Since the stock market rally reached a pinnacle nearly two weeks ago, the Dow Jones Industrial Average has lost about 3.3% while the Standard & Poor’s 500 Index has fallen about 3.7%. And if this week’s earnings report come in below expectations, the rally that helped stock prices surge more than 50% could come to an abrupt end.

Fortunately, many of the companies set to report earnings this week are traditionally strong performers and for the most part, companies that have weathered the financial crisis. But not all of them have met Wall Street’s expectations.

The quarterly results for five companies in particular – Yum! Brands Inc. (NYSE: YUM), Alcoa Inc. (NYSE: AA), Costco Wholesale Corp. (Nasdaq: COST), Monsanto Corp. (NYSE: MON) and PepsiCo Inc. (NYSE: PEP) – will of particular interest to investors.

Yum! Brands Inc.

Scheduled to report today (Tuesday), the Louisville, Ky.-based Yum! will be one of the first companies to report its quarterly take.

As owner of the Taco Bell, Kentucky Fried Chicken (KFC) and Pizza Hut brands, Yum! is the world’s largest restaurant company. Even more impressive, the company has beaten the market’s consensus forecast in the last four quarterly reporting periods.

Analysts’ estimates for the quarter ending September 2009 range from a low of 52 cents a share to a high of 63 cents a share, with a consensus of $0.59 a share. Yum will lean heavily on its international business if it’s going to continue its trend of topping analysts’ estimates.

Yum! is a well balanced company with about 41% of its 2008 operating profit coming from the United States and the rest from overseas – particularly China.

By 2013, China will account for 40% of Yum’s operating profit – up from 28% in 2008 – while the United States and the rest of the world will each account for a 30% share, according to company projections.

KFC, in particular, has long seen its most robust growth coming from China, with less than 10% of its franchises on the mainland accounting for more than a quarter of the company’s earnings.

Yum! added 328 new restaurants in the second quarter, including 118 in Mainland China.

“Yum!’s global growth potential, consistent performance and track record of generating strong free cash flow give us the confidence and ability to return significant cash to our shareholders even in these challenging economic times,” said Yum! Chief Executive Officer David Novak.

An analyst with Credit Suisse Group AG (NYSE ADR: CS) earlier this week told Barron’s that Yum! shares deserve a better premium because of its large international footprint and ongoing reallocation of capital.

Yum! shares should trade at a premium to their peer group and could climb nearly 25%, a the analyst said.

Shares of Yum! surged 5.13% yesterday to close at $34.85.

Alcoa Inc.

Though its release comes a day after Yum’s, Alcoa’s quarterly report marks the unofficial start of earnings season.

Hit hard by the collapse of commodities prices and sluggish industrial demand, Alcoa has missed earnings expectations in three of the past four quarters. And the company’s latest earnings report will likely show that its struggles continued, albeit at a slower pace.

Alcoa is expected to report a net loss of 12 cents per share for the three months that ended in September. That’s down substantially from a profit of 37 cents a share in the same period last year, but would be a marked improvement on the 32 cents a share loss the company posted in the second quarter.

Indeed, Alcoa’s earnings will provide an important look at just how far global demand for industrial metals has come. Hopes are high, as Alcoa stock has surged more than 143% since mid-March.

Deutsche Bank AG (NYSE: DB) analyst Jorge Beristain has increased his rating of Pittsburgh-based Alcoa to “Buy” from “Hold” and increased his price target to $17 from $12.

The upgrade partially reflects Deutsche Bank’s higher price projections for base metals. The bank sees base metal prices climbing an average of 31% next year, on account of strong third-quarter “price surges” and increased demand from China, Beristain said in a note to clients.

“China’s seemingly insatiable appetite for industrial raw materials has led to record high imports in many metals and a consequent tightening in market balances,” he said.

Alcoa’s stock rose 4.68% in trading yesterday, to close at $13.42 a share.

Costco Wholesale Corp.

Costco is the largest membership warehouse club chain in the world by sales volume. That makes it an ideal choice for cost-conscious consumers. Costco has enjoyed seven straight years of earnings growth, but the company’s past two quarters have disappointed investors.

The third time might be the charm for the nation’s largest warehouse chain. William Blair & Co. LLC analyst Mark Miller last month upgraded the stock to “Outperform” from “Market Perform” and after the company stepped up sales in August.

