. New York time and reached $1.3082, the strongest level since Dec. 14. The yen rose 1.3 percent to 113.71 per euro. Japan’s currency gained 0.5 percent to 86.87 per dollar after depreciating to 87.36, the weakest since July 2010.

The U.S. currency will strengthen to $1.19 per euro by year-end, Robson said. That compares with a median estimate of $1.27, based on analyst forecasts compiled by Bloomberg….”

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“Crude slid for the first time in three days in New York on speculation that this week’s gains were unjustified as the U.S. budget deal is insufficient to ensure growth in the world’s biggest oil-consuming country.

Futures lost as much as 0.7 percent after rallying 2.6 percent in the past two sessions as U.S. lawmakers passed a bill to undo automatic tax increases and spending cuts that threatened the nation’s economic recovery. The accord won’t reduce deficits enough to avoid a sovereign-rating downgrade, Moody’s Investors Service said yesterday. Technical indicators showed crude may have risen too quickly, according to data compiled by Bloomberg.

“We’re seeing short-term jitters on the back of Moody’s comments of a potential downgrade in the pipeline if things are not improved in the coming months,” said Michael Poulsen, an analyst at Global Risk Management Ltd. in Middelfart, Denmark.

West Texas Intermediate for February delivery dropped as much as 63 cents to $92.49 a barrel in electronic trading on the New York Mercantile Exchange and was at $92.65 at 11:38 a.m. inLondon. The contract yesterday climbed 1.4 percent to $93.12 a barrel, the highest settlement for a contract nearest to expiration since Sept. 18.

Brent for February settlement on the London-based ICE Futures Europe exchange fell as much as 79 cents to $111.68. Prices advanced 3.5 percent in 2012, a fourth annual gain. The North Sea crude was $19.33 a barrel more than WTI.

Trading volume in WTI was 30 percent below the 100-day average for the time of day, while Brent was 8 percent above…”

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“Gold fell in London with stocks and oil after reaching a two-week high yesterday and as a stronger dollar curbed demand for bullion as an alternative investment.

Gold rose to the highest since since Dec. 18 yesterday after U.S. lawmakers passed a bill averting automatic spending cuts and tax increases, heading off the so-called fiscal cliff. TheU.S. Dollar Index, a gauge against six counterparts, rose to the highest since Dec. 11 today, on speculation policy makers will struggle to reach an agreement to raise the U.S. debt limit….”

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“German unemployment increased less than economists forecast in December even asEurope’s debt crisis curbed company investment and economic growth.

The number of people out of work rose a seasonally adjusted 3,000 to 2.942 million, the Nuremberg-based Federal Labor Agency said today. Economists predicted an increase of 10,000, the median of 19 estimates in a Bloomberg News survey showed. The adjusted jobless rate held steady at 6.9 percent, close to a two-decade low…”

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