The New York Times reports that Capital One Financial Corp. (NYSE: COF) and the lending arm of General Motors Co. (NYSE: GM) are offering credit to sub-prime customers and that HSBC Holdings plc (NYSE: HBC) and JPMorgan Chase & Co. (NYSE: JPM) “are among those tiptoeing again into subprime lending.”

Consumer advocates suggest that banks are once again preying upon people who are the least sophisticated when it comes to borrowing and who are the most in need of credit though among those most at risk of being able to make repayments. Lenders point out that current deleveraging has opened up the market for new credit. Lenders also note that new credit offers are being more carefully monitored than they were before the financial crisis.

If we are seeing the beginning of a new push to expand credit availability to sub-prime borrowers in the same way that credit exploded before 2008, that is not likely to turn out any better than it did before. But with stagnant wages, still-high unemployment, and a reduction in hours worked, a bit more credit availability could help keep the US economy on its slow-motion growth path.

Paul Ausick

China’s factory activity slows, as evidenced by the HSBC flash PMI of 48.1, a low reading. (Reuters)

A Brazilian court brings charges against Chevron (NYSE: CVS) and Transocean (NYSE: RIG) over an oil spill. (Reuters)

The inspector general at the Federal Housing Finance Agency finds fault with Fannie Mae and Freddie Mac for spending lavishly on an industry conference. (Reuters)

Royal Dutch Shell (NYSE: RDS-A) receives permission to drill for shale gas in China. (Reuters)

The Joint Committee on Taxation says the so-called Buffett bill would not raise as much money as anticipated as the rich would often find ways around the levy. (WSJ)

Deutsche Bank (NYSE: DB) changes the structure of its U.S. operation to skirt Dodd-Frank rules. (WSJ)

Hartford Financial (NYSE: HIG) to leave the annuity business. (WSJ)

Jim Skinner, CEO of McDonald’s (NYSE: MCD), to retire. (WSJ)

The U.S. is running out of storage facilities for natural gas. (WSJ)

Gary Pruitt, CEO of McClatchy (NYSE: MNI), will become the CEO of the Associated Press. (WSJ)

Verizon (NYSE: VZ) and Comcast (NASDAQ: CMCSA) defend the right of telecoms to buy spectrum from cable companies. (WSJ)

Microsoft (NASDAQ: MSFT) says China still blocks sales of some of its products, including versions of its Xbox. (WSJ)

The Consumer Financial Protection Bureau says student loans now total more than $1 trillion. (WSJ)

German politicians intend to balance its budget in two years. (WSJ)

Watson Pharmaceuticals (NYSE: WPI) will buy Actavis for $5.9 billion in a consolidation of the generics industry. (WSJ)

Morgan Stanley (NYSE: MS) and Citigroup (NYSE: C) may speed plans for the brokerage to take over Morgan Stanley Smith Barney. (WSJ)

Bernanke and Geithner praise the financial progress of Europe in testimony before Congress. (NYT)

Homebuilder stocks reach a two-year high as it appears the housing market may have stabilized. (NYT)

Alaska will support a $40 billion gas line project to transport liquid natural gas. (FT)

Jaguar may invest $3 billion in Chinese car company Chery. (Bloomberg)

The head of airline Emirates says more airlines will falter because of fuel prices. (Bloomberg)

Japan posts a trade surplus. (Bloomberg)

Douglas A. McIntyre

The U.S. Consumer Financial Protection Bureau will examine overdraft fees. (Reuters)

Apple (NASDAQ: AAPL) will hold its annual meeting with the company in the best shape in its history. (Reuters)

China and India to cut imports of Iranian oil. (Reuters)

Ford (NYSE: F) puts $3.8 billion into its pension funds. (Reuters)

Proview Technology will try to stop the sales of iPads in Shanghai as a part of its trademark disagreement with Apple. (Reuters)

The Business Software Alliance attacks Brazil and China for policies that undermine cloud computing. (Reuters)

Shares of Alibaba.com rise on news its parent will go private. (Reuters)

President Obama may drop the corporate tax maximum from 35% to 28% but kill a number of loopholes. (WSJ)

Citigroup (NYSE: C) may have to take a multibillion dollar write-down on its investment in Morgan Stanley Smith Barney. (WSJ)

Comcast (NASDAQ: CMCSA) to launch a competitor to Netflix (NASDAQ: NFLX). (WSJ)

The FHFA’s inspector general attacks legal fees for Fannie Mae and Freddie Mac, which have reached $100 million. (WSJ)

Rural regions have low population growth over the past decade due to a lack of new jobs. (WSJ)

Dunkin’ Donuts (NASDAQ: DNKN) and Starbucks (NASDAQ: SBUX) join the battle for India’s coffee drinkers. (WSJ)