Sales at established locations declined 2%, beating Wall Street expectations for a larger 5.7% decline.

“With the step-up in sales during August and positive takeaways from our meeting last week with [Costco Chief Financial Officer] Richard Galanti and [Vice President of Financial Planning and Investor Relations] Bob Nelson, we are more confident that sales and earnings could meaningfully surpass Street expectations over the next year,” said Miller.

Like Yum!, Costco could receive a significant bump from its overseas operations, as recent store openings in Asia have been strong and the dollar has weakened.

For the third quarter, the average analysts’ estimate is for a profit of 76 cents a share – a 17% drop from the 92 cents a share it earned in the same quarter last year.

Costco CEO Jim Sinegal said earlier this month in an interview with Motley Fool that he expects his company to turn around regardless of whether or not the economy experiences a quick recovery.

“We can always blame bad sales on weather and on economic conditions and everything else,” he said. “But when we have the right merchandise out on the floor, it sells. … [We] don’t like the fact that the [average customer] basket is down, but we certainly like the fact that the customers are coming back more frequently and, as things turn, they will start to buy again. Now it is on us to get the hot merchandise.”

Costco stock edged up 0.73% yesterday to close at $56.88 a share.

Monsanto Co.

As the world’s largest producer of genetically modified seeds, Monsanto is a closely watched biotech bellwether. Like Alcoa, Monsanto was hit in recent quarters by a drop in commodities prices, as well as a drop in demand for its products.

However, the company announced an acquisition, a partnership, and a divestiture in its fiscal fourth quarter. It is expected to squeeze out a one cent per share profit, compared to three cents per share loss in the same quarter last year.

Monsanto’s acquisition of WestBred LLC – a Montana-based company that specializes in wheat germplasm – will bring wheat into its seeds and traits portfolio, and its joint venture with Dole Fresh Vegetables, Inc. will put more genetically modified vegetables on Monsanto’s plate. Meanwhile, Monsanto’s divestiture of its global sunflower assets to Syngenta brought in $160 million.

The company also shed 9,000 employees in a bid to cut costs, and despite being heavily targeted by anti-trust groups and chief rival E.I. du Pont de Nemours & Co. (NYSE: DD), Monsanto insists it’s on track to more than double its 2007 profit by the year 2012.

“We have committed to using our technology to double yields in our three core crops – corn, soybeans and cotton – by 2030, while reducing our use of key resources by one-third per unit produced,” said Monsanto Chairman and CEO Hugh Grant. “Innovation has us well on our way to achieving this, with our most robust pipeline ever. We’re on the verge of an unprecedented technology explosion that will deliver the types of products growers want most – those that offer greater yield and value.”

By 2012, Monsanto expects its gross profit from its core seeds and traits business to be between $7.3 billion and $7.5 billion – about 2.5 times its 2007 level. Grant said this increase will be facilitated by the development of seven new “high impact technologies” that by 2020 will boost revenue by $3 billion.

Monsanto has reported better-than-expected earnings in the past three quarters, and at Monday’s close of $74.85 a share is an undervalued stock according to Morningstar.

“Monsanto is a fierce competitor that continues to dominate a market that it essentially created more than a decade ago,” said Morningstar senior analyst Ben Johnson. “Through its ongoing commitment to research and development and assertive capital allocation, the company has positioned itself to grow value for its shareholders over the long haul.”

PepsicCo Inc.

Of all the companies reporting this week, PepsiCo has generated the most buzz. Bullish speculators yesterday piled into PepsiCo call options after Deutsche Bank raised its earnings for the salty-snack-and-soda giant.

Call volume surged by nearly 700%, according to optionMonster.

Deutsche Bank raised its price target for PepsiCo shares, which closed yesterday at $60.85, to $70 from $66. The bank maintained its buy rating on the stock, and said shares have been negatively affected by an “unwarranted deal overhang” related to the company’s acquisition of Pepsi Bottling Group Inc (NYSE: PBG).

PepsiCo in August said it would merge with Pepsi Bottling, as well as invest in Russia, during the three months that ended in September, and is expected to post a profit of $1.02 per share – four cents per share less than a year ago. Revenue for the quarter is expected to come to $11.3 billion, about the same as last year.

PepsiCo has only missed expectations in one of the past four quarters, and by just two cents at that.

