The market is down 73. The SFE Futures suggested a 2 point fall in the market this morning.

The Dow Jones closed up 44 – It moved in a 174 point range and closed up in a session dominated by economic news.

  • The Commerce Department said November retail sales increased by 2.1%, double the 0.6% rise economists had predicted. Consumers are still spending.
  • November’s PPI (Producer Prices – prices at the factory gate) shot up 3.2% – the biggest jump in wholesale prices in more than 34 years. Consensus was +1.5%.
  • Core PPI (excluding food and energy) was up 0.4%, the biggest increase this year. Consensus was +0.2%.

Financials struggled yet again; some are questioning the effectiveness of the Fed’s plan to inject more liquidity into the banking system. Lehman Brothers announced a 12% fall in 4Q income and closed down 1%. Morgan Stanley lost 2.1% and Merrill Lynch fell 3.7%. Washington Mutual down 3% after Bank of America cut their recommendation to “sell” from “neutral”. It also cut its target price by 46%. In other news, Honeywell closed up 5% after forecasting impressive earnings growth, JetBlue Airways put on 14% after German airline company, Deutsche Lufthansa, said it would buy a 19% stake in the company for $330m, and Dow Chemical finished 6.3% higher after agreeing to sell a 50% stake in 5 of its global businesses for around $9.5bn to a Kuwaiti company. The NASDAQ finished slightly lower.

Resources all down across the board today after metal prices took a hammering overnight. BHP down 60c to 4266c, RIO down 191c to 13929c. Metals all down overnight. Copper down 3.2%, Nickel down 2.3% and Zinc 3.6%. Aluminium down 1.7%. Zinifex down 34c to 1425c. Oil price down $2.06 to $92.35 on speculation the central bank won’t be able to prevent a slowdown in the US economy. Woodside up 20c to 4805c. Gold down $14.80. Newcrest down 57c to 3390c.

  • Caltex (CTX) down 5% after lowering its profit outlook for next year. It now expects after tax profit in the range of $435m to $460m compared to $430m announced last year and the $450-$500m previously predicted. Currency issues is to blame along with lower production. CTX last traded at 2024c.
  • Bank of Queensland (BOQ) has announced this morning that their offer of BOQ Perpetual Equity Preference Shares that closed on Dec 10. is heavily oversubscribed. The proceeds will be used to fund further growth in the business. BOQ up 16c to 1816c.
  • “Please Explain” – The ASX have asked AED Oil (AED) to explain why their share price yesterday went down the gurgler. The stock fell from 605c to 491c despite not issuing an announcement; it then recovered to finish around 541c. The stock is down 24% in the past month. AED down 31c to 510c.
  • According to today’s AFR, Origin (ORG) is in talks with CLP Holdings and will purchase TRUenergy for around $5bn. A deal would add pressure to the already struggling AGL Energy (AGK) but might face regulatory hurdles. The paper doesn’t expect anything to happen until after the privatization of electricity assets in NSW is complete. ORG up 4c to 897c, AGK down 11c to 1331c.
  • Goldman Sachs JB Were has released its outlook for 2008 and initial thoughts on 2009. They tell investors to “Expect terms of trade to peak in 2008 and a more challenging earnings environment for the next 2yrs”. They have a 2008 ASX 200 target of 6800 (now 6568) implying 3.5% growth (only). They say “While we remain constructive on the long-term growth potential from China, this investment thematic appears well owned and fully priced in the near term”. Top picks include ANZ, AUB, CRG, MCG, NCM, NWS, ORG, QAN, QBE and WES.
  • Bradken (BKN) up 4.8% to 927c today – it lost 35% of its market cap. yesterday after telling investors it expects net profit to be “relatively flat”. Were’s say the company needs to delivery the goods in the 2nd half of the year. “We remain cautious given the significant levels of growth required in 2H to achieve guidance”. They maintain their HOLD recommendation 960c target price.
  • Both Qantas and Flight Centre both had profit upgrades yesterday. What does that tell you? The whole of the travel market (probably because of the strong A$) is booming, underpinning the growth in the on line flight and accommodation booking sector. If they are doing well… so are Webjet (WEB) and Wotif (WTF). (Note: Author has Webjet tucked away in the Super Fund at the moment). QAN down 1c to 589c and FLT up 55c to 3155c. Credit Suisse has upgraded FLT earnings by 9.9% and 6.4% and upped their target price to 2945c from 2750c… but have an UNDERPERFORM recommendation.
  • According to Bloomberg, the Australian IPO index of 243 companies that went public in the last 12 months fell 2.2% in 2007. Not a good selling point for future firms contemplating a 2008 listing. RAMS Home Loans had a lot to do with the average. The stock is down around 80% on its listing price. Six of the 10 worst performers in the IPO index are unprofitable mineral exploration companies. Were’s believe Australian IPOs may lose money for the second straight year.
  • After the R&D Briefing yesterday ABN AMRO has a BUY on CSL with a 3750c target price. Now 3620c up 8c today.
  • JP Morgan maintain their OVERWEIGHT recommendation on Macquarie Group (MQG) and 11401c target price (40% above the current share price) – They say strong Asian stock market volumes, activity in MQG managed trusts, continuing strong M&A revenues and increased equity market volatility will all support the stock. MQG up 14c to 8129c.
  • Ruralco Holdings (RHL) goes 13c ex dividend today.

We answer a few more “stupid questions” in the newsletter today and have the list of the CHEAPEST stocks in the ASX 200 and those with the HIGHEST YIELDS along. Stupid Questions are proving to be immensely popular and informative. If you have a stupid question (related to the stockmarket) please email it to us and we will do our best to answer it if it is likely to be of interest to everybody.

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