Feb 16 2011

The Dow ended in the red as poor

Dow 12,226.64 -41.55 -0.34%
economic data weighed on the
market’s sentiment. A gainer on S&P 500 1,328.01 -4.31 -0.32%
Monday, but a loser on Tuesday, Nasdaq 2,804.35 -12.83 -0.46%
XOM slipped to the bottom of the
table.

Retail sales, a key indicator to US spending, rose 0.3% in January, slower than the expected
rise of 0.6% and also below the rise in December (0.5%). Excluding auto sales, the sales also
rose 0.3%, at the same pace as in December. This was also below the expected 0.6% rise.
With sales less robust than anticipated, the outlook remains fragile for the US economy.

Despite the improving Empire state index in February, inventories had edged higher in
December by 0.8%, more than the expected rise of 0.6%. The pace doubled the November’s
rise of 0.4%. Meanwhile, home builders’ index stays stagnant in February at 16, as expected.

Wednesday will also feature key indicators such as the housing starts, industrial production
and also Producer Price Index. Industrial production is expected to have slowed from 0.8% in
December to 0.4% in January. PPI is seen to edge lower from 1.1% to 0.9%. Excluding food
and energy however, the index is seen accelerating from 0.2% to 0.3%. Housing starts for
January is also seen moderating from 529,000 to 515,000. Finally, FOMC minutes of the
Federal Reserve’s most recent meeting will be released on Wednesday.

Corporate News
 XOM made it to the headline again as the stock fell 2.28% to $82.97. The
drop came as the company announced its reserves replacement on
Tuesday. With its 3.5 billion oil-equivalent barrels of proven reserves in
2010 added, which replaced 209% of production, XOM had increased its
total reserves to 24.8 billion oil-equivalent barrels. However, 2.8 billion of the 3.5 billion
came from XTO, and this has raised the question whether XOM actually bought XTO just
for its reserves or something else. This also sparked the question whether XOM has been
having difficulties in finding more new reserves. Elsewhere, based on Reuters data, oil
supply in the North Sea is expected to fall 8.6% in March from a year earlier. Month-on-
month however, the oil supply will increase 1%. Although falling, XOM remains as the
fourth best performer among the Dow 30 this year with gains of 13.47%. It is also
27.65% higher than its year-ago level.
 Next at the bottom was BA. Despite it was reported that the US Navy has planned to buy
more Boeing planes (from 1 to 28 planes) next year, the stock plummeted 1.19% to finish
at $71.40. Meanwhile, BA and Fluor have agreed to pursue work from the US Department
of Energy. The contract will expire in September 2012. Argus reiterated its rating on BA
on HOLD, but slashed its 2011 EPS to $4.10 from $4.70 due to the expected slow growth
in the defense industry.
 BAC also down on Tuesday. Obama’s budget proposal will include charging banks around
$30 billion of new fee. Businesses will also have to pay more to the government to insure
their pensions. BAC also reported that its net charge offs declined to 9.2% in January from
 Feb 16 2011
9.31% in December, while delinquencies in January was at 5.17%. As Buffett exited BAC
trades and Paulson cut his stakes on BAC, Fairholme raised stakes in BAC to 92.14 million
shares, up from 70.68 million. The fall on Tuesday pared its gains this week and dragged
BAC’s MTD gains lower to 2.76%. YTD however, BAC has tallied 10.72% gains as it
struggles to recoup its losses last year. Compared to a year-ago-level, BAC is still 11.34%
underwater.
 VZ led the Dow 30 table on Tuesday with 1.56% gains. The
company made an agreement with CenturyLink which would
authorize CenturyLink as a marketing agent of Verizon Wireless.
CenturyLink will then offer Verizon Wireless’ products and services
to residential and small business customers. No details on the financials of this deal. On
another deal, VZ and Intrado have entered a collaboration to work on next-generation
911 services. Also on Tuesday, VZ has announced that it will start selling HPQ’s new
WebOS-based smartphones: Pre 2 on Thursday. VZ’s aggressive moves may bear fruit
later on this year and already Fairholme reported a new 7.4 million share stake in VZ. VZ
has yet gained significantly so far in 2011, as it merely gains 1.9%.
 JPM jumped to hit $47.34 before the stock settled the day at $46.82 or up 0.6% after
the company announced that it had a perfect trading quarter in the fourth quarter last
year. During the Q4 2010, there was not a single day that the company suffered a net
trading loss. Only eight times that the bank had recorded a daily net loss and those were
in the second quarter. JPM also reported that January delinquency rate was at 3.39%,
down from 3.47% a month before. So far in 2011, JPM has gained 10.37%, while just in
February the bank has collected 4.18% of gains.
 HD is planning to hire over 60,000 seasonal employees to anticipate the busy Spring
Black Friday. Usually the event marks the beginning of the busiest shopping season for
home improvement products. HD’s shares climbed 0.29% to $37.69 on Tuesday.
 WMT is expected to create local jobs should the company wanted to proceed with its deal
to acquire Massmart Holdings in South Africa. The retail giant is also seen to remain
competitive by Stifel Nicolaus, which reiterated its HOLD rating on WMT but upbeat on its
upcoming Q4 earnings (it will due on Feb 22nd). It remains to be seen whether WMT will
be able to maintain its gross margins, especially under the current circumstances where the
rising raw material costs could continue to rise to a point where retailers will be left with
very few choices or even none but to pass it to the consumers. WMT shares so far have
been deemed as lacking positive catalysts to rise, but the 0.27% rise on Tuesday was still
far from pulling WMT out of the red zone this month. MTD, WMT is still losing 2%.
 Bill & Melinda Gates Foundation was reportedly buying KO during the recent Q4 2010.
The beverage company, which has been rumored of having its secret recipe exposed (but
later denied) was said to have extended its marketing deal with NBA on Tuesday. KO has
not performed well so far this year, having lost 3.92% YTD, reducing its 12-month gains to
19.86%. Lack of positive catalysts could be the factor behind the slump.
 PFE’s Vfend tablets have been launched by Mylan Pharmaceuticals Inc. The product had
recorded $186 million worth of sales during 2010 in the US alone. PFE was unchanged for
the day, hovering at $19.05 by the end of the day.
 MRK and Novartis have been reported to have invested in mobile phone applications
capable of tracking diabetes and cancer.
 Feb 16 2011
 JNJ’s request to offer a lower dose Procrit has been refused by the FDA. JNJ has also
recalled 70,000 Invega syringes due to cracks which raised sterility issue.
 MSFT lost its top ad VP Carolyn Everson as she switched sides to become Facebook’s new
VP of global sales.
 HPQ and VMware have agreed to collaborate in the development of security technology
for the Cloud, called IPS or Intrusion Prevention System. Both companies will also work on
the marketing of the technology as well.
 Fairholme has added new 9.38 million share stake in T during the last Q4. Meanwhile, T’s
CEO Randall Stephenson said that T will gain contract customers this year despite losing
some to VZ. T will also sell handsets powered by Android.

