Feb 4 2011

Dow Jones Industrial Average finished the

day on the positive area as the index settled Dow 12,062.26 +20.29 0.17%
at 12,062.26 or up 0.17%. Both S&P 500 S&P 500 1,307.10 +3.07 0.24%
and Nasdaq were also closed up by 0.24% Nasdaq 2,753.88 +4.32 0.16%
and 0.16%, respectively.

Violent clashes in Egypt were not enough to put a pressure on the market, while disappointing
result from MRK dragged the stock 2.72% lower. Data from the economic front showed
improving job outlook and productivity, as well as the strengthening ISM index for the non-
manufacturing sector. Factory orders were also reportedly up, albeit slower than its prior
month’s rate.

There was no economic indicator released on Wednesday but, on Thursday the jobless claims
report will be released along with productivity, ISM for non-manufacturing sector and also
factory orders. Friday will see the key nonfarm payrolls data; complete with the
unemployment rate and average hourly earnings data. A hint on NFP came from ADP
employment report which was released on Wednesday. The report showed private sector
added 187K of jobs to the economy, lower than the 247K jobs added in December. Still, the
January data could be considered on the strong end as well. NFP is expected to be at 140K
in January, up from 103K in December.

Elsewhere, Federal Reserve chief Ben Bernanke delivered his speech at National Press Club.
The Fed chief said that the economy needs more amount of jobs to recover from recession, and
while corporate profitability improved, companies need to hire more so that economy could
recover fully.

Today, the most-awaited US data, the nonfarm payrolls for January is expected for release.
The market expected the US economy to add 140K jobs in January, up from 103K in
December. Don’t forget that unemployment rate could complicate the number appraisal.
Unemployment rate is seen at 9.5%, up from 9.4% in prior month.

Corporate News
MRK reported Q4 EPS of $0.88 per share (outside one-time items), better than the
consensus of $0.83 per share. For the entire 2011, the company sees EPS to be around
$3.64-$3.76 per share, below the consensus of $3.82 per share. Revenue in 2011 is seen
to be growing from $46 billion (2010) by the low-to-mid-single digit percent range. The
market consensus however, is at $45.03 billion. Due to European austerity, US health
reform, and also Vorapaxar program, MRK withdrew its long-term EPS target. MRK’s
animal health division revenue were up to $815 million from $494 million achieved a year
earlier; consumer care revenue were also up from $149 million to $251 million; human
health revenue was higher as well, at $10.58 billion up from $9.07 billion a year earlier.
Strong growth was seen in Japan as revenue climbed 14% in FY10, driven by sales of
Januvia, Singulair and Zetia. The total sales of Singulair, Januvia, Remicade and Isentress
were reportedly up 15%.
 Feb 4 2011
MSFT was reportedly planning to issue 5-, 10-, and 30-year senior unsecured debt to
reward its shareholders. Proceeds from the sale will be available for expenditures, stock
repurchases, and/or even acquisitions.
VZ, who announced the sale date of its iPhone on February 10, announced stock buyback
worth of 100 million of shares on Thursday. Rival AT&T was said to counter VZ-AAPL
alliance by selling Atrix 4G. At the same time, VZ has also adopted the policy of adjusting
the data connection for heavy users to anticipate high data traffic.
BAC was said to sell its Balboa Insurance assets and liabilities to the Australian QBE
Insurance Group. BAC along with its affiliates is to obtained upfront cash of around $700
million. The rest of the net tangible equity of around $1.7 billion will be retained by BAC
over the next two years and will be available for redeployment during that period of
time.
According to Barrons.com, two of JNJ’s drugs are listed as candidates to receive
approvals from FDA this year. The first would be the hepatitis C drug telaprevir which was
developed by Vertex Pharmaceuticals with JNJ, and the second one is Xarelto, a product
coming from JNJ and Bayer.

