Frontrunning: October 9


  • Janet Yellen, a Backer of Pushing the Fed's Policy Boundaries (WSJ)

  • Jos. A. Bank proposes to buy Men's Wearhouse for $2.3 billion (Reuters)

  • J.P. Morgan to Cull Business Clients (WSJ)

  • RBS Said to Pass Currency Trader Chats to FCA Amid Probe (BBG)

  • Prosecutors give SAC settlement ultimatum (FT)

  • U.S. builders hoard mineral rights under new homes (Reuters)

  • Bill Comes Due for Brazil's Middle Class (WSJ)

  • US expected to slash aid to Egyptian government (AP)

  • Samsung launches world's first smartphone with curved screen (Reuters)

  • Microsoft’s $7.2 Billion Nokia Bet Not Luring Apps (BBG)

  • China raises hurdles for foreign banks (FT)

  • U.S. Refiners Export More Fuel Than Ever (WSJ)

  • Fidelity Billionaire Johnson Taps ETFs as Profits for Funds Fade (BBG)

  • Sears Cashes Out of Prime Stores (WSJ)


 


Overnight Media Digest


WSJ


* Budget battles could draw out the process of confirming Janet Yellen as chairwoman of the Federal Reserve and provide a new venue to debate the effectiveness and duration of the central bank's bond-buying program.


* President Obama warned of "economic chaos" if a political stalemate causes the U.S. to no longer be able to pay its bills, and said he would accept even a short-term increase in the borrowing limit to give lawmakers time to negotiate.


* From Treasury yields to the volatility "fear gauge", market metrics indicate worry as the government deadlock drags.


* JPMorgan is looking to scale back lending to pawn shops, payday lenders, check cashers and certain car dealerships as it seeks to tighten controls in a period of heightened regulatory scrutiny.


* U.S. refiners are selling more fuel abroad than ever before, effectively exporting the American energy boom around the world.


* Sears Holdings has been selling off some of its best stores to raise cash, an unusual strategy that makes it harder for the struggling chain to improve its sales even as it helps shore up its financial position.


* Efforts by creditors of Energy Future Holdings Corp to reach a wide-ranging deal to address the Texas power company's massive debt load suffered a setback earlier this week when separate groups of lenders and bondholders gave a tepid response to a proposal from another large creditor, the giant mutual-fund firm Fidelity Investments, according to people familiar with the matter.


* Jos. A. Bank has approached Men's Wearhouse about a combination of the two companies, a proposed deal that would create a nationwide powerhouse in men's apparel.


* U.S. drug distributor McKesson Corp is in advanced negotiations with the majority shareholder of Celesio AG to buy the German rival for more than 3.74 billion euros ($5.08 billion), according to people familiar with the matter.


 


FT


The International Monetary Fund revised up UK growth forecast more than any other leading economy and dropped its criticism of the UK government's austerity program.


The U.S. unmanned aircraft industry which was hoping to benefit from the domestic commercial sector is facing a backlash as scores of U.S. states have privacy concerns ahead of 2015, when the commercial airspace opens up for the drone manufacturers.


Alitalia, Italy's national airlines faces a cash crunch with a major creditor threatening to cut off fuel, even as the government attempted to keep the airline afloat.


Hedge fund SAC Capital was given until November by the U.S. prosecutors to resolve criminal charges or risk paying more than 1.8 billion.


The privitisation of Royal Mail is set to become one of the biggest state sell-offs since the British Telecom and British Gas in the 1980s.


A regulatory framework for the British press was postponed till the end of the month after parliament and industry seemed set to fail at arriving at a compromise.


Several of Samsung smartphones are likely to be stop being sold in U.S. after President Obama decided against vetoing the ban, despite using a veto for lifting a similar ban of Apple inc products earlier.


European Parliament declined to impose stringent regulations on the electronic cigarette industry bringing relief to the rapidly growing industry.


 


NYT


* President Obama will nominate Janet Yellen as chairwoman of the Federal Reserve on Wednesday, White House officials said Tuesday night, ending an unusually prolonged and public search to fill one of the most important economic policy-making jobs in the world.


* In a suburb due east of Los Angeles, Starbucks Corp is opening a $70 million, state-of-the-art plant that will produce cold-pressed juices. The factory is the latest investment that underscores Starbucks' determination to transform its brand from being synonymous with coffee to a food and beverage juggernaut.


* From New York to Silicon Valley, more and more large American corporations are reducing their tax bill by buying a foreign company and effectively renouncing their U.S. citizenship.


* The Government Accountability Office is to release a report on Wednesday that the supply of most U.S. nuclear reactors is drying up and that their ability to provide electricity is at risk. Most nuclear reactors in the United States rely on a type of lithium that is produced only by China and Russia, and the supply may be drying up.


* After months of fighting the government's insider trading case tooth and nail, hedge fund SAC Capital Advisors is leaning toward admitting criminal wrongdoing and agreeing to pay a record financial penalty to resolve the charges, according to two people briefed on the deliberations. (


* Nuance Communications Inc, a maker of voice recognition software, disclosed on Tuesday that it would allow billionaire Carl Icahn to nominate two directors to its board. Icahn has chosen his son Brett and David Schechter, a senior analyst at his firm.


* Twitter Inc's initial public offering appears to be the first one from a big technology company that simply prepared a thorough filing without pushing the boundaries.


* The European Parliament on Tuesday scrapped proposals by health officials that electronic cigarettes be tightly regulated as medical devices, setting the stage for a debate in the United States over the extent of regulation.


* In another blow to Samsung Electronics Co Ltd in its continuing patent disputes with Apple Inc, the Obama administration has decided to uphold a ban requested by Apple of some of Samsung's mobile products. The ban, which was ordered by the International Trade Commission, was issued in August after the agency determined that Samsung had violated two Apple patents.


* The Agriculture Department issued a public health alert this week, saying that a strain of salmonella may have sickened 278 people who reported becoming ill after they ate poultry produced by Foster Farms.


 


Canada


THE GLOBE AND MAIL


* Ottawa is offering to make it easier for small businesses to take part in its proposed Canada Job Grant by allowing "mom-and-pop" firms to pay less money than larger ones to access the program. Federal Employment Minister Jason Kenney announced this detail of the grant on Tuesday in Toronto's financial district, as he promised more "flexibility" to get reluctant provinces onside with the program.


* Ontario's Liberal government will spend a billion dollars to cancel two gas-fired power plants, a sum that puts the scandal among the costliest in the province's history and threatens to damage the party months before an expected election.


Reports in the business section:


* The federal government will be watching for any national security implications in the event that BlackBerry Ltd is sold, says Treasury Board President Tony Clement. Speaking on the sidelines of the Government Technology Exhibition and Conference, Clement said Ottawa's position for now is to let events play out.


NATIONAL POST


* The Progressive Conservatives made the jump from third to second in Tuesday's Nova Scotia election, four years after losing power. When the legislature returns Jamie Baillie will be the leader of the Official Opposition, an achievement for a party that is still seen to be in a rebuilding phase under his fledgling leadership.


* A high-profile Toronto lawyer has filed an application for judicial review, contesting the appointment of Marc Nadon, a former Federal Court and Federal Court of Appeal judge from Quebec who was sworn in as the newest member of the Supreme Court earlier this week.


FINANCIAL POST


* In a final bid to convince Canada's National Energy Board of the merits of its Line 9 pipeline reversal project, Enbridge Inc played up the economic benefits while insisting criticism of the plan by certain parties has been nothing short of "irresponsible".


 


China


CHINA DAILY


- China's central government unveiled plans to tighten its supervision over the use of poverty-relief funds on Tuesday, following reports of corrupt mis-allocation by local authorities.


SHANGHAI DAILY


- Torrential rain in Shanghai between Monday night and noon on Tuesday flooded 50 roads and 600 households. The biggest rainfall in 52 years led to the death of two workers who were electrocuted when attempting to pass a flooded area.


- Shanghai home sales hit a six-month high in September, according to research conducted by Shanghai Uwin Real Estate Information Services Co.


PEOPLE'S DAILY


- Some Chinese government officials indulge in excessive numbers of meetings, documents and speeches, said a commentary in the paper that acts as the government's mouthpiece. It is more important to engage in activities that have a practical impact on society.


 


Fly on the Wall 7:00 AM Market Snapshot


ANALYST RESEARCH


Upgrades


Calamos (CLMS) upgraded to Market Perform from Underperform at Keefe Bruyette
Cubist (CBST) upgraded to Buy from Neutral at Mizuho
EOG Resources (EOG) upgraded to Outperform from Neutral at Credit Suisse
Masco (MAS) upgraded to Neutral from Underweight at JPMorgan
Michael Kors (KORS) upgraded to Overweight from Neutral at Piper Jaffray
Owens Corning (OC) upgraded to Overweight from Neutral at JPMorgan
TD Ameritrade (AMTD) upgraded to Market Perform from Underperform at Keefe Bruyette
Teekay (TK) upgraded to Overweight from Equal Weight at Barclays


Downgrades


C&J Energy (CJES) downgraded to Market Perform from Outperform at Cowen
Green Dot (GDOT) downgraded to Neutral from Overweight at Piper Jaffray
Hess Corp. (HES) downgraded to Neutral from Buy at Citigroup
K12 (LRN) downgraded to Market Perform from Outperform at BMO Capital
K12 (LRN) downgraded to Neutral from Outperform at RW Baird
Pacific Sunwear (PSUN) downgraded to Neutral from Overweight at Piper Jaffray
Patterson-UTI Energy (PTEN) downgraded to Market Perform from Outperform at Cowen
Ralph Lauren (RL) downgraded to Neutral from Overweight at Piper Jaffray
ViroPharma (VPHM) downgraded to Neutral from Buy at Mizuho


Initiations


AbbVie (ABBV) initiated with an Outperform at Credit Suisse
Allergan (AGN) initiated with an Outperform at Credit Suisse
Amphenol (APH) initiated with a Neutral at SunTrust
Arrow Electronics (ARW) initiated with a Buy at SunTrust
Avnet (AVT) initiated with a Buy at SunTrust
Bristol-Myers (BMY) initiated with an Outperform at Credit Suisse
Brunswick (BC) initiated with a Buy at Citigroup
Chicago Bridge & Iron (CBI) initiated with a Buy at Jefferies
Coach (COH) initiated with a Neutral at Piper Jaffray
Eli Lilly (LLY) initiated with a Neutral at Credit Suisse
ExOne (XONE) initiated with a Buy at Janney Capital
Fluor (FLR) initiated with a Buy at Jefferies
Forest Labs (FRX) initiated with a Neutral at Credit Suisse
Foster Wheeler (FWLT) initiated with a Hold at Jefferies
Goodrich Petroleum (GDP) initiated with an In-Line at Imperial Capital
GulfMark Offshore (GLF) initiated with an Outperform at Cowen
Hancock Holding (HBHC) initiated with an Underperform at BofA/Merrill
Hornbeck Offshore (HOS) initiated with an Outperform at Cowen
IBERIABANK (IBKC) initiated with a Buy at BofA/Merrill
Jacobs Engineering (JEC) initiated with a Hold at Jefferies
KBR (KBR) initiated with a Buy at Jefferies
Matson (MATX) initiated with a Buy at Stifel
Merck (MRK) initiated with a Neutral at Credit Suisse
Navios Maritime (NM) initiated with a Hold at Stifel
OCI Resources (OCIR) initiated with a Buy at Citigroup
Pfizer (PFE) initiated with an Outperform at Credit Suisse
Pike Electric (PIKE) initiated with a Hold at Jefferies
Ruby Tuesday (RT) initiated with a Buy at B. Riley
SVB Financial (SIVB) initiated with a Buy at BofA/Merrill
Sensata (ST) initiated with a Buy at SunTrust
TE Connectivity (TEL) initiated with a Neutral at SunTrust
Texas Capital (TCBI) initiated with a Buy at BofA/Merrill
URS Corporation (URS) initiated with a Hold at Jefferies
Ultrapetrol (ULTR) initiated with a Buy at Stifel


HOT STOCKS


JoS. A. Bank (JOSB) confirmed proposal to acquire Men's Wearhouse (MW) for $48 per share
Wi-LAN (WILN), BlackBerry (BBRY) settled all litigations, terms confidential
Moody's downgraded Telecom Italia's (TI) ratings to Ba1; negative outlook
Alcoa (AA) CEO Kleinfeld told CNBC getting out of high cost positions. Said aluminum demand worldwide a "growth story," not seeing slowdown in China
FDA approved Bayer's (BAYRY) Adempas for two forms of pulmonary hypertension


EARNINGS


Companies that beat consensus earnings expectations last night and today include:
ADTRAN (ADTN), Mistras (MG), Alcoa (AA)


Companies that missed consensus earnings expectations include:
Costco (COST), A. M. Castle (CAS), Yum! Brands (YUM)


Companies that matched consensus earnings expectations include:
Healthcare Services (HCSG)


NEWSPAPERS/WEBSITES



  • U.S. refiners (MPC, VLO, EPD) are selling more fuel abroad than ever before, effectively exporting the American energy boom to the four corners of the world. While federal law bars overseas shipments of most U.S.-produced oil, refiners can export petroleum products created from that crude, including gasoline, diesel and jet fuel, the Wall Street Journal reports

  • Wal-Mart Stores (WMT) and Bharti Enterprises are breaking up their Indian JV, leaving the world's biggest retailer to go it alone in a country where it has struggled to build a bigger presence. Wal-Mart will take over its Indian partner's 50%, which runs 20 wholesale stores under the Best Price Modern Wholesale brand, Reuters reports

  • Nestle (NSRGY) is looking to sell its Jenny Craig diet business and is talking to a small group of potential buyers about the brand, sources say, Reuters reports

  • Microsoft’s (MSFT) $7.2B pairing with Nokia’s (NOK) handset business is failing to win over the software developers crucial to its success, Bloomberg reports

  • Delta Air Lines (DAL) and AMR Corp.’s (AMR) American Airlines are waiting on new jets stuck as far afield as Germany with the partial shutdown of the U.S. government stalling deliveries across the global aerospace industry, Bloomberg reports


SYNDICATE


CytRx (CYTR) 10M share Spot Secondary priced at $2.25
Dyax (DYAX) files to common stock
EZCORP (EZPW) files to sell 300,000 shares of Class A non-voting common
Kythera (KYTH) 2.62M share Secondary priced at $45.75
LDR Holding (LDRH) 5M share IPO priced at $15.00
SFX Entertainment (SXFE) 20M share IPO priced at $13.00

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