Source: The Five Stocks to Watch This Week

The St. Louis-based Monsanto said in June that its fiscal third-quarter earnings fell to $694 million, or $1.25 a share, from $811 million, or $1.45 a share, in the same period a year ago. Sales slipped to $3.16 billion from $3.54 billion last year. The company also said its annual earnings would likely be at the low end of its $4.40 to $4.50 a share forecast range.

That’s not very impressive for a company that last year posted record net sales of $11.4 billion for fiscal 2008, a 36% jump from fiscal 2007. But there’s also good news for Monsanto investors. Chairman and Chief Executive Officer Hugh Grant said last week that his company is poised to achieve its long-term goals by producing more efficient products and streamlining production.

“We have committed to using our technology to double yields in our three core crops – corn, soybeans and cotton – by 2030, while reducing our use of key resources by one-third per unit produced,” Grant said. “Innovation has us well on our way to achieving this, with our most robust pipeline ever. We’re on the verge of an unprecedented technology explosion that will deliver the types of products growers want most – those that offer greater yield and value.”

By 2012, Monsanto expects its gross profit from its core seeds and traits business to be between $7.3 billion and $7.5 billion – about 2.5 times its 2007 level. Grant said this increase will be facilitated by the development of seven new “high impact technologies” that by 2020 will boost revenue by $3 billion.

“These projects came to be through a disciplined investment in seed and biotech that is unmatched in the industry,” Grant said. “We consistently invest 14% to 15% of our total net sales for seeds and genomics in research and development for breeding and biotechnology.”

It’s true that Monsanto’s commitment to research and development have made it the dominant player in the market for genetically modified seeds. But Monsanto has become a victim of its own success.  It is currently locked in an ugly legal spat with its chief rival in the biotechnology E.I. du Pont de Nemours & Co. (NYSE: DD), which has led to accusations that Monsanto is a monopoly – an accusation that has drawn the attention of the federal government.

DuPont Gets Dirty

Conflict between the agribusiness arch-nemeses erupted earlier this year when Monsanto sued DuPont, and its subsidiary Pioneer Hi-Bred International Inc., for unlawful use of its proprietary “Roundup Ready” herbicide tolerant technologies in soybeans and corn.

DuPont doesn’t deny “stacking” soybeans with the Roundup Ready trait with its own Optimum GAT trait, but instead argues it is not violating Monsanto’s patent by doing so.

“We fundamentally disagree with Monsanto’s position that they can use their current trait monopoly to prevent the introduction of competitive seed products for U.S. growers,” DuPont spokesman Dan Turner told Reuters. “This is yet another example of Monsanto trying to flex its anti-competitive muscle in the market, by stifling healthy competition among seed producers that are looking to grow yields for those that matter most — the farmers,” he added.

The conflict escalated Monday, when Monsanto CEO Grant sent a letter to DuPont Chairman Charles O. Holliday Jr. accusing the company of a “serious breach of business ethics.”

“Your lobbying and communications that paint your company as a victim of limiting technology licenses is dishonest, disingenuous and downright deceitful,” Grant told Holliday in the letter.

Furthermore, Grant decried the use of “masked third parties” to “attack” Monsanto as
“misleading to the public and a serious breach of business ethics far beyond honest competitor behavior.”

It’s likely that by “masked third parties” Grant meant the Organization for Competitive (OCM) Markets, a nonprofit group that claims Monsanto controls 90% of the market for genetically modified seed. The Lincoln, NE-based organization claims to take on big agricultural companies in defense of small farmers and consumers, but it was recently revealed DuPont gives the group financial support.

“We’ve supported OCM for a number of years as we have dozens of organizations that are aligned with our belief around what’s in the best interest of our farmer customers,” DuPont spokesman Dan Turner told St. Louis Today. “However, we don’t disclose the amount that we give to OCM or any other organization.”

Turner couldn’t name any of the other organizations that DuPont supports, the paper said.

Is Monsanto Being Thrown Under the Anti-Trust Bus?

In July 2008, the OCM started the Crop Seed Concentration Project an initiative target specifically at Monsanto, which the group says controls 90% of the market for genetically modified seed, a figure Monsanto disputes.

“Monsanto’s effort to enforce licensing agreements and protect its patent rights has dramatically altered American agriculture,” the OCM says on its Web site. “Monsanto has filed more than 100 patent infringement lawsuits against U.S. farmers.”

