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
House, Senate leaders agree to budget deal. House and Senate negotiators have reached a budget agreement that sets spending levels for the next two years and replaces some of the automatic budget cuts in the sequester. If the full House and Senate back the proposals, which include modest spending reductions, a government shutdown next month will be averted. However, some conservative groups are unhappy with the measures and are urging for them to be rejected.

Discovery mulls bid for $11B Scripps. Discovery's (NASDAQ:DISCA) board has reportedly discussed making an offer for Scripps Networks (NYSE:SNI), whose market cap is $11B. Scripps owns the Food Network, HGTV, and the Travel Channel, which could mesh well with Discovery's stable of lifestyle channels. A merger would also give Discovery more leverage and bundling opportunities in talks with pay-TV providers. Scripps' shares jumped 14.5% in AH trading.

Hilton set to price IPO. Blackstone (NYSE:BX) portfolio company Hilton Worldwide (NYSE:HLT) is due to price its IPO after the market closes later today. Should the hotel operator sell shares at the top of the anticipated range of $18-$21 each, the listing would raise $2.7B and enable Blackstone to enjoy one of its most profitable ever investments.

Top Stock News
Costco EPS misses forecasts. Costco's (NASDAQ:COST) FQ1 EPS came in at $0.96 and missed expectations by $0.06, although net profit rose to $425M from $416M last year. As flagged last week, net revenues increased 5% on year to $24.47B, with membership fees climbing to $549M from $511M.

GM to end Australian production in four years. GM (NYSE:GM) intends to follow in Ford's (NYSE:F) footsteps and halt manufacturing in Australia by 2017. GM will take pretax charges of $400-$600M in Q4, while 2,900 workers will lose their jobs. The carmaker said the decision was due to the strong Aussie dollar, the high cost of production, and the small and fragmented domestic market. GM's move will leave Toyota (NYSE:TM) as the last major car manufacturer in Australia, although the latter might now also leave.

Smith & Wesson shares spike following strong earnings. Smith & Wesson's (SWHC) shares shot up 5.9% premarket after the gun maker's FQ2 earnings beat forecasts and it issued higher-than-expected FQ3 guidance. FQ2 EPS came in at $0.28 and revenue rose 2% to $139.3M, while income from continuing operations increased to $17.1M from $16.4M a year earlier. Earnings were boosted by a 27% jump in sales of handguns amid a fresh push for gun control.

RBS finance chief quits after just 10 weeks. RBS (NYSE:RBS) Finance Director Nathan Bostock has resigned after just 10 weeks in the job and is returning to Santander (NYSE:SAN) - where he has held several senior roles - to become the chief risk officer and deputy CEO at the Spanish firm's U.K. operations. Bostock's departure is the latest blow for RBS as it carries out a review of its operations. Shares were -1.6% premarket.

MasterCard to split stock 10:1; to boost capital returns. With shares trading comfortably above $750, MasterCard (NYSE:MA) is carrying out a 10:1 stock split. The transaction processing giant is also hiking its quarterly dividend by 83% to $1.10 a share - or $0.11 post the split - and it has announced a $3.5B buyback that will kick in once the remaining $514M of an existing $2B program is used up. MasterCard's shares were +4.8% premarket.

Top Economic & Other News
EU agrees on plan for dealing with failing banks. European finance ministers could be creating the conditions for a future run on banks after agreeing on a framework for dealing with failing firms in the sector. Crucially, major depositors will be a first port of call if a bank needs cash to shore up its finances, as happened in such brutal fashion in the bailout of Cyprus earlier this year. Money could then be taken from a country's national resolution fund; eventually, a common Europe-wide fund would be created to rescue banks.

States' income to edge up this fiscal year. State revenues are projected to increase 0.8% in FY 2014 - which began in October - sharply down from a 5.7% rise in FY 2013, the National Association of State Budget Officers says. Major reasons for the slowdown include tax cuts and a one-time surge in revenue last year following a change in federal laws. Spending is poised to rise 3.6% vs 4.3% a year earlier, with both increases below the historical average growth rate of 5.6%.

Recovery in Japanese machinery orders bodes well for economy. As expected, Japanese machinery orders rose 0.6% on month in October after falling 2.1% in September. The figures "should ease concerns that the fledgling recovery in business...(investment) has already come to an end," says Economist Marcel Thieliant. Q3 GDP was revised down earlier this week, partly due to lower-than-expected business expenditure. Core orders topped ¥800B for the third consecutive month for the first time since 2008. The trend "points to a renewed rise in capital spending" in Q4, says Thieliant.

German CPI returns to growth. As expected, German CPI rose 0.2% on month in November following a drop of 0.3% in October. On year, inflation edged up to 1.3% from 1.2%. As in previous months, the low rate of inflation was mainly due to the falling prices of mineral-oil products, although these contrasted with rising electricity costs. Food inflation was still substantial for some products, but the overall increase in expenses slowed.

Alpha-Rich Stock Movers and Great Calls
1) Last Tuesday, Alpha Vulture called Conduril (OTC:CNDUF) his "highest conviction pick," and highlighted a cheap valuation and potential triple-digit upside. Shares are +14.2% to date. Read article »
2) On October 1, Street Smart Investor noted that DNO International (OTCPK:DTNOF) was already up 43% this year but had plenty more upside ahead. The stock is +64.4% since his call. Read article »

Alpha-Rich Stocks To Watch
1) Embraer (NYSE:ERJ) is trading at a discount to peers, but it is experiencing secular growth and it is facing limited competition. This makes it a compelling contrarian value play, writes Trading the Spread. Read article »
2) Intangible Valuation calls Tuesday Morning (NASDAQ:TUES) an excellent short play, as investors have priced in a turnaround to peak earnings that may never come. Read article »

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Today's Markets:
In Asia, Japan -0.6% to 15515. Hong Kong -1.7% to 23338. China -1.5% at 2204. India -0.4% at 21171.
In Europe, at midday, London +0.1%. Paris +0.7%. Frankfurt +0.1%.
Futures at 6:20: Dow -0.1%. S&P -0.1%. Nasdaq -0.1%. Crude flat at $98.54. Gold -0.5% to $1254.50.
Ten-year Treasury Yield flat at 2.81%.

Today's economic calendar:
7:00 MBA Mortgage Applications
10:30 EIA Petroleum Inventories
1:00 PM Results of $21B, 10-Year Bond Auction
2:00 PM Treasury Budget

Notable earnings before today's open: COST, JOY

Notable earnings after today's close: ASYS, CWTR, MW, SIGM, VRA

See full real-time earnings coverage »

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