February 5, 2008

IBD's Top 10 - Monday

Q4 Profits Strong, Ex Financials

1 Corporate earnings are on track to dive 20.7% vs. a year earlier, the worst decline since the '01 recession. Financials, hard hit by subprime write-downs, will report a net loss. But S&P 500 profits ex banks should rise 11%. Tech earnings are set to soar 26%, with several other sectors doing well. Guidance overall has been solid. But investors and analysts remain wary.

Stocks Close Near Session Lows

2 The Nasdaq fell 1.3%, as big-cap techs Google (NasdaqGS:GOOG - News) and Cisco (NasdaqGS:CSCO - News) sold off. The S&P 500 lost 1% and the Dow 0.8%. Home builders, financials and retailers that ran up last week were among Mon.'s big losers. But volume declined on both exchanges. And the ratio of stocks hitting new highs vs. new lows improved. The 10-year Treasury yield rose 6 ticks to 3.64%.

Obama Within Striking Distance

3 While GOP front-runner John McCain hopes Super Tuesday delivers a knockout blow to Mitt Romney, the race among Dems was too close to call as nat'l polls showed Barack Obama erasing a double-digit deficit with Hillary Clinton. About half of both parties' delegates will be awarded Tue., with 24 states holding primaries and caucuses. Related story on this page

Microsoft Defends Yahoo Deal

4 Buying the Net icon would spur competition by creating a strong No. 2 vs. No. 1 search giant Google , said CEO Steve Ballmer. Google says the deal would give Microsoft (NasdaqGS:MSFT - News) too much control over the Internet. Google also reportedly offered to help Yahoo (NasdaqGS:YHOO - News) repel Microsoft, including a revenue guarantee and ad partnership. Google shares fell 4% and Microsoft 1%. Yahoo rose 1%.

Bush Offers $3.1 Tril Budget Plan

5 The president said it would keep the economy growing and protect U.S. security. Bush said his "good, solid budget" would boost money for education, health and housing and make the tax code fairer. It projects $196 bil in savings over 5 years in Medicare and Medicaid, but still foresees deficits of over $400 bil the next 2 years. Dems declared his budget a non-starter.

SocGen Probes Extend Into U.S.

6 The SEC is looking into Societe Generale board member Robert Day's stock sales before France's No. 2 bank reported a record $7.25 bil trading loss. It's also probing stock sales by 2 foundations tied to the American investor. Brooklyn's U.S. attorney also has begun an unspecified probe related to the loss, which SocGen blames on a rogue trader.

Banks Tighten Lending Standards

7 As credit woes continue, more banks are raising the bar on loans; 55% of U.S. banks tightened standards vs. 40% in Oct. Many lifted standards on prime and subprime mortgages; 80% raised loan standards for commercial real estate, seen as a possible trouble spot in '08. Consumer and business demand for loans fell sharply.

Ethanol Prices Hurt ADM Profit

8 The ethanol producer and food processor's Q2 EPS rose 9% to 73 cents, missing views by a penny. Sales climbed 50% to $16.5 bil, beating views. Lower ethanol prices and higher corn costs hurt Archer Daniels Midland (NYSE:ADM - News). But demand for seed oil and protein meal helped. ADM also cited gains in its malt and wheat processing units. Shares fell 3%.

Humana Tops On Lower Tax Rate

9 The HMO earned $1.43 a share in Q4, up 55% from a year earlier and beating views by 11 cents. It cited a lower-than-expected rate. Revenue increased 12% to $6.34 bil. Humana's (NYSE:HUM - News) enrollment in its full-service Medicare Advantage plans rose 14% to 1.14 mil. The medical cost ratio was good. Humana raised its 08 EPS outlook to $5.35-$5.55 vs. views of $5.46. But its shares fell 3.5%.

Dec. Factory Orders Rose 2.3%

10 That was roughly in line with Wall St. forecasts, while Nov.'s gain was revised up to 1.7%. Dec. durable goods orders were revised down to 5% from last week's initial reading of 5.2%. Nondefense capital goods ex aircraft jumped 4.5%. Unfilled orders, a sign of future demand, rose 2.5%. But shipments fell 0.3% in Dec.

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