Wall Street Breakfast: Must-Know News

by: Wall Street Breakfast
Wall Street Breakfast
Seeking Alpha's flagship daily business news summary, gives you a rapid overview of the day's key financial news. It is published before 7:00 AM ET every market day and delivered to over 900,000 email subscribers.

Top Stories
Investors, analysts skeptical of China economic plan. Markets in Shanghai and Hong Kong (NYSEARCA:FXI) fell nearly 2% Wednesday, as investors bemoaned a lack of detail in the 5000-word statement that followed a four-day meeting at which China's leaders sketched a forward-looking plan for their country's economy. Some expect a final document (called the "Decision Document") due out next week to provide more detail on specific reforms. One Barclays economist quoted by CNBC remarked that it is "normal practice" for the post-Plenum statement to "cover only broad principles."

BOE upgrades economic forecast, says 7% unemployment achievable by H2 2014. In its quarterly inflation report, the Bank of England pulled forward its expectations for when unemployment could hit the 7% threshold at which point a rate hike would be considered. The central bank now says the jobless rate could fall to 7% by H2 2014 versus previous guidance of mid-2016. The BOE also upgraded its outlook for the U.K. economy, saying 2014 growth should come in around 2.8%.

Top Stock News
Johnson & Johnson will reportedly pay $4B to resolve implant claims. Just eight days after the announcement of a $2.2B settlement tied to the alleged misbranding of Risperdal, Bloomberg said Tuesday that Johnson & Johnson (NYSE:JNJ) is set to pay "more than $4B" to settle some 7,500 lawsuits related to metal-on-metal hip-implants. Notably, the deal does not preclude future compensatory claims by patients whose devices have not yet failed, meaning that the settlement, in Bloomberg’s words, is "uncapped in terms of total value."

Tide may be turning for Yum in China. Yum Brands (NYSE:YUM) said Tuesday that same-store sales in China fell 5% in October, better than the 5.8% decline analysts were expecting. The October number is much smaller than the 11% Y/Y decline YUM reported for September, and the 10% drop reported for August. It's arguably a sign the bird flu-related fears that have badly damaged the company’s 2013 Chinese sales are abating.

Musk dismisses Model S recall talk. "Maybe there is a car as safe as the Model S, but there is certainly not a car that is safer," Tesla (NASDAQ:TSLA) CEO Elon Musk said Tuesday, at the New York Times DealBook conference. Musk went on to contend that despite three recent fires in the pricey electric sedans, there is no reason to voluntarily recall the vehicles. The owners of the cars which caught fire have all requested new Teslas and Musk drove the point home by emphasizing that the company has "never had a serious injury or death in any of [its] cars." TSLA rose 2% in after-hours trading.

Starbucks to pay $2.75B in Kraft dispute. A 2011 decision by Starbucks (NASDAQ:SBUX) to prematurely cancel a deal under which Kraft (KRFT) sold SBUX coffee in grocery stores is set to cost the coffee giant nearly $3B. An arbitrator has determined that SBUX should pay $2.23B in damages and another $527M in "prejudgement interest" for terminating the grocery deal. The payment will go to Mondelez (NASDAQ:MDLZ), which will use the cash to repurchase stock.

Ecuador’s high court slashes Chevron judgement. The Ecuador National Court of Justice has ruled to reduce the amount Chevron (NYSE:CVX) must pay to rectify alleged pollution of the nation's rainforests to $9.5B from $19B. Far from grateful, CVX calls the judgement "as illegitimate and unenforceable today as it was when it was issued two years ago." The case has turned into a veritable sideshow over the years, with CVX suing the Ecuadorean plaintiffs' lawyer for racketeering in New York federal court. Despite CVX's criticism, a spokesperson for the plaintiffs calls the most recent ruling "fair and a clear victory for environmental justice."

Potbelly beats estimates. In its first quarterly report as a public company, Potbelly (NASDAQ:PBPB) beat analysts’ profit and sales expectations. Revenue increased nearly 12% Y/Y and same-store sales jumped 2.5%. The company also said it expects revenue of $300-303M for the full year. Analysts are expecting $301.5M.

Top Economic & Other News
Japan September core machinery orders underwhelm. Japan September core machinery orders fell 2.1%, more than the 1.4% economists were expecting (orders rose 5.4% in August). Additionally, a survey showed companies believe orders will fall during the October-December period, snapping two quarters of gains. The weakness in the September print suggests capex is still a concern in Japan despite efforts to revive business investment.

Eurozone industrial output disappoints. Just a day ahead of the first read on Q3 GDP, data shows eurozone industrial output fell 0.5% M/M in September. The reading was worse than anticipated, as economists were expecting a decline of just 0.3%. On year, output rose 1.1%.

Inflation flatlines for Spain in October. The EU-harmonized CPI comes in flat Y/Y for Spain in October, as lower prices for housing and transportation help keep a lid on inflation. The index rose 0.5% Y/Y in September. For its part, Spain says the CPI fell 0.1% last month. The news comes on the heels of Tuesday’s tame inflation data out of Italy, the U.K., and Germany.

Alpha-Rich Stock Movers and Great Calls
1) On Thursday, tech expert Valuable Insights recommended Digirad (NASDAQ:DRAD) for its fat dividend and upcoming margin expansion. Shares are +18.6% since. Read article »
2) On August 21st, Helix Investment Research recommended shares of JetBlue Airways (NASDAQ:JBLU) as a potential acquisition target and a stellar standalone play. The stock is +30.6% to date. Read article »

Alpha-Rich Stocks To Watch
1) REIT expert Dane Bowler says a pending spin-off could lead to 40% upside for Ashford Hospitality Trust (NYSE:AHT). Read article »
2) Conrad Industries (OTCPK:CNRD) generates exceptional free cash flow, which soon should lead to a special dividend. Contributor Steven Reiman sees 50% returns once the market catches on. Read article »

Today's Markets:
In Asia, Japan -0.15% to 14567. Hong Kong -1.9% to 22463. China -1.8% to 2087. India -0.4% to 20194.
In Europe, at midday, London -1%. Paris -0.5%. Frankfurt -0.3%.
Futures at 6:20: Dow -0.2%. S&P -0.2%. Nasdaq -0.3%. Crude +0.3% to $93.33. Gold +0.35% to $1275.00.
Ten-year Treasury Yield -2 bps

Today's economic calendar:
7:00 MBA Mortgage Applications
1:00 PM Results of $24B, 10-Year Note Auction
2:00 PM Treasury Budget
7:00 PM Bernanke Press Conference

Notable earnings before today's open: CSIQ, EJ, ELOS, IKGH, M, MTOR, PF

Notable earnings after today's close: AFCE, ANW, CSCO, EGLE, KGC, MM, NTAP, NTES, PNNT, SEAS, TTEK, WGL, XONE

See full real-time earnings coverage »

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