U.S. EQUITIES WEEK AHEAD: Costco, 'Cliff' Wrangling, Fed Meeting

Date : 12/07/2012 @ 3:56PM
Source : Dow Jones News
Stock : Costco Wholesale Corp. (MM) (COST)
Quote : 173.42  1.14 (0.66%) @ 8:00PM
Costco Wholesale Corp. (MM) share price Chart

U.S. EQUITIES WEEK AHEAD: Costco, 'Cliff' Wrangling, Fed Meeting

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   By Ben Fox Rubin 

Stocks got a boost Friday as U.S. jobs growth was better than expected for November, though sluggish consumer sentiment data tempered investor enthusiasm. Despite the general positivity for the economy's momentum, fiscal cliff talks should continue to cast a shadow over markets.

   Quarterly Results from Costco, Teavana 

Only a few major U.S. companies are scheduled to report quarterly results next week, with Costco Wholesale Corp. (COST) being the biggest name on the list.

The wholesale-club operator is set to release its fiscal first-quarter report on Wednesday. In anticipation of potentially higher taxes next year, Costco last month approved a special dividend of $7 a share, which should cost about $3 billion and will be funded through debt.

Analysts are expecting higher earnings and revenue, as Costco has posted stronger monthly same-store sales through the latest period, with November's 6% increase easily beating market estimates.

Additionally, loose-leaf tea retailer Teavana Holdings Inc. (TEA), which Starbucks Corp. (SBUX) last month agreed to buy for about $620 million, is scheduled to report Monday.

Other companies slated to report are software firm Adobe Systems Inc. (ADBE), retailer Pier 1 Imports Inc. (PIR) and electronic-payments company VeriFone Systems Inc. (PAY).

   Fiscal Cliff Talks to Continue 

House Speaker John Boehner (R., Ohio) on Friday sounded a downbeat note about talks to avoid a so-called fiscal cliff, saying that no progress had been made.

Still, Mr. Boehner sidestepped a question about whether Republicans would go along with allowing the top individual rate to rise, but not all the way to the 39.6% rate demanded by President Barack Obama.

"There are a lot of things that are possible to put the revenues the president seeks on the table," Mr. Boehner said. "But none of it is going to be possible if the president insists on his position, insists on my way or the highway."

Mr. Boehner and Mr. Obama have been trying to find a way to avoid $500 billion in tax increases and spending cuts set to kick in January, though the discussions have been punctuated by a series of adversarial public comments from both Democrats and Republicans.

Mr. Obama has insisted that tax rates increase on high earners. Mr. Boehner has agreed to higher tax revenue, but only through closing tax loopholes. He says that higher tax rates would harm small businesses that report income through the tax forms of individual owners.

   A123 to Seek Approval for Sale 

A123 Systems Inc. (AONEQ) plans to seek bankruptcy-court approval Tuesday to sell itself to the winning bidder of an auction that began Thursday.

The government-backed maker of batteries for electric cars sought Chapter 11 protection in October with a deal in hand to sell its automotive-business assets to Milwaukee-based auto-parts manufacturer Johnson Controls Inc. (JCI). The deal included the Michigan factory for which A123 in 2009 received nearly $250 million in grants from the Department of Energy to construct.

However, bankruptcy laws generally require such deals to be tested at the auction block. A123 drew the interest of several bidders ahead of Thursday's auction, which was expected to last more than one day given the complexity of its business.

   Fed Meeting Part of Busy Week for Data 

A handful of reports will occupy the time of investors, who will also need to keep tabs on the Federal Reserve's two-day policy-setting meeting.

The meeting, on Tuesday and Wednesday, will also include a press conference with Chairman Ben Bernanke.

The Fed on Friday also said it will consider a draft proposal to impose tough new rules on foreign banks with large U.S. operations next week. The Fed posted a notice on its website announcing it would hold an open meeting next Friday to consider the foreign-bank rule.

Three price reports are on tap next week, and economists forecast the top-line numbers all will be held down by falling fuel prices.

Import prices will be reported Wednesday. The median estimate of economists surveyed by Dow Jones Newswires is that the import price index dropped 0.5% in November, reversing a 0.5% gain in October. Similarly, economists expect the producer price index, out Thursday, and the consumer price index, due Friday, to be held down by energy costs.

   SolarCity, PBF Energy IPOs to Launch 

Solar energy company SolarCity Corp. is expected to launch its initial public offering next week.

The company serves customers in 14 states--most around the East and West Coasts--and intends to expand internationally. SolarCity generates revenue from a mix of residential customers, government entities and companies such as Wal-Mart Stores Inc. (WMT) and Intel Corp. (INTC). Since its founding in 2006, the company has provided or contracted to provide systems or services on more than 33,000 buildings, it has said.

Independent petroleum refiner PBF Energy Inc. is expected to start trading next week, as well.

(Siobhan Hughes, Kathleen Madigan, Victoria McGrane and Jacqueline Palank contributed to this report.)

-Write to Ben Fox Rubin at ben.rubin@dowjones.com

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