January 4, 2013 Update

DJIA:13,391 NASDAQ:3,100 10-YR TRS: 17/32 yield 1.899% Oil:$92.92 EURO:$1.3049 YEN:87.24

Micro

• Earnings: Sonic Corp. (NASDAQ:SONC) Q1 EPS of $0.11 per share and a revenue of $126M, Progress Software Corp. (NASDAQ:PRGS) Q4 EPS of $0.57 per share and a revenue of $91.3M, Mosaic (NYSE:MOS) forecast Q2 EPS of $0.94 per share, Finish Line (NASDAQ:FINL) forecast Q3 EPS of $0.10 a share. 
• Santander (NYSE:SAN) will lay off 3,000 employees and close 700 branches when the merger with the Banesto unit is complete.
• The SEC has closed an investigation on Warren Buffet’s top aide, David Sokol, on an alleged insider trading scandal and has decided not to press charges. Sokol purchased shares of Lubrizol two months before Berkshire Hathaway announced the acquisition of the company. As it turns out, it was Sokol who recommended the company purchase the entire time.
• If Eli Lily (NYSE:LLY) is victorious in their patent battle, then LLY could keep marketing exclusivity for its Alimta lung cancer drug until 2022 instead of 2016. 

Macro

• SPZ: keeping steady as investors wait for the release of nonfarm-payrolls data.
• Asian Markets: Japanese stocks soared in a post-holiday catch-up rally that was aided by a weaker yen, the rest of Asia traded lower from news from the Federal Reserve. 
• European Markets: traded lower on news that the Federal Reserve will stop purchasing bonds in 2013, banks and resource firms are posting the biggest losses. 
• The Labor Department will release December’s nonfarm-payrolls statistic at 8:30am, the unemployment rate is forecast to hover around 7.7% with an expected 160,000 net jobs.
• German retail sales rose by 1.2% M/M in November, boosted by low unemployment and higher income expectations.  

Yesterday’s Notable Winners

• SunPower (NASDAQ:SPWR) +47.6% (+$2.94) to $9.07 after Lazard upgraded to “buy” from “neutral.”
• Ross Stores (NASDAQ:ROST) +7.97% (+$4.34) to $58.78 from announcement of bullish Q4 projections based on better-than-expected sales.
• Transocean (NYSE:RIG) +6.4% (+$2.96) to $49.20 after settlement was reached regarding the 2010 Deepwater Horizon accident. 

Yesterday’s Notable Losers

• Mellanox Tech. (NASDAQ:MLNX) -17.14% (-$10.49) to $50.70 after cutting Q4 revenue outlook. 
• Family Dollar Stores (NYSE:FDO) -12.96% (-$8.30) to $55.74 because Q1 earnings missed expectations and also from a downbeat outlook.
• Limited Brands (NYSE:LTD) -5.68% (-$2.69) to $44.71 from news of slower than originally anticipated same-store-growth.

Risk Taking and the Brain

A new field of neuroeconomics is emerging, which attempts to explain how humans manage risk and why they often make irrational decisions. In a study to examine the relationship between risk taking and brain function, Brian Knutson (Stamford) and Camelia Kuhnen (Northwestern) scanned the brains of investors while they made decisions. The scientists found that those with the biggest appetite for risk had increased brain activity in the nucleus accumbens (the part of the brain that lights up in animals when it finds food or in predator when it goes in for the kill) and also had a surge in feel-good chemical dopamine, which can cause risky behavior. On the other hand, more risk-averse investors showed increased activity in the anterior insula, which plays a key role in anxiety and pain (which occurs when sniffing a rotten egg or hearing a snake). What is there was a way to scan a trader’s brain before a company hired a new employee? Although it may seem like an invasion of personal privacy, it could be more efficient than a verbal interview. Deconstructing why investors get excited and understanding why they choose to make the decisions they do will help society design tools that help people make better choices, not only in the financial markets but in all aspects of human life.