Fed president Richard Fisher says there is no need for QE3. (Reuters)

Panasonic posts a quarterly loss of $2.6 billion. (Reuters)

Martha Stewart Omnimedia (NYSE: MSO) says a provision in its deal with Macy’s (NYSE: M) would let it move ahead with its new JCPenney (NYSE: JCP) deal. (Reuters)

The U.S. plans to spend $2.8 billion to upgrade the F-16. (Reuters)

The Senate will pass a bill that makes it illegal for members of Congress to engage in insider trading. (WSJ)

Glencore and Xstrata may merge because of the rise in value of natural resources. (WSJ)

Bank “rainy day” funds may be run down by a need to boost earnings. (WSJ)

PetroChina (NYSE: PTR) will buy into Canadian shale assets to ensure future supply. (WSJ)

Corporate profits have risen but the portion paid out in taxes has fallen. (WSJ)

The Government Accountability Office says many hospitals overpay for devices. (WSJ)

The Obama Administration will accelerate the approval of wind farms off the East Coast. (WSJ)

Facebook will push advertisers to use its Sponsored Stories to increase its revenue. (WSJ)

Google (NASDAQ: GOOG) will try to add to the security of its Android mobile-device software to combat hackers. (WSJ)

The head of Dow Chemical (NYSE: DOW) says Europe is in a recession. (WSJ)

New York Times (NYSE: NYT) profits fall as digital revenue fails to grow enough to offset print. (WSJ)

CME Group (NASDAQ: CME) will set an insurance program to help farmers after the collapse of MF Global. (WSJ)

A St. Louis Federal Reserve report shows that startup growth has slowed. (WSJ)

Excess natural gas supplies could cause a price crash in the spring. (WSJ)

The Securities and Exchange Commission allows big banks to avoid some sanctions. (NYT)

The National Institute of Economic and Social Research says the UK will be in recession this year. (NYT)

Greek tax reform has not overcome the nation’s inability to collect taxes. (NYT)

China may put money into the European Stability Mechanism/European Financial Stability Facility to help the region. (FT)

In testimony before Congress, Bernanke expresses concern about the growth of the economy. (FT)

Greece faces more trouble in its effort to remain in the eurozone as its rescue falters. (Bloomberg)

Deutsche Bank will not take European Central Bank loans in a move to protect its reputation. (Bloomberg)

Douglas A. McIntyre

Several media reports say that Johnson will lay off several thousand workers. The cuts make sense from a financial standpoint, but their announcement should have been handled better. Press leaks made it appear that JCPenney is desperate to cut costs, which is probably true. There is no need to telegraph the retailer’s problems, though. It could have shown the need to carefully cut costs as part of a broader strategy.

JCPenney set a deal to distribute Martha Stewart Omnimedia (NYSE: MSO) products in its stores. It took a 16.6% equity position in the media company for which it paid $38.5 million. Rival Macy’s (NYSE: M) says it has an exclusive arrangement for Stewart products that dates from 2007. JCPenney management, which includes Johnson, must have known of the risk of a Macy’s action. And Martha Stewart’s brand is aged. Her company is in trouble, which probably would have accelerated without the JCPenney infusion. Now, JCPenney has the distraction of a legal battle that involves its larger and more successful rival.

In addition to these tactical problems, JCPenney’s fortunes continue to erode. Same-store sales are expected to show erosion for the past quarter. Revenue dropped 2.3% in the five weeks that ended December 31, compared to the same period last year.

JCPenney will host a two-day discussion about its prospects on January 25 and January 26. It has been described by the company as an event at which senior management “will outline the Company’s plan to transform JCPenney into America’s favorite store.” The characterization of the event is grandiose. It implies that new management already has most, if not all, of the answers for stemming a long-term decline. The change actually will have to be very gradual. JCPenney’s sales and brand are too badly damaged. Recent events show that the task of fixing the company becomes more difficult with each passing week.

Douglas A. McIntyre

Macy’s (NYSE: M) sues Martha Stewart Omnimedia (NYSE: MSO) over a deal the media company did with JCPenney (NYSE: JCP) that may have broken an exclusivity agreement. (Reuters)

India’s central bank shifts it emphasis from inflation to growth. (Reuters)

Texas Instruments (NYSE: TXN) reports its chip demand has risen, but it will shutter two factories. (Reuters)

International Monetary Fund leader Largarde warns that the eurozone must promote growth in addition to austerity. (WSJ)

The European Union agrees to begin to embargo Iran oil. (WSJ)

The Organisation for Economic Co-operation and Development says in its “Going for Growth” report that nations should cut tax benefits for mortgages. (WSJ)