Upgrades & Downgrades

Rating PT
Code House Date
Prv Current Prv Current
BA Argus 15-Feb Hold Hold $4.70* $4.10*
CVX Argus 15-Feb Buy Buy $100.00 $120.00
INTC S&P Equity Research 15-Feb Buy Hold - -
WMT Stifel Nicolaus 15-Feb Hold Hold - -
* 2011 EPS estimate

US Economic Calendar
Date Time Report Period Actual Forecast Previous
15-Feb 8:30 AM Retail sales Jan 0.3% 0.6% 0.5%
15-Feb 8:30 AM Retail sales ex-autos Jan 0.3% 0.6% 0.3%
15-Feb 8:30 AM Import price index Jan 1.5% n/a 1.2%
15-Feb 8:30 AM Empire state index Feb 15.4 14.3 11.9
15-Feb 10:00 AM Inventories Dec 0.8% 0.6% 0.4%
15-Feb 10:00 AM Home builders' index Feb 16 16 16
16-Feb 8:30 AM Producer price index Jan 0.9% 1.1%
16-Feb 8:30 AM Core PPI Jan 0.3% 0.2%
16-Feb 8:30 AM Housing starts Jan 515,000 529,000
16-Feb 9:15 AM Industrial production Jan 0.4% 0.8%
16-Feb 2:00 PM FOMC minutes 1/26/2011
17-Feb 8:30 AM Jobless claims 2/12/2011 n/a 383,000
17-Feb 8:30 AM Consumer price index Jan 0.3% 0.5%
17-Feb 8:30 AM Core CPI Jan 0.1% 0.1%
17-Feb 10:00 AM Leading indicators Jan 0.2% 1.0%
17-Feb 10:00 AM Philly Fed Feb 20.8 19.3
 Feb 16 2011
Stock focus: VZ

VZ
Feb 15th MTD Resistances 38.12 39.29 40.45 44.04 45.13

↑ 1.56% ↑ 2.36% Supports 35.55 35.25 34.90 34.35 33.65

YTD 12-Month Outlook

↑ 1.90% ↑ 26.03%
Last
POSITIVE
$36.46 Strategy Buy > $35.25, risk < $34.35, PT @ $45.13
 Feb 16 2011