Fitch cuts the rating of JCPenney (NYSE: JCP). (WSJ)

The Research In Motion (NASDAQ: RIMM) PlayBook adds new email applications. (NYT)

Greece has nine days to reach austerity goals. (FT)

PSA Peugeot Citroën and General Motors (NYSE: GM) may set a car-building alliance in Europe. (FT)

Floods in Thailand hurt Dell’s (NASDAQ: DELL) earnings. (FT)

Goldman Sachs (NYSE: GS) cuts its forecast for commodities prices but keeps those for oil and gold high. (Bloomberg)

Data from HSBC (NYSE: HBC) and Markit show contraction in the Chinese manufacturing sector in February. (Bloomberg)

Douglas A. McIntyre

In the Moody’s warning, Credit Suisse Group (NYSE: CS), Morgan Stanley (NYSE: MS), and UBS AG (NYSE: UBS) were put on notice that their credit ratings could be downgraded potentially by as many as three notches.  That is a very aggressive downgrade warning, and it now almost assures that a downgrade of one or two notches is almost certain.

Warnings of a two notch downgrade were handed out to Barclays PLC (NYSE: BCS), BNP Paribas, Credit Agricole, Deutsche Bank AG (NYSE: DB), Goldman Sachs Group Inc. (NYSE: GS) and HSBC Holdings PLC (NYSE: HBC). This seems to all but assure that at least a one notch downgrade could come on these.

Interestingly enough, Bank of America Corporation (NYSE: BAC) and Nomura Holdings, Inc. (NYSE: NMR) were “only” given warnings of a possible one notch downgrade.

Moody’s noted that these existing ratings just do not reflect the current market challenges.  Here are the pre-market trading indications on each, in New York trading indications:

• Credit Suisse Group (NYSE: CS) -0.7% at $25.36;
• Morgan Stanley (NYSE: MS) -2% at $18.58;
• UBS AG (NYSE: UBS) is down only $0.01 at $13.91;
• Barclays PLC (NYSE: BCS) is down 0.4% at $14.97;
• Deutsche Bank AG (NYSE: DB) is down 1.2% at $42.45;
• Goldman Sachs Group Inc. (NYSE: GS) is down 0.5% at $112.55;
• HSBC Holdings PLC (NYSE: HBC) is down 0.5% at $44.69;
• Bank of America Corporation (NYSE: BAC) is down 0.8% at $7.72.

Even the triple-leveraged Direxion Financial Bull 3X Shares (NYSE: FAS) is down ‘only’ 0.7% at $86.30 in the pre-market.

What is interesting here is that the move lower this morning is on the heels of major moves higher since the first of the year.  The downgrades seem assured on at least some level now, but the market is not really acting as though it is ready to panic.

Your email address

subscribe

terms and conditions

JON C. OGG

NEC to cut 10,000 workers. (Reuters)

Nintendo posts poor earnings and cuts forecasts. (Reuters)

Warren Buffett says higher taxes on the rich are a way to bring the burden on Americans back inline. (Reuters)

George Soros criticizes efforts to put austerity over growth in Europe. (Reuters)

Netflix (NASDAQ: NFLX) shares rise on news its subscriber base rose sharply. (Reuters)

Tokyo Electric Power will get a $13 billion bailout. (Reuters)

George Soros buys Italian bonds because of high yields coupled with deflation. (Reuters)

U.S. officials are looking at HSBC (NYSE: HBC) for money laundering. (Reuters)

German consumer morale reaches a 10-month high. (Reuters)

Creditors may accept a lower yield on Greek bonds to end negotiations to keep the nation out of default. (Reuters)

The International Monetary Fund says a halt to Iran’s oil flow would push crude prices up 30%. (Reuters)

Nintendo will have the new Wii in markets before the end of the year. (Reuters)

Strategy Analytics says Google (NASDAQ: GOOG) Android-based tablets have narrowed the sales gap with Apple’s (NASDAQ: AAPL) iPad. (Reuters)

SAP (NYSE: SAP) says it will do more to target Oracle (NASDAQ: ORCL) customers. (Reuters)

Public pensions have increased their investment in private equity, according to the Wilshire Trust Universe Comparison Service. (WSJ)

Roche’s offer for Illumina (NASDAQ: ILMN) is based on the belief that doctors will use genetic products on a more regular basis. (WSJ)

U.S. bond yields reached near record lows. (WSJ)

The U.S. Department of Agriculture releases data that show winters have been warmer recently. (WSJ)

A new Wall Street Journal poll shows better results for Obama. (WSJ)

Merkel says labor reforms and closer ties among EU nations were key to the success of austerity programs to close national deficits. (WSJ)

A drop in output shows the UK is closer to recession. (WSJ)

U.S. auto makers have returned to U.S. labor because of foreign exchange rates and low wages. (WSJ)