Dice Holdings (NYSE: DHX) reports that Silicon Valley engineer pay moved beyond an average of $100,000. (WSJ)

AT&T (NYSE: T) sets plans to give T-Mobile $1 billion in spectrum as part of a deal breakup pact. (WSJ)

A second bailout of Portugal is likely. (WSJ)

AMR, parent of American Airlines, tells employees that vested benefits will not be undermined if pension programs are ended. (WSJ)

Falling demand for coal will undermine industry profits. (WSJ)

Lee Enterprises will leave Chapter 11 with much of its long-term debt deferred. (WSJ)

Federal and state authorities are close to a deal with banks over mortgage violations that could total $25 billion. (WSJ)

The Energy Information Administration expects oil prices to reach an average of $146 by 2035. (WSJ)

A mortgage deal between banks and the government could cut one million mortgages by about $20,000 each. (NYT)

Eurozone finance ministers are closer to an arrangement to create a permanent bailout fund. (NYT)

Germany may back a permanent bailout fund for the eurozone in exchange from more stringent budget rules. (FT)

NYSE Euronext (NYSE: NYX) and Deutsche Boerse may be unable to block an European Commission veto of their merger. (Bloomberg)

S&P cuts Societe Generale’s ratings. (Bloomberg)

Douglas A. McIntyre

Shares had risen from under $26 to over $35 based upon Ron Johnson’s taking the helm.  Prior to that, J.C. Penney had been somewhat on life support compared to Macy’s Inc. (NYSE: M) and Saks Inc. (NYSE: SKS).  It did manage to do better than Kohl’s Corporation (NYSE: KSS).

The retail chain posted December same-store sales of 0.3% versus an expected drop of -0.1%.  Last year the company posted a same-store sales increase of 3.7%.  The outlook is as follows: “Due to the softer sales performance during the first two months of the quarter, the Company now anticipates that comparable store sales for the fourth quarter will be down slightly to last year. Earnings before one-time items identified below, are now expected to be in the range of $0.65 to $0.70 per share on a non-GAAP basis, reflecting lower sales and higher markdown activity than anticipated throughout the quarter.”  The consensus estimate had been $1.08 EPS.

Investors who missed getting in on this one may look at the news with a smile because it at least allows them a closer chance of getting in on a transformation in the making. Ron Johnson, the brains behind the retail effort of the hugely successful stores of Apple Inc. (NASDAQ: AAPL), has taken over as CEO.  For new investors, this is not a fourth quarter story.  This is not a story of guidance for the current quarter, and it may not even be a story of strong results in 2012. 

Ron Johnson is set to transform the look and feel of this company entirely.  The company has already signed a deal with Martha Stewart Living Omnimedia Inc. (NYSE: MSO) for branded merchandise for years ahead.  Johnson is going to unveil his new store design later this month (January 25) and here is a photo of the invite that was sent to me last night:

Penney’s shares are down about 6.2% at $32.75 and the 52-week range is $23.44 to $41.00.  This drop still only gets the stock back down to the prior consensus price target of $32.31 from Thomson Reuters.  Unfortunately, this turnaround story is not cheap against other retailers on a forward earnings valuation.  That happens to be the case in many turnarounds as investors sometimes pay a premium to get in line.

New investors and those on the sidelines may hope that the stock gets back into the high $20′s.  That may happen and it may not.  When you consider that Ron Johnson is likely going to revamp the company from the ground up and give a major facelift to bring the Apple-cool through the doors and when you consider that Apple’s playbook has been to “underpromise and over-deliver,” this drop may be a blessing for new and interested investors.

The good news is that the stock also offers stock options so investors van hedge their turnaround bets rather easily.  Options expire on January 20, 2012, but the February options make it easy to invest with providing downside protection of about only 5% risk in the next six weeks.  For a turnaround story under a great new retail leader, that might be a gift.

The other side of the coin is simple, even if hard to consider: What if Ron Johnson flops?  It is easy to argue that clothing, accessories and household products have no catalyst like Apple did a decade ago.

Stay tuned.

JON C. OGG

How to Annoy Macy’s. The Martha Stewart (NYSE: MSO) merchandising and license deal with JCPenney (NYSE: M) may face a lawsuit by Macy’s (NYSE: M). The joint venture includes a JCPenney investment that would leave it with 16.6% of Martha Stewart Living Omnimedia stock. The Wall Street Journal reports that the deal “appears to have annoyed Macy’s, which has sold an exclusive Martha Stewart line since 2007. In a statement Wednesday, Macy’s said it will review its Martha Stewart product line for ‘potential changes’ in light of ‘the proliferation of Martha Stewart-branded product in the marketplace.’” Martha Stewart and JCPenney are such weak companies that the venture probably will not help either anyway.

