December 12, 2012

DJIA:13,248 NASDAQ:3,022 10-YR TRS: 10/32, yield 1.651% Oil:$85.79 EURO:$1.3006 YEN:82.51 

Micro

• SPZ: trading in a tight spread as investors remain uncertain about today’s second half of the FOMC meeting. 
• Earnings: Costco (NASDAQ:COST) Q1 EPS of $0.95 which is higher than forecast by $0.02, Joy Global (NYSE:JOY) Q4 EPS of $1.99 beating expectation by $0.08, Restoration Hardware (NYSE:RH) Q3 EPS forecast of $0.04.
• Dividends: Great Lake Dredge & Dock (NASDAQ:GLDD) declared special dividend of $0.25 per share payable 12/28, U.S. Global Investors (NASDAQ:GROW) declared special dividend of $0.02 per share.
• Avon (NYSE:AVP) announced plan to let go of 1,500 employees from across the globe and cut business in South Korea and Vietnam as part of their goal to save $400M annually by 2015.
• Costco (NASDAQ:COST) increased net profits to $416M (+30%), membership fee revenue to $511M (+14.3%), and same stores sales +7%. Costco currently operates 621 warehouses internationally.
• While investigating Big Lots (NYSE:BIG), the WSJ discovered that senior management collectively sold over $23M in stock in March right before the company announced slower Q1 revenues. 

Macro

• Asian Markets: trading higher from optimism that US will avoid fiscal cliff, Australian and Hong Kong equity markets closing at 16-month highs.
• European Markets: trading steady overall as market participants wait for FOMC news in the US, resource firms driving U.K. stocks to trade higher.
• The Federal Reserve is expected to announce its latest monetary policy at 12:30pm, many economists believe will be the monthly purchase of $45B of Treasuries starting in 2013. 
• China’s economy is forecast by the Bank of China to have grown 7.8% in 2012 and will expand 8% in 2013, which is the slowest annual pace since 1999.

Yesterday’s Notable Winners 

• TNS (NYSE:TNS) +42.58% (+$6.20) to $20.76 after an investor group agreed to buy TSN for 44% premium to Monday’s close.
• TripAdvisor (NASDAQ:TRIP) +6.56% (+$2.52) to $40.91 from decision to expand its stake in Liberty, grating the company with 57% voting power. 
• Urban Outfitters (NASDAQ:URBN) +4.46% (+$1.65) to $38.65 after announcing expectations for robust same-store sales data this quarter. 

Yesterday’s Notable Losers 

• Dollar General (NYSE:DG) -7.79% (-$3.63) to $42.94 from company announcement of a bearish sales outlook for the rest of 2012.
• SPX (NYSE:SPW) -9.15% (-$6.25) to $62.07 from being the top bidder in the race to acquire Gardner Denver. 
• Magellan Health Services (NASDAQ:MGLN) -5.74% (-$3.04) to $49.94 which resulted from the release of disappointing annual earnings data. 

The Risk of Flying the Friendly Skies 

Prior to the formation of United Continental, United and Continental Airlines were two separate entities with contrasting business models, inflight ideologies, and corporate cultures. When United acquired Continental in October of 2010, these three business aspects were forced to merge. In an effort to increase revenue, the conglomerated UAL restructured their entire business model (from seating blueprints to the way employees interact) based on their theory that having the ability to match opportunity with luck would pull in the highest profitability. By having the right service to provide to the right passenger at the most opportune moment, UAL believes they will be able to outperform their competitors. However, there is one major risk threatening the success of the entire entity- ensuring that flight attendants are happy. A major part of air travel is the experience. If flight attendants are rude and unwilling to serve, customers are more to likely never to fly UAL again. According to an inside source, the merger of employees and mixing corporate cultures is proving to be a problem for flight attendants who are apparently prejudiced and resentful against the other company’s employees. Although the final stages of the flight attendant merger has yet to be completed, poor management is forecast to make the situation even more bearish. United Continental operates approximately 5,656 flights to over 376 domestic and international destinations on a daily basis, if flight attendants stop serving with a smile the outlook is bound to be nasty.