The OCD’s crop concentration campaign coincides with U.S. President Barack Obama’s vow to enforce antitrust laws that were neglected by the Bush administration, and its national convention attracted the representatives from the Federal Trade Commission, the Department of Justice, and the Commodity Futures Trading Commission.

“For many farmers and consumer advocates, we understand that there are concerns regarding the levels of concentration in the seed industry–particularly for corn and soybeans,” Philip Weiser, the new Deputy Assistant Attorney General, said at the OCM gathering, which took place in Monsanto’s hometown of St. Louis, Mo.

Weiser said federal regulators are “committed to examining” the level of competition in several agribusiness sectors

The Department of Justice and the Department of Agriculture will have a series of “workshops” to “openly discuss legal and economic issues associated with competition in the agriculture industry,” said Christine Varney, the assistant attorney general in charge of antitrust issues at the Justice Department.

“Monsanto welcomes the opportunity to be an active participant in the discussion and looks forward to these workshops,” the company said on its Web site. “There have been unsubstantiated allegations of a lack of competition in the seed market for several years now. We’re confident an objective review will reveal competition is alive and flourishing in the seed market.”

The workshops are scheduled to begin in January.

Source: Monsanto Focused on Long-Term Growth, but DuPont Dustup Draws Attention from Regulators

• The U.S. Federal Reserve has opted to hold the federal funds rate at 0% to .25% and “continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period,” the central bank said in a statement yesterday (Wednesday). Information the Fed received since its last meeting in April suggests “the pace of economic contraction is slowing. Conditions in financial markets have generally improved in recent months.”

• As unemployment in the United States is expected to keep rising, the world’s largest economy may need another stimulus package, billionaire Warren Buffett said in a Bloomberg Televisioninterview. “It looks like we’re going to need more medicine, not less,” Buffett said. “We’re going to have more unemployment. The recovery really hasn’t got going.” Buffett, who like many economists sees the unemployment rate surpassing 10%, said the economy “hasn’t turned yet. There’s no telling how long it will take. It will happen.”

• The Methodist University Hospital Transplant Institute in Memphis, Tenn. confirmed a weekend Wall Street Journal reportthat said Apple Inc. (Nasdaq: AAPL) Chief Executive Officer Steve Jobs had a liver transplant. The confirmation came with the permission of Jobs, who has an “excellent prognosis.” The hospital did not say when the transplant took place, but The Journal puts the procedure at sometime in April, citing an unnamed source. Billionaire investor and Berkshire Hathaway Inc. (NYSE: BRK.A,BRK.B) Chairman and Chief Executive Officer Warren Buffett weighed in on the controversy on whether Jobs should have revealed his condition to investors in an interview with CNBC: “If I have any serious illness, or something coming up of an important nature, an operation or anything like that, I think the thing to do is just tell the American public, the Berkshire shareholders about it. I work for ‘em. Some people might think I’m important to the company. Certainly Steve Jobs is important to Apple. So it’s a material fact.”

• Although gas prices are significantly lower than they were at this time last year, fewer Americans will be traveling on July Fourth weekend, according to a survey by AAA. The auto club expects 37.1 million travelers, or 12% of the U.S. population to take a trip of 50 miles or more from home this year, a decrease of 1.9% from last year and a 12% decrease from 2007, months before the recession began. Factors such as the rising unemployment rate and sagging personal incomes are to blame for the drop in travel, AAA said.

• The world’s largest seed maker suffered a 14% drop in profit and disclosed plans to cut 900 jobs, blaming the deteriorating performance of its mainstay revenue source. Monsanto Co.(NYSE: MON) reported a net income of $694 million, or $1.25 per diluted share on revenue of $3.1 billion for the third quarter. That compares to a net income of $811 million, or $1.45 per share on revenue of $3.5 billion in the same quarter last year. Executives were not expecting a drop in performance of the herbicide Roundup, once a primary revenue source for the company. Several generic products hurt the prices for Roundup and profit on the product is expected to drop by half this year, Monsanto said. Shares for the company closed yesterday (Wednesday) at 76.16, down 3.9%.

• The Securities and Exchange Commission (SEC) voted unanimously to institute tough new rules for money market funds to help avoid a repeat of what happened when the collapse of the Reserve Primary Fund triggered a flurry of redemptions in the $3.6 trillion market. The proposal will prohibit money market funds from buying illiquid securities and requiring them to hold at least 5% in liquid securities such as cash. “These proposals are designed to increase the ability of money market funds to weather future economic storms,” said SEC Chairman Mary Schapiro. “The stability of money market funds in times of turmoil is enormously important both for investors and for the securities markets. The proposals also would improve the operations of money market funds and oversight of their investments during calmer times, which can further protect funds and increase public awareness of potential risks.”