Technical focus: MRK

Resistances 32.98 33.28 33.46 34.01 34.19

Supports 32.73 32.5 32.39 31.73 30.78
Outlook Negative
Strategy SHORT on upticks to $33.28, PT $30.78, Risk > 34.19
 Feb 4 2011

Dow 30 - Feb 3rd 2011

CSCO 1.34% 1 JNJ 0.30% 11 XOM 0.04% 21
BAC 1.33% 2 MCD 0.26% 12 DIS 0.02% 22
T 1.16% 3 MMM 0.23% 13 JPM 0.02% 23
PFE 1.11% 4 GE 0.19% 14 AA 0.00% 24
TRV 0.95% 5 PG 0.18% 15 BA -0.03% 25
HPQ 0.92% 6 DD 0.15% 16 CAT -0.16% 26
CVX 0.86% 7 IBM 0.14% 17 AXP -0.43% 27
VZ 0.61% 8 WMT 0.11% 18 KO -0.46% 28
KFT 0.59% 9 UTX 0.07% 19 MSFT -1.04% 29
HD 0.38% 10 INTC 0.05% 20 MRK -2.72% 30

Dow 30 - Month-to-Date - Feb 3rd 2011

PFE 5.21% 1 BAC 2.16% 11 INTC 0.51% 21
BA 5.10% 2 VZ 2.13% 12 AXP 0.35% 22
DIS 4.19% 3 CAT 1.98% 13 MCD 0.22% 23
AA 3.86% 4 TRV 1.76% 14 MMM 0.03% 24
CSCO 3.59% 5 JNJ 1.72% 15 HD -0.19% 25
HPQ 3.57% 6 T 1.71% 16 WMT -0.27% 26
XOM 3.42% 7 JPM 1.16% 17 MSFT -0.29% 27
GE 3.03% 8 UTX 1.13% 18 PG -0.36% 28
CVX 2.51% 9 IBM 0.94% 19 KO -0.45% 29
DD 2.47% 10 KFT 0.56% 20 MRK -0.81% 30

Dow 30 - Trailing Twelve Months (TTM) - Feb 3rd 2011

CAT 73.41% 1 KO 18.68% 11 KFT 8.13% 21
DD 54.00% 2 HD 17.63% 12 INTC 5.07% 22
CVX 34.59% 3 MCD 15.63% 13 WMT 3.42% 23
DIS 29.64% 4 AXP 13.98% 14 PG -0.60% 24
AA 29.40% 5 T 12.82% 15 JNJ -3.49% 25
GE 29.20% 6 BA 12.38% 16 MSFT -3.56% 26
IBM 28.60% 7 MMM 9.73% 17 HPQ -6.83% 27
XOM 28.37% 8 PFE 9.23% 18 CSCO -9.95% 28
VZ 25.75% 9 TRV 8.86% 19 MRK -10.79% 29
UTX 19.77% 10 JPM 8.32% 20 BAC -13.39% 30
 Feb 4 2011

Date Time Report Period Actual Forecast Previous

31-Jan 8:30 AM Personal income Dec 0.4% 0.4% 0.4%
31-Jan 8:30 AM Consumer spending Dec 0.7% 0.6% 0.3%
31-Jan 8:30 AM Core PCE price index Dec 0.0% 0.1% 0.1%
31-Jan 9:45 AM Chicago PMI Jan 68.8% 65.0% 66.8%
1-Feb 10:00 AM ISM Jan 60.8% 58.5% 58.5%
1-Feb 10:00 AM Construction spending Dec -2.5% 0.1% -0.2%
1-Feb - Vehicle sales Jan 12.6 mio 12.5 mio 12.5 mio
2-Feb 8:15 AM ADP employment Jan 187K - 247K
3-Feb 8:30 AM Jobless claims 1/29/2011 415K 418K 454K
3-Feb 8:30 AM Productivity 4Q 2.6% 2.2% 2.3%
3-Feb 10:00 AM ISM non-manufacturing Jan 59.4% 57.3% 57.1%
3-Feb 10:00 AM Factory orders Dec 0.2% -0.4% 0.7%
4-Feb 8:30 AM Nonfarm payrolls Jan - 140K 103K
4-Feb 8:30 AM Unemployment rate Jan - 9.5% 9.4%
4-Feb 8:30 AM Average hourly earnings Jan - 0.2% 0.1%

Upgrades & Downgrades

Rating PT
Company Code House Date
Prv Current Prv Current
Cisco Systems, Inc. CSCO Oppenheimer 3-Feb - Outperform $23.00 $25.00
JP Morgan Chase & Co. JPM S&P Equity Research 3-Feb Strong Buy Buy - -
Exxon Mobil Corp. XOM Oppenheimer 3-Feb - Outperform $90.00 $96.00

Disclaimer: This report is provided for information purposes only. It is not an offer to sell or to buy any
securities. This report has been prepared based on sources believed to be reliable, but there is no
assurance or guarantee regarding its completeness & and accuracy. The author accepts no responsibility or
liability arising from any use of the report.