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Wall Street Breakfast: China PPI Slumps For 34th Straight Month

Seeking Alpha

Jan. 9, 2015

Economy

Chinese stocks ended lower today after hitting their highest level in over five years during the session. Shares rose 3.4% after falling factory-gate prices spurred speculation that the government will ease monetary policy further, but stocks quickly pulled back in the last hour of trade. Although China's consumer inflation ticked up in December, the country's PPI fell a record 3.3% Y/Y, the 34th straight month of decline. Many analysts are now expecting China’s full-year growth figure to fall short of the government’s 7.5% target.

With U.S. employers probably adding 240,000 workers to their payrolls last month, today's December jobs report is expected to show the latest sign of the economy's vigor. It would be the 11th consecutive month of job gains above 200,000, the longest such stretch since 1994, reinforcing views that the economy's fundamentals are strong enough to weather the turbulence in Europe, Japan and China. The unemployment rate is forecast slipping to 5.7% in December from 5.8% in November.

President Obama has unveiled a proposal to make community college free for the first two years, with federal funding covering three-quarters of the cost and states that participate contributing the rest. "We have to make sure that everybody has the opportunity to constantly train themselves for better jobs, better wages, better benefits," said Obama. The White House expects an estimated 9M students to participate in the program and save $3,800 a year on tuition.

Stocks

Macy's -4% premarket after announcing plans to close 14 of its stores and book charges of up to $110M, a move that was not previously included in the company's earnings guidance. The changes announced are part of Macy's (NYSE:M) aim to put a greater focus on digital channels and target of $140M in savings per year starting in 2015.

Nelson Peltz's Trian Fund has launched a proxy fight against DuPont (NYSE:DD) to add four directors to the board, setting up a showdown following 18 months of bickering between the activist investor and the company. The four nominees, which include Peltz himself, likely will be put to a shareholder vote in April unless the parties reach a settlement. Trian says the DuPont board "has not held management accountable for...repeated failures to deliver publicly stated revenue and earnings targets." DD +0.3% premarket.

As it continues to shift its attention to the automotive industry, Google (GOOG, GOOGL) may move into the market with a shopping site for people to compare and buy insurance policies, WSJ reports quoting Forrester analyst Ellen Carney. A business called Google Compare Auto Insurance Services has obtained licenses to sell insurance in 26 U.S. states, and is authorized to sell auto policies on behalf of six insurers.

German automakers had a great year in 2014 despite stiff competition in the growing market for luxury cars and SUVs. BMW's (OTCPK:BAMXY) vehicle sales soared past the 2M mark for the first time last year, as deliveries of its BMW, Mini and Rolls-Royce brands rose 7.9% to 2.12M cars. Volkswagen’s (OTCQX:VLKAY) Porsche brand also sold more cars than ever in 2014, delivering 190K vehicles to customers, and reporting a 17% rise in annual sales.

Troy Alstead, Starbucks' COO since last February and its CFO for five years prior to that, is "taking an extended unpaid leave from the company" beginning March 1. Further transition plans will be discussed on Starbucks' (NASDAQ:SBUX) Q1 earnings call, scheduled for Jan. 22. SBUX -1.8% premarket.

General Mills is planning to eliminate another 500 jobs with the closure of two Pillsbury dough factories, adding to the roughly 1,400 job cuts it announced last year. Struggling with weak sales due to Americans’ growing aversion to packaged foods, the new cost-saving program is targeted at saving General Mills (NYSE:GIS) more than $400M in fiscal 2015.

Dealing a blow to CEO Dave Lewis' turnaround plans, Moody's has cut Tesco's (OTCPK:TSCDY, OTCPK:TSCDF) ratings to junk. "We think that the company's efforts to stabilize the U.K. operations and to protect the balance sheet...will take time...and the company's financial profile is likely to remain leveraged beyond what we consider to be commensurate with an investment grade profile," says Senior Analyst Sven Reinke.

Mexican broadcaster Grupo Televisa has completed the sale of its 50% stake in mobile operator Iusacell to JV partner Grupo Salinas, clearing the way for AT&T (NYSE:T) to acquire the cellphone company. Televisa (NYSE:TV) used some of the proceeds from the $717M sale to buy Mexican cable company Cablevision Red, a regional operator with around 650K subscriptions, for about 3B pesos ($204M).

AbbVie is predicting higher earnings for the new year, driven by its rheumatoid-arthritis drug Humira and the launch of its new hepatitis C virus treatment - Viekira Pak. AbbVie's (NYSE:ABBV) current estimate for 2015 earnings, excluding items, is $4.25 to $4.45 a share, in line with the consensus. The midpoint of that range marks a jump of more than 30% over the company’s 2014 guidance.

Just days after it announced the closure of 338 stores and 3,700 job cuts, Wet Seal (NASDAQ:WTSL) has been reported to have hired restructuring lawyers to help it with a potential bankruptcy filing. Several other teen apparel retailers have also been losing market share, including Deb Stores and Delia’s, which both recently filed for bankruptcy. WTSL -30.8% premarket.

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Today's Markets:

In Asia, Japan +0.2% to 17198. Hong Kong +0.4% to 23920. China -0.2% to 3287. India +0.7% to 27458.

In Europe, at midday, London -0.5%. Paris -0.6%. Frankfurt -0.5%.

Futures at 6:20: Dow -0.2%. S&P -0.1%. Nasdaq -0.1%. Crude -0.1% to $48.76. Gold +0.3% to $1211.90.

Ten-year Treasury Yield +6 bps to 2.02%

Today's economic calendar: