Friday (01/06/12) Pre-Market Morning Update: Citi Ends Talks With PE Firm

Every morning the Street of Walls team puts out an update on market levels, today’s top stories, and active M&A deals.

Today’s Top Stories:

  • GS Morning Update: “Stocks in Asia were choppy overnight with little news on which to trade. The major markets – Japan and Hong Kong – both traded 1%+ lower leaving these markets little changed for the first week of the year. Stocks in Europe are also opening mixed this morning as investors appear to be simply milling about in anticipation of this morning’s December US Payrolls report” (GS)
  • Apple iPads: Apple will ship the so-called “iPad 3? with a full HD display in March and then “iPad 4? – named so by its component suppliers – with killer applications in October, according to industry sources in Taiwan
  • Financials as Outperformers in 2012: Deutsche initiated this week on the Mid Cap Banks with 4 Buy recommendations based on profitability in the context of valuation, expanding ROTCE, accelerating EPS growth with upside potential, and full/partial removal of policy overhang
  • CA Budget Gap at $9bn: California faces a smaller budget deficit in the coming fiscal year but will require nearly $5 billion in cuts to public education if voters reject Gov. Jerry Brown’s plan to raise taxes in the fall, the governor said Thursday in releasing its budget proposal for the 2012-13 fiscal year
  • Citi Ending PE Talks: the company has ended talks to sell its OneMain consumer-lending unit to PE firms
  • Bill Gross on the Economy: The New Normal, previously believed to be bell-shaped and thin-tailed in its depiction of growth probability and financial market outcomes, appears to be morphing into a world of fat-tailed, almost bimodal outcomes
  • New CEO at RIG: RIG names new CFO
  • YHOO Selling Assets: “WSJ reports YHOO looking at a complex deal to save $4B in taxes on sale of Asian assets thru a tax rule that allows the possibility of the “cash-rich-split-off” but the IRS has to sign off on it” (UBS)
  • Monster Employment Index: Monster Employment Index U.S. shows annual growth of 8 percent in December, consistent with slow, but steady growth in online recruitment activity
  • SSS Update from Yesterday: “While the bifurcation of SSS results was an important takeaway from December comps, the biggest surprise yesterday was the magnitude of the 4Q earning reductions. Specifically, JCP shockingly cut its forecast by ~39%, KSS guided down by ~14%, and TGT reduced its range by ~6%. Importantly, we’d avoid temptation to step into both Target and Kohl’s as structural issues at both (weak traffic at TGT despite P-Fresh/Redcard and heavy reliance on promotions at KSS) will leave each name in purgatory for the next 4-6 months” (Barclays)

Economic Calendar:

  • BLS Non-Farm Paryroll: “the expectations for Fri’s private BLS add had a “2” handle even before ADP hit Thurs.  It seems like an upside surprise would take ~250K at this point” (JPM)

M&A Watch:

  • Weekly M&A Update: M&A volumes decline by over 50% while equity underwriting saw some improvement
  • CS On Capital Markets: It continues to be a tough market out there for small to mid-size brokerage firms that are struggling to stay alive in this lower trading and banking activity
Disclosure: I do not have a position in any stocks mentioned in this article, do not have a plan to initiate a position within the next 72 hours.
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