Samsung’s chip business is growing even faster than its cellphone division. (WSJ)

Farmers are planting more wheat despite droughts. (WSJ)

The Fed’s message is that a recovery may be years away. (NYT)

There is an oversupply of freighters, in part because it takes so long to make them. (NYT)

Citigroup (NYSE: C) says EU banks have raised $52.8 billion in new capital since the third quarter to meet regulatory demands. (NYT)

Hedge funds are dumping Greek debt. (NYT)

Apple thinks the Chinese market could sharply increase its sales. (FT)

Iran may block oil exports ahead of sanctions. (FT)

As EU-based banks keep cash on their balance sheets, more companies may default because of lack of capital. (Bloomberg)

Geithner says he will leave office after Obama’s first term. (Bloomberg)

Airbus begins to fix cracks in wings of its A380. (Bloombeg)

Ford (NYSE: F) may post its largest profit since 1998. (Bloomberg)

Douglas A. McIntyre

It has been generally assumed that manufacturing and exports are absolutely critical to China’s future GDP expansion. However, one concern about this advance is that the success of these businesses has caused widespread agitation for higher wages. Even President Obama recently said the price of Chinese labor would cause a return of manufacturing to America. It is not so simple. America does not have China’s manufacturing infrastructure, although it once did. The U.S. would need years to create the capacity. Nonetheless, wages have become a problem in China. Nothing solves that problem more than slower growth.

China’s central government will make money more available, as a means to cushion a slow economy. Access to capital will help the manufacturing sector build for the time when the global economy needs it, while current slow growth will cap wage increases. The formula is not as good as outright growth, but it is a reasonable bridge. Global GDP will not remain halting forever. In fact, consumer and business activity in the $14 trillion U.S. economy has already gained speed. That will not entirely offset problems in Europe, but it gives China a ready and improving market.

China is in the midst of a fairly serious contraction of its manufacturing sector, which has no precedent in recent years. But there are some silver linings that could keep the People’s Republic from a landing that is entirely hard.

Douglas A. McIntyre

IKEA posts a profit and grows in most regions of the world. (Reuters)

Greece and private creditors move closer to a debt deal. (Reuters)

Apple (NASDAQ: AAPL) says it will enter the digital textbook business. (Reuters)

IBM (NYSE: IBM) results show solid IT demand. (Reuters)

Angry Birds’ parent pushes back the date of its IPO. (Reuters)

The EC will decide whether to approve a Google buyout of Motorola Mobility (NYSE: MMI) by February 13. (Reuters)

Eastman Kodak’s (NYSE: EK) move into bankruptcy as a means to cut costs may not yield high value for its patents as well. (WSJ)

Credit Suisse (NYSE: CS) buys old AIG (NYSE: AIG) mortgage paper from the New York Federal Reserve. (WSJ)

AT&T’s (NYSE: T) new plan to raise data costs for subscribers may prompt some to switch to competitors. (WSJ)

HSBC’s (NYSE: HBC) Chinese PMI estimate shows slow manufacturing, with a 48.8 measurement compared to 48.7 in December. (WSJ)

Floods in Thailand do not dent Intel’s (NASDAQ: INTC) earnings much. (WSJ)

American homeowners finally begin to improve their property, according to IHS Global Insight. (WSJ)

China sets more deals with U.S. allies to strengthen its supply of oil. (WSJ)

The European Aviation Safety Agency says Airbus will do more safety inspections of its A380 superjumbo. (WSJ)

General Motors (NYSE: GM) says it is the largest car company in the world, but experts disagree on how to count affiliate sales. (WSJ)

The Energy Information Administration says exports of natural gas could drive U.S. prices up by 54% in 2018. (WSJ)

Google presses its effort in display ads, which could pressure Aol (NYSE: AOL) and Yahoo! (NASDAQ: YHOO). (WSJ)

General Electric (NYSE: GE) tries to improve its prospects, but its size and diversity may hurt that push. (WSJ)

Hedge fund investors pull more cash from the firms than they add in the last part of 2011. (WSJ)

Commerzbank, Banca Monte dei Paschi di Siena, and Spain’s Bankia must push to raise cash to meet regulations. (WSJ)

American Express (NYSE: AXP) and Capital One (NYSE: COF) earnings show consumers returning to the use of credit. (WSJ)

Dealogic says that companies have raised $44.2 billion this year — a record for the period. (WSJ)

Chris Dodd, the head of the Motion Picture Association of America, suggests that tech and content companies meet to explore their differences. (NYT)

Ireland says its economy will be troubled again this year as its tries to meet austerity goals. (NYT)

Italy’s banks borrow 50 billion euros from the European Central Bank. (FT)

International Monetary Fund’s Largarde warns that budget cuts linked to austerity could damage growth. (Bloomberg)