• The worst recession in 60 years has taken its toll on everyone, including the millionaire’s club. According to a report from Merrill Lynch Global Wealth Management and consulting firm Capgemini, the number of people with assets of between $1 million and $30 million fell by 14.9%, BusinessWeek reported. The drop in millionaires represents the largest decline in the report’s 13-year history, said Ileana van der Linde, a principal with Capgemini. “We’ve never seen such a decline in all the years we’ve been doing the report,” she said. The recession has now reduced the cumulative wealth of the world’s millionaires by 19.5% to $32.8 trillion.

Source: Investment News Briefs Thursday, June 25, 2009

Monday
Earnings Announcements: Walgreens (WAG)

Tuesday
Economic Reports: Existing Home Sales

Earnings Announcements: Oracle (ORCL)

Wednesday
Economic Reports: Durable Orders, New Home Sales, FOMC Rate Decision

Durable Orders are expected to fall dramatically since last month. I am not sure if this is due to no more income tax refund checks to spend on big ticket items or not, but with Personal Spending for May expected to increase, a drop in Durable Orders is surprising.

New Home Sales are expected to climb this month, and after last weeks surprise in Building Permits and Housing Starts, I have a hard time trying to figure out the New Home Sales report. If I had to pick, I would expect the report to meet or beat expectations. Just a gut feeling.

The FOMC Rate Decision is announced at 2:15, and I don’t expect a change to be made to the current 0.0-0.25 percent rate

Earnings Announcements: Monsanto (MON), Rite-Aid (RAD),

Thursday
Economic Calendar: Q1 GDP Final

Expectations are for no revision to the first quarter GDP figure. At this point, I doubt there would be a surprise showing improvement. If anything, the report may show a tenth of a point or so larger contraction for the first quarter GDP.

Earnings Announcements: Con-Agra (CAG), Palm (PALM)

Friday
Economic Reports: Personal Income and Spending, Michigan Sentiment

As mentioned earlier, Personal Income and Personal Spending for May are both expected to show an increase. I guess the surprise is that the expected increase in spending is larger than the expected increase in income. With money tight for everyone, an increase in spending is quite surprising.

The Michigan Sentiment reading is expected to show no change since the last report, which is about what I expected. With rising gas prices, uncertainty about the economy and slowing  job losses, the consumer has many offsetting considerations.

Source: Will Housing Continue Its Uptick? GDP Could Scare The Market on Thursday

• More than $48 billion was withdrawn from emerging market funds in 2008, with the largest chucks of change pulled from funds tracking Asia, according to EPFR Global. An emerging markets bellwether, the MSCI Emerging Markets Index, dropped 54% last year, its worst performance since it was created in 1987, Bloomberg reported.

• Bank of America Corp. (BAC) sold 5.62 billion of its China Construction Bank Corp. shares, raising $2.83 billion. Based on the Construction Bank’s IPO price, Bank of America realized a profit of about $1.13 billion, Reuters reported.

• Bargain retailer Family Dollar Stores Inc. (FDO) closed its fiscal fourth quarter with a 14% rise in profit and raised its annual forecast, Reuters reported. The compact expects to earn $1.63 to $1.81 a share, up from $1.58 to $1.78, in its fiscal year ending August 29. It also expects sales, same-store sales and total sales to rise as well.

• Orbitz Worldwide, Inc. (OWW), an online travel agency, announced a new president and chief executive, and that it would institute more measures to save an additional $20 to $25 million annually. Barney Harford will replace Steve Barhart as CEO, The Wall Street Journal reported.

• Russia cut off all gas supplies to Europe through Ukraine yesterday (Wednesday) leaving more than a dozen countries struggling with dwindling energy supplies in the depths of winter, The Associated Press reported. “It is unacceptable that the EU gas supply security is taken hostage to negotiations between Russia and Ukraine,” said European Union spokeswoman Pia Ahrenkilde Hansen.

• Monsanto Co. (MON), the world’s largest producer of genetically modified seeds, closed up more than 17% yesterday (Wednesday) after the company reported that first-quarter profit more than doubled. Revenue jumped 29% to $2.65 billion from $2.05 billion.

