Stocks have been strong all morning on the U.S. tax deal; the S&P 500and the Dow Industrials is on track to open at a 2-year high, joining the Nasdaq, the Dow Transports, the Russell 2000, and the S&P Midcap.
The deal keeps the dividend and the capital gains tax to 15 percent, and includes a 2 percent employee payroll tax cut and a 13-month extension of unemployment benefits. That's the good news. The bad news is the government will lose $450 billion in revenues next year.
1) Citigroup trading up 4 percent pre-open as the government announced a secondary offering of its remaining 2.4 billion (about $10.5 billion) common shares, a bit earlier than expected.
Why is the stock trading up on a big secondary? This removes a key overhang for Citi, and it could push up the timing for dividend reinstatements and buybacks.
And though it sounds big, it is only about 8 percent of the outstanding Citi stock. And there is an appetite for financials: Blackrock, traders note, was recently able to place $9.6 billion in stock in a single day. Also bear in mind that the S&P 500 will have to reweight Citi, which will create incremental buying from indexers.
2) Talbots will be the big loser this morning, down 22 percent (!) pre-open. They reported a better-than-expected bottom line, but comp store sales were poor (down 5.2 percent) and guidance was exceptionally poor, with Q4 guidance of a loss of $0.05 to a gain of $0.03; consensus is for a gain of $0.14. Top-line sales are now expected to be flat to down 1 percent, it was previously expected to be up 1 percent. CEO Trudy Sullivan said "the challenging and promotional environment will continue."
3) 3M , at an analyst meeting, gave an upbeat view for 2011, with organic sales volumes growing 5.5 to 7.5 percent, earnings of $6.17-$6.37 (excluding a $0.27 pension expense increase). Including the increase in pension expenses guidance is at $5.90-$6.10 (consensus is $6.20).
4) Autozone reported earnings above expectations ($3.77 vs. $3.40), domestic comp store sales were far better than expected, up 9.5 percent versus consensus of 5 percent. AZO is up 40 percent this year, as the do-it-yourself (DIY) market has taken off and sales have improved.
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