Douglas A. McIntyre

American Express Co. (NYSE: AXP) Reiterated Buy with $60 target at Argus.
Atmel Corporation (NASDAQ: ATML) Maintained Buy but cut target to $11 at Canaccord Genuity.
BlackRock Inc. (NYSE: BLK) Started as Buy at UBS.
Chevron Corporation (NYSE: CVX) Maintained Outperform but cut earnings estimates at Credit Suisse.
Continental Resources (NYSE: CLR) Cut to Hold with $79 target at Canaccord Genuity.
Entertainment Properties Trust (NYSE: EPR) Cut to Neutral at JPMorgan.
Equity Residential (NYSE: EQR) Cut to Neutral at JPMorgan.
France Telecom SA (NYSE: FTE) Cut to Underweight at JPMorgan.
HSBC Holdings PLC (NYSE: HBC) Cut to Underperform at BofA/ML.
Juniper Networks Inc. (NYSE: JNPR) Cut to Hold at Argus.
Lennar Corporation (NYSE: LEN) Cut to Market Perform at KBW.
Lincoln Electric Holdings, Inc. (NASDAQ: LECO) named as Value stock of the day at Zacks.
MarkWest Energy Partners (NYSE: MWE) named as Bull of the Day at Zacks.
Microsoft Corporation (NASDAQ: MSFT) Maintained Outperform but cut target to $34 from $35 at Credit Suisse; Maintained Hold and lowered estimates at Argus.
Oasis Petroleum (NYSE: OAS) Cut to Hold with $32 target at Canaccord Genuity.
SUPERVALU Inc. (NYSE: SVU) Maintained Neutral but cut target to $7 from $10 at Credit Suisse.

Your email address

subscribe

terms and conditions

JON C. OGG

It turns out that many stocks with high dividend yields are now more attractive than sovereign debt in the U.S. and abroad. Part of the allure, besides income or reinvestment, is that dividend stocks often hold up better than other investments during jittery markets. It is hard to imagine, but the high-yield utility sector was one of the top performers of the S&P in 2011. In some cases, half of an investor’s total return through time may come from dividends. Warren Buffett generally picks dividend-paying companies for Berkshire Hathaway Inc. (NYSE: BRK-A) after following some of the principles of Benjamin Graham.

The 24/7 Wall St. 2012 Model Dividend Portfolio includes the following stocks: American Electric Power Co., Inc. (NYSE: AEP); American Water Works Company, Inc. (NYSE: AWK); AT&T, Inc. (NYSE: T); General Electric Co. (NYSE: GE); Government Properties Income Trust (NYSE: GOV); Kimberly-Clark Corporation (NYSE: KMB); Senior Housing Properties Trust (NYSE: SNH); and Wal-Mart Stores Inc. (NYSE: WMT).

While exchange-traded products have been avoided in the past, recent trends merit a look at the open-end or closed-end mutual funds and ETF products as follows: SPDR Barclays Capital High Yield Bond (NYSE: JNK); JPMorgan Alerian MLP Index ETN (NYSE: AMJ); ALPS Alerian MLP ETF (NYSE: AMLP); and PowerShares Financial Preferred (NYSE: PGF).

Lastly, there have been some exits due to upside price performance: Altria Group Inc. (NYSE: MO); Digital Realty Trust Inc. (NYSE: DLR); Enterprise Products Partners LP (NYSE: EPD); and Kinder Morgan Energy Partners LP (NYSE: KMP).

We have described the features and outlook for each component of our Model Dividend Portfolio.

Gardner Denver, Inc. (NYSE: GDI) named as the Value Stock of the Day at Zacks Investment Research. HSBC Holdings PLC (NYSE: HBC) was named as the Bear of the Day and AGCO Corporation (NYSE: AGCO) was named as the Bull of the Day by Zacks Investment Research.

Warner Chilcott plc (NASDAQ: WCRX) lowered price target to $25 and Forest Labs Inc. (NYSE: FRX) target cut to $40 at Bank of America Merrill Lynch.

Windstream Corporation (NASDAQ: WIN) Started as Neutral at Piper Jaffray.

Rayonier Inc. (NYSE: RYN) and Reliance Steel & Aluminum (NYSE: RS) were added to the #1 (Strong Buy) List at Zacks Investment Research.  The Zacks additions to the #5 (strong Sell List are as follows: Agnico-Eagle Mines Ltd. (NYSE: AEM); Badger Meter Inc. (NYSE: BMI); Kellogg Co. (NYSE: K); and Sears Holdings Corporation (NASDAQ: SHLD). 

Molycorp Inc. (NYSE: MCP) is one where we said earlier in the week that the efficient market theory cannot be applied, and Zacks included it on the Strong Sell ratings list this morning to close out 2011.

JON C. OGG