• India’s Sun Pharmaceuticals Industries Ltd. said yesterday (Wednesday) that it’s secured U.S. Food & Drug Administration approval to sell a generic tablet version of the painkiller Vicodin. The U.S. market for branded and generic versions of that drug is worth $540 million. Sun has also received approval for generic versions of cholesterol-fighting Lopid, for Aredia, which is used to treat high blood calcium, and for the anti-allergent drug Phenargen, in multiple strengths, Reuters reported.

• Light, sweet crude for February delivery yesterday (Wednesday) tumbled 12%, or $5.95, to settle at $42.63 a barrel on the New York Mercantile Exchange. The drop was the mainly the result of a report from the Energy Information Administration said U.S. inventories of commercial crude inventories rose by 6.7 million barrels.

Source: Global Investing Roundups Thursday, January 8th, 2009

Tomorrow morning the Factory Orders report for November is released, and things might get better. The report is expected to show a decline, but not as large of a decline as the previous month. Whether or not this means that factories are starting to get more orders on a consistent basis remains to be seen, but anytime a decline is shrinking, it seems like a small victory.

The final report I wanted to touch on this week is the December Non-Farm Payrolls report. This will be the final report for 2008, and will allow us to look at the overall loss for the year. As it stands, the country has lost just over 1.3 million jobs this year. The expected loss for December is another 475k jobs, which will put us over 1.8 million jobs lost for the year. The scary thing is that the job losses have increased every month for the last four months, so December may be worse than expected. I remember back in mid-summer when some of us were wondering if we would see one million jobs lost this year. Now we are looking to nearly double that amount.

Earnings:
Wed: BBBY, MON

Thurs: BLK, MER

Source: Employment Data Dominates Calendar, Earnings Season Starts Again

• Symantec Corp. (SYMC) was upgraded to “overweight” from “neutral” by a JPMorgan Chase & Co. (JPM) analysts yesterday (Wednesday). “We are upgrading shares of Symantec… as the shares have fallen to a value less than what we believe the maintenance is worth, and investors are essentially getting the consumer business and any future enterprise license for free,” JPMorgan’s John DiFucci wrote, MarketWatch reported.

• Monsanto Co. (MON), one of the largest global sellers of seeds and agriculture products, said that it believes farmers will continue to be able to get credit, despite tight credit markets. “A farmer on solid financial footing should have no trouble gaining access to any credit they need to run their normal operations,” Monsanto Chief Financial Officer Terry Crews said in a conference call yesterday (Wednesday), Reuters reported. “There continues to be confidence in the availability of credit for farmers.”

• Despite criticism from the U.S. Congress and President George W. Bush, American International Group Inc. (AIG) is planning another high-priced broker retreat. The last such trip cost approximately $440,000. The President didn’t push for the bailout “to help top executives go to a spa,” White House Press Secretary Dana Perino said yesterday (Wednesday) at the daily White House briefing, Bloomberg News reported.

• Wells Fargo & Co. (WFC) and Citigroup Inc. (C) yesterday (Wednesday) agreed to extend their truce in the takeover battle for Wachovia Corp. (WB) The “litigation standstill” was extended until 8 a.m. EST time on Friday, Oct. 10. The truce began Oct. 6 and was scheduled to expire at noon yesterday.

• Pending home sales rose 7.4% from July to August, the National Association of Realtors said yesterday (Wednesday). The group said its seasonally adjusted index of pending sales for existing homes climbed to 93.4 – the highest reading since June 2007. The index registered an upwardly revised 87 in July.

• Light, sweet crude for November delivery fell $1.11 yesterday (Wednesday) to settle at $88.95 on the New York Mercantile Exchange. Crude fell as low as $86.05 earlier in the day, its lowest price since Dec. 6, 2007.

Source: Global Investing Roundups Thursday, October 9th, 2008

The FOMC Minutes from the September 16 meeting come out tomorrow afternoon at 2:00 P.M. and will provide an interesting read. Going into the weekend before the meeting, the odds that the Fed would cut rates stood at ten percent. By that Monday the chances the Fed would cut rates jumped to 90 percent. The next day, the Fed didn’t cut rates, and the market reeled. Many on Wall Street will be reading the minutes to try to determine why the Fed left rates untouched. In an interesting side note, the probabilities for the October Meeting are all over the board. Currently the probability of the Fed leaving rates unchanged stands at 20 percent, a one-quarter percent cut stands at 20 percent, a half-percent cut stands at 30 percent, and a full one percent cut stands at 30 percent. Or, another way of looking at it, there is an 80 percent chance of a rate cut of some sort.

On Tuesday, the Consumer Credit report for August is released, and the number is expected to grow significantly versus July. An increase of almost $1 billion is what the market expects. How the amount of credit extended to American consumers has grown in the face of the current credit fiasco is unknown, but it could also mean that Americans are more desperate than ever to pay bills and are maxing out their credit cards.

The Trade Balance report comes out on Friday, and the market expects a drop in the trade balance of almost $2 billion. This is most likely due to the strengthening dollar over the last five to six weeks. A smaller part could be due to a decrease in demand due to slowing consumer spending.

Earnings Reports:
Tues: AA, YUM
Wed: COST, MON
Thurs: CVX
Fri: GE

Source: The FOMC Minutes Will Get The Most Attention, Earnings Are Upon Us Again

Lilly has been distributing Posilac, which has been on the market since 1994, for Monsanto under an exclusive agreement and hopes this deal will enable it to expand its veterinary health offerings.

“You’d assume the controversy is part of the price, so there must be some other reason Lilly wants this asset,” Charles Anthony Butler, an analyst for Lehman Brothers Holdings Inc. (LEH) in New York, told Bloomberg News. “Maybe it’ll help them sell other products to those farmers. Animal health as a component for all pharma companies is a business they want to grow.”

While Lilly’s motives for the purchase remain unclear, it’s a smart move for Monsanto.

Growing consumer opposition to the use of hormones in dairy products has been swelling over recent years. Sales of such products are already outlawed in Canada and parts of the European Union.

In the United States, leading grocer The Kroger Co. (KR), coffee-chain Starbucks Corp. (SBUX) and the largest domestic milk processor Dean Foods Co. (DF) all refuse to use milk that contains rBST.

This recent sale is part of Chief Executive Officer Hugh Grant’s plan to sell-off Monsanto’s smaller animal units in order to concentrate company efforts on Monsanto’s popular crop-agriculture product lines, which include Roundup-brand herbicide, as well as modified corn and soybean seeds.

Divesting this controversial asset can only help Monsanto bolster its international reputation. Shares gained $5.22, or 4.63% yesterday (Wednesday), to close at $118.08.

Meanwhile, Lilly’s stock shed $0.39, a decline of 0.82%, to close at $47.41.

Source: Monsanto Sells Off Controversial Milk-Hormone Unit to Focus on Seed Product Lines

According to the report, US farmers will harvest almost 9% less corn this year than last. Offsetting the flood damage is the more than 1 million additional acres of corn planted in March.

Corn futures, which were about $7.60 last week, dropped to about $7.25 yesterday on the Chicago Board of Trade.

“The World Bank estimates that worldwide food prices have risen a scorching 83% over the past three years,” says Jason Simpkins in Money Morning. “And the president of the World Bank, Robert B. Zoellick, estimates that the spike in food prices could push 100 million people in low-income countries deeper into poverty, as food costs cut into already meager earnings.

“The biotech industry claims it can help. Research by the U.S. Department of Agriculture found that one variety of genetically modified corn yielded 9% more than conventional corn. The International Service for the Acquisition of Agri-Biotech Applications, which encourages developing countries to adopt GM technology, says GM cotton has increased yields by 50% in India.”

Is it time to consider investing in so-called “Frankenfoods?”

Jason thinks it may be….

Monsanto Co. (MON), whose insect resistant crops have gained widespread popularity among U.S. farmers, has pledged to double yields on corn and soy by 2030.

Genetically modified crops have become so popular in countries like the United States that they are actually cheaper and more readily available than their non-GM counterparts.

“We cannot get hold of non-GM corn nowadays,” Yoon Chang-gyu, director of the Korean Corn Processing Industry Association, told the International Herald Tribune.

According to Yoon, non-modified corn costs Korean millers about $450 per metric ton, up from $143 a metric ton in 2006. Genetically engineered corn costs about $350 per metric ton.

In 2007, 75% of the corn grown in the United States was genetically modified, up from 40% in 2003.

MON’s profit jumped 42% in 3Q thanks to a strong performance by its controversial herbicide Roundup. The company has upped its earnings guidance for the year.