Dow 30 - Feb 15th 2011

VZ 1.56% 1 MCD -0.12% 11 AXP -0.71% 21
TRV 0.87% 2 JNJ -0.13% 12 CSCO -0.74% 22
JPM 0.60% 3 GE -0.19% 13 DD -0.75% 23
KFT 0.59% 4 IBM -0.23% 14 T -0.77% 24
HD 0.29% 5 CAT -0.25% 15 BAC -0.81% 25
WMT 0.27% 6 UTX -0.33% 16 PG -0.96% 26
MMM 0.11% 7 DIS -0.35% 17 MSFT -0.99% 27
KO 0.08% 8 INTC -0.56% 18 AA -1.08% 28
PFE 0.00% 9 CVX -0.63% 19 BA -1.19% 29
MRK -0.09% 10 HPQ -0.66% 20 XOM -2.28% 30

Dow 30 - Week-to-Date - Feb 15th 2011

PFE 1.17% 1 MCD 0.01% 11 T -0.81% 21
TRV 0.61% 2 BAC 0.00% 12 MRK -0.85% 22
GE 0.61% 3 CVX -0.11% 13 DD -0.86% 23
HD 0.56% 4 JNJ -0.13% 14 BA -1.03% 24
MMM 0.22% 5 CSCO -0.16% 15 MSFT -1.06% 25
VZ 0.19% 6 UTX -0.32% 16 HPQ -1.09% 26
XOM 0.18% 7 CAT -0.52% 17 AXP -1.20% 27
AA 0.17% 8 KO -0.60% 18 PG -1.25% 28
JPM 0.15% 9 IBM -0.62% 19 WMT -1.33% 29
KFT 0.03% 10 DIS -0.74% 20 INTC -1.42% 30

Dow 30 - Month-to-Date - Feb 15th 2011

DIS 10.86% 1 PFE 4.56% 11 JNJ 1.42% 21
BA 7.57% 2 UTX 4.46% 12 PG 1.25% 22
DD 6.77% 3 JPM 4.18% 13 KO 0.54% 23
GE 6.55% 4 MCD 3.37% 14 IBM 0.52% 24
AXP 6.48% 5 XOM 2.84% 15 KFT 0.33% 25
CAT 6.17% 6 BAC 2.76% 16 INTC -0.05% 26
TRV 5.49% 7 T 2.62% 17 MRK -1.15% 27
HPQ 5.03% 8 HD 2.50% 18 WMT -2.00% 28
AA 5.01% 9 VZ 2.36% 19 MSFT -2.78% 29
MMM 4.64% 10 CVX 1.49% 20 CSCO -11.73% 30
 Feb 16 2011

Dow 30 - YTD Feb 15th 2011

GE 17.33% 1 PFE 8.79% 11 WMT 1.89% 21
DIS 14.88% 2 DD 8.48% 12 PG -0.64% 22
HPQ 13.99% 3 UTX 7.89% 13 MCD -0.79% 23
XOM 13.47% 4 AXP 7.62% 14 JNJ -1.99% 24
AA 13.06% 5 HD 7.50% 15 KFT -2.67% 25
IBM 10.96% 6 MMM 6.60% 16 MSFT -3.40% 26
BAC 10.72% 7 TRV 6.53% 17 T -3.88% 27
JPM 10.37% 8 CVX 5.58% 18 KO -3.92% 28
CAT 9.97% 9 INTC 2.00% 19 CSCO -7.71% 29
BA 9.41% 10 VZ 1.90% 20 MRK -9.02% 30

Dow 30 - Trailing Twelve Months (TTM) - Feb 15th 2011

CAT 80.54% 1 AXP 20.95% 11 KFT 7.88% 21
DD 60.47% 2 HD 20.80% 12 INTC 4.48% 22
DIS 37.93% 3 KO 19.86% 13 WMT 1.63% 23
GE 33.62% 4 MCD 19.26% 14 PG 1.01% 24
CVX 33.25% 5 MMM 14.78% 15 JNJ -3.78% 25
AA 30.83% 6 T 13.83% 16 HPQ -5.51% 26
IBM 28.06% 7 BA 13.05% 17 MSFT -5.96% 27
XOM 27.65% 8 TRV 12.85% 18 MRK -11.09% 28
VZ 26.03% 9 JPM 11.56% 19 BAC -11.34% 29
UTX 23.71% 10 PFE 8.55% 20 CSCO -23.26% 30

Disclaimer: This report is provided for information purposes only. It is not an offer to sell or to buy any
securities. This report has been prepared based on sources believed to be reliable, but there is no
assurance or guarantee regarding its completeness & and accuracy. The author accepts no responsibility or
liability arising from any use of the report.