AT&T Does Not Surrender. AT&T (NYSE: T) Chief Financial Officer John Stephens told a conference that his company’s pursuit of a deal to buy T-Mobile for $39 billion has not ended. That will be news to the FCC, which has effectively blocked that transaction. The Justice Department may be shocked as well. It has set a suit to block the buyout. But Stephens says AT&T has access to the capital, and while it does, it must close a deal. AT&T has a powerful incentive. It owes T-Mobile parent Deutsche Telekom a $4 billion break-up fee if the buyout does not close. DT could use the money to strengthen T-Mobile’s position in the U.S. market, which would turn it into a more powerful competitor to AT&T, as well as Verizon Wireless and Sprint-Nextel (NYSE: S).

Grand Central Apple. Apple (NASDAQ: AAPL) continues it aggressive retail expansion. It will open a store in one of the busiest transportation hubs in America — Grand Central Station in New York City. Apple already has locations on Fifth Avenue and Soho. Grand Central offers such tremendous foot traffic as people come and go from trains and subways that it is hard to imagine the store will not do well. The stores compete with those of Apple’s wireless carriers and Apple’s own effort to sell its products online. But, as long as the demand for the iPhone 4S and iPad 2 remain at extraordinary levels, it hardly seem a concern about the number of outlets through which they are available.

Douglas A. McIntyre

France and Germany continue to press new eurozone treaty measures that would help trigger new financing for the region. (Reuters)

Japan says it is not aware of a $600 billion IMF plan for Europe. (Reuters)

The Department of Health blocks wider distribution of the morning-after birth control pill. (Reuters)

Japan’s government may set a bailout fund from crippled TEPCO. The fund may be as high as $19 billion. (Reuters)

Two large electronics retailers in China increase e-commerce efforts. (Reuters)

Nintendo says its lead game designer, Shigeru Miyamoto, will not leave. (Reuters)

AT&T (NYSE: T) says it will continue its campaign to buy T-Mobile. (Reuters)

A Wall Street Journal analysis shows the SEC allowed 50 money managers to avoid disclosing ownership in corporations. (WSJ)

Natural gas will replace coal as the primary means to generate electricity in the U.S. by 2025. (WSJ)

Regulators may decide U.S. banks do not have to set risk parameters based on credit rating agency opinions. (WSJ)

A deal between Deutsche Boerse and NYSE Euronext (NYSE: NYX) faces more regulator scrutiny. (WSJ)

Macy’s (NYSE: M) may try to block a deal between Martha Stewart Living Omnimedia (NYSE: MSO) and JCPenney (NYSE: JCP). (WSJ)

General Motors (NYSE: GM) says Volt fires were cause by welded parts in the cars. (WSJ)

Verizon’s (NYSE: VZ) 4G network not working in some areas. (WSJ)

Some central banks in Europe set plans in the event the eurozone does not survive. (WSJ)

New York State raises a tax on the wealthy. (WSJ)

Avon (NYSE: AVP) has a gap between earnings and free cash flow that limits its operations. (WSJ)

Discovery Communications (NASDAQ: DISCA) says its investment in the Oprah network continues to rise. (WSJ)

Pacific Sunware of California (NASDAQ: PSUN) will close 200 stores. (WSJ)

Southwest Air (NYSE: LUV) is close to a transaction to buy 100 Boeing (NYSE: BA) planes. (WSJ)

Pfizer (NYSE: PFE) has advanced approval of a new kidney cancer drug. (WSJ)

AstraZeneca (NYSE: AZN) says it will cut its U.S. workforce by 24%. (WSJ)

LivingSocial will try to raise $400 million and probably put IPO plans on hold. (WSJ)

Developers buy closed auto plants because of cheap property values. (NYT)

Boeing (NYSE: BA) workers approve a new four-year contract. (NYT)

Genetech and Novartis (NYSE: NVS) develop a drug that may slow the advance of breast cancer. (NYT)

Nokia (NYSE: NOK) may sell its luxury operations. (FT)

JPMorgan (NYSE: JPM) says it will increase lending in Europe. (FT)

Apple (NASDAQ: AAPL) loses a key trademark case in China. (FT)

McGraw-Hill (NYSE: MHP) to cuts jobs in its education unit. (FT)

A Bloomberg poll says investors expect a banking crisis in China. (Bloomberg)

Douglas A. McIntyre

The unofficial closing bells put the DJIA up more than 45 points to 12,195.61 (0.37%), the NASDAQ fell less than 1 point (-0.01%) to 2,649.21, and the S&P 500 rose 0.20% or more than 2 points to 1,261.02.

There were several analyst upgrades and downgrades today, including Google Inc. (NASDAQ: GOOG) started as ‘buy’ with a $725 target price at Canaccord Genuity. Other ratings actions today include JDS Uniphase Corp. (NASDAQ: JDSU) started as ‘buy’ with a $14.75 target price at Jefferies; Darden Restaurants Inc. (NYSE: DRI) cut to ‘hold’ from ‘buy’ at Argus; Chubb Corp. (NYSE: CB) started as ‘outperform’ at Credit Suisse; and LinkedIn Corp. (NASDAQ: LNKD) started as ‘buy’ with an $85 target price at Canaccord Genuity.

Here are today’s post-earnings news reactions with prices during the last half-hour of trading: SAIC Inc. (NYSE: SAI) is up 6.5% at $12.95; Vera Bradley Inc. (NASDAQ: VRA) is down about -1.5% at $36.62; Vail Resorts Inc. (NYSE: MTN) is up slightly less than -1% at $45.48; Village Super Market Inc. (NASDAQ: VLGEA) is down more than -3.8% at $30.49; and The Men’s Wearhouse, Inc. (NYSE: MW) is up more than 20% at $32.68.

Several other standouts from today are as follows…

The Talbots Inc. (NYSE: TLB) is up about 65% at $2.58. The women’s clothing store has received a takeover offer from private equity firm Sycamore Partners for $3.00/share, a 92% premium to the stock’s closing price yesterday.

The McClatchy Co. (NYSE: MNI) is up more than 52%, at $1.80. The newspaper company said that advertising rates have not fallen as badly in the first two months of the current quarter. For the first nine months of this year ad revenue declined -10%, compared with a decline of -5.6% in October and November.

Martha Stewart Living Omnimedia Inc. (NYSE: MSO) is up more than 32%, to $4.12. Retailer J.C. Penney Co. (NYSE: JCP) acquired a 16.6% stake in the lifestyle and media company today for $3.50/share, or $38.5 million. More coverage here.

First Solar Inc. (NASDAQ: FSLR) is up more than 4.6%, at 48.26. The company sold its 550-megawatt Topaz solar PV plant to a subsidiary of Berkshire Hathaway Inc. (NYSE: BRK-A) for an undisclosed sum. The plant had previously been valued at more than $2 billion. More coverage here.

Jaguar Mining Inc. (NYSE: JAG) is down -9.6%, at $6.55. The junior gold miner said yesterday that its founding CEO had resigned.

Great Basin Gold Ltd. (AMEX: GBG) is up about 17.8%, at $1.19. Another junior gold miner, Great Basin has finalized a $150 million term credit facility for 5 years at a rate 4% above LIBOR.

Stay tuned for Thursday. Here are some noteworthy events on the schedule (all times Eastern):

• 8:30 a.m. – New US unemployment claims report
• 10:00 a.m. – Wholesale trade report
• 10:30 a.m. – EIA weekly natural gas status report
• 4:30 p.m. – Federal Reserve balance sheet
• 4:30 p.m. – Money supply report

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Paul Ausick

MSLO has had prior product distribution deals with Macy’s, Inc. (NYSE: M) and also with K-Mart under Sears Holdings Corporation (NASDAQ: SHLD).  The Macy’s deal still has many key Martha Stewart products but Martha Stewart products have lost that Kmart deal and Martha Stewart has moved a home furniture, bath, paint,, kitchen and other efforts to The Home Depot Inc. (NYSE: HD).

Ron Johnson, the guru who was credited with launching the Apple Inc. (NASDAQ: AAPL) retail look, theme, and strategy, has now taken over as head of J.C. Penney and this is his first real public change of substance.  Customers will get to start entering Martha Stewart stores starting in February 2013. 

This is a 10-year commercial agreement where both companies will jointly develop an e-commerce site as well.  MSLO is expected to receive more than $200 million from J. C. Penney over the initial 10-year contract period.  Another feature of the pact is that J. C. Penney spent some $38.5 million for 11 million newly issued shares of Martha Stewart Living Omnimedia (at $3.50 a share) and it will now hold a 16.6% stake in MSLO and will have a seat on the board of directors.

J.C. Penney shares are down about 4 cents at $33.26 versus a 52-week trading range of $23.44 to $41.00.  The real win is in Martha Stewart Omnimedia shares, where they are trading up 28% at $4.06 versus a 52-week range of $2.77 to $5.49.

JON C. OGG

China says its annual rate of growth slowed between October and November. (Reuters)

Congress pressures the CFTC for stronger regulation after the MF Global incident. (Reuters)

Verizon (NYSE: VZ) will launch a content service to compete with Netflix (NASDAQ: NFLX). (Reuters)

Trouble in the solar industry causes consolidation and brings more Chinese companies into the market. (Reuters)

Verizon says it will not block the use of Google Wallet. (Reuters)

Carl Icahn to make a hostile bid for Commercial Metals (NYSE: CMC) for $1.73 billion. (Reuters)

Treasury Secretary Geithner will press EU finance ministers to stop the crisis in the region. (WSJ)

The chairman of the House Financial Services Committee to hold a vote on insider trading by members of Congress. (WSJ)

Yahoo! (NASDAQ: YHOO) wants better terms from bidders for a minority stake. (WSJ)

Private-equity firm Sycamore Partners makes an offer for Talbots (NYSE: TLB). (WSJ)

The EU is considering antitrust charges against e-book publishers. (WSJ)

Microsoft (NASDAQ: MSFT) will offer a product that competes with Apple (NASDAQ: AAPL) apps. (WSJ)

Spain may invest billions of dollars to clean up its banking system. (WSJ)

General Electric’s (NYSE: GE) financial arm may take retail deposits. (WSJ)

Bank of America’s (NYSE: BAC) Merrill Lynch & Co. agrees to pay $315 million to end a mortgage-securities lawsuit. (WSJ)

Free shipping could cost retailers more than the revenue they receive is worth. (WSJ)

JCPenney (NYSE: JCP) may buy a piece of Martha Stewart Omnimedia (NYSE: MSO). (NYT)

Citigroup (NYSE: C) to fire 4,500 people. (NYT)

Amazon.com (NASDAQ: AMZN) begins push into children’s books. (NYT)

India kills a retail reform proposal that would have let companies like Walmart (NYSE: WMT) own retail operations in the country. (FT)

Bank of America is less confident about the size of its dividend than most other large U.S. banks. (FT)

Large buyouts set in the 2006 to 2008 period face poor returns, according to Moody’s. (FT)

Geithner supports a plan by Germany and France to increase regulation of nations with large deficits. (Bloomberg)

BP (NYSE: BP) and Shell (NYSE: RDS-A) to restart oil operations in Libya. (Bloomberg)

Douglas A. McIntyre

More Bank Layoffs. Citigroup (NYSE: C) says it will cut another 4,500 jobs and take a $400 million charge. The action is part of a long, painful series of decisions to prune workers from the least profitable parts of the bank. Citi is not alone in this. Bank of America (NYSE: BAC) announced 30,000 layoffs two months ago. Investment bank business leader Goldman Sachs (NYSE: GS) also has announced job reductions. All of these firms are bracing for Federal Reserve stress tests early next year. As the Fed looks for weaknesses in the companies, one of its yardsticks will be costs. Banks have begun efforts to avoid that as an issue.

JCPenney and Martha Stewart. The New York Times reports that JCPenney (NYSE: JCP) will invest $36.5 million in Martha Steward Living Omnimedia (NYSE: MSO). This is an example of one drowning body grabbing at another. Martha Stewart has been hurt by its inability to improve its publishing division revenue. The company also has TV and licensing properties. Among them, sales have fallen recently and Martha Stewart has produced losses. JCPenney recently pushed out its CEO Myron Ullmann. He tried to improve the retailer’s fortunes by creating license arrangements with Liz Claiborne (NYSE: LIZ) and make-up company Sephora. None of these remedies worked. JCPenney has been unable to effectively compete with big-box retailers like Target (NYSE: TGT) or department stores like Macy’s (NYSE: M). JCPenney recently brought in former Apple (NASDAQ: AAPL) retail head Ron Johnson. There is no reason to think that he can turnaround such a troubled company. A license partnership and investment in troubled Martha Stewart is a poor beginning.

Slowing Chinese Economy. China has admitted its economic engine has slowed. Vice Commerce Minister Chong Quan said the government witnessed a pause in economic growth between October and November. PMI figures release last week demonstrated trouble in the manufacturing sector. There is little the People’s Republic can do to improve its fortunes. Large trade partners, especially Japan, the U.S., the UK and the EU all have struggled with their own GDP problems and unemployment. Austerity moves by governments in these regions likely will curb expansion further. Consumer activity by China’s newly created middle class is likely to flag as well. Wages probably will not increase as factory orders drop. The Chinese are savers more than spenders. An economic slowdown on the mainland will reinforce that habit.

Douglas A. McIntyre