Actual finance blog

The St. Louis region is set to have its newest public company debut.

Post Holdings Inc., the branded cereal business unit of Ralcorp Holdings, will be spun off as a separate publicly traded company after markets close Friday. The spinoff was announced last July.

After the close of trading Friday, Post will replace Comstock Resources Inc. in the S&P MidCap 400 index.

Post’s brands include Honey Bunches of Oats, Grape Nuts, Raisin Bran and Pebbles cereals. Post Holdings is based at 2503 South Hanley Road in Brentwood.

Once the separation is completed, Post will trade Monday on the New York Stock Exchange under the “POST” ticker symbol. Bill Stiritz, chairman of Ralcorp, has been named Post’s new chairman and CEO. J. Patrick Mulcahy, Ralcorp’s vice chairman, will serve as chairman of the board at Ralcorp after the spinoff finalizes business card.

In filings with the U.S. Securities and Exchange Commission, Post signaled it will make changes to its marketing and pricing to grow sales and regain market share. Post’s market share in ready-to-eat cereals dropped from 14 percent in 2008 to 12 percent last year, according to a research note issued this week by Alexia Howard, an analyst at Sanford C. Bernstein & Co.

St. Louis-based Ralcorp Ralcorp Holdings acquired the Post cereals business from Kraft Foods in 2008 for $2.6 billion. Ralcorp is spinning off Post to concentrate on its private-label cereals, pasta and other baked goods. After the spinoff, Ralcorp will retain up to a 20 percent ownership stake in Post.

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Johnson & Johnson said Tuesday that fourth-quarter profit was barely a tenth what it made a year ago as a slew of charges for recalls, litigation and an acquisition dragged down income. But the health care giant’s revenue jumped last year, ending an unprecedented two-year decline.

After two tough years overshadowed by an embarrassing series of product recalls and other problems, the maker of Tylenol, prescription drugs and medical devices managed to beat Wall Street’s forecast for adjusted profit and came in just below its revenue forecast.

The company said net income was $218 million, or 8 cents per share, down from $1.94 billion, or 70 cents a share, a year earlier.

Excluding charges, net income was $3.13 billion, or $1.13 per share.

Revenue totaled $16.26 billion, up from $15.64 billion in 2010’s fourth quarter.

Analysts polled by FactSet, on average, expected earnings per share of $1.09 and revenue of $16.28 billion.

“We delivered solid results for 2011, built on the strong growth of our recently launched pharmaceutical products, and continued the steady momentum of new product approvals across all our businesses,” CEO Bill Weldon said in a statement.

Revenue fell 3.4 percent in the U.S., to $6.99 billion, but jumped 10.2 percent in foreign countries, to $9.27 billion. The U.S. decline was mostly due to an 8 percent drop in sales of prescription drugs.

J&J said it expects 2012 earnings of $5.05 to $5.15 per share, excluding special items. Analysts had expected $5.20 per share.

In morning trading, shares of the company rose 23 cents to $65.23.

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Swedish inflation-linked bonds may be understating the risk of price gains in the largest Nordic economy as most forecasters, including the central bank, predict inflation will outpace market bets.

The breakeven rate on Sweden

Strong corporate earnings reports and the lowest unemployment claims in almost four years gave investors more reasons Thursday to take risks on stocks, and the market continued its quiet but solid January climb.

The Dow Jones industrial average gained 45.03 points to close at 12,623.98. The Standard & Poor’s 500 index added 6.46 points to close at 1,314.50. Both averages are at their highest since July.

Volume was slightly above average. The market has been subdued this year: The S&P has moved up or down 1 percent or more only twice, and the Dow has moved 100 points only once, a 179-point gain on opening day, Jan. 3.

But the gains have been steady. The S&P has closed higher 12 of 14 days, and all three major averages have recorded healthy advances for the young year _ 3.3 percent for the Dow, 4.4 percent for the S&P and 7 percent for the Nasdaq composite index.

Investors appear ready to believe that the economic recovery is for real and getting stronger.

“The market is screaming loud and clear,” said Doug Cote, chief market strategist with ING Investment Management. “Prices have lagged fundamentals, and now they’re catching up.”

After the market closed, Google stock plunged more than 10 percent after its earnings per share badly missed Wall Street expectations. Intel and Microsoft rose slightly in after-hours trading after more encouraging reports.

In a sign of a bigger appetite for risk, investors moved money out of U.S. debt, a haven during the stock market’s volatile second half of 2011. The yield on the 10-year U.S. Treasury note increased to 1.98 percent from 1.90 percent Wednesday.

The market was led by industries that tend to perform best when the economy is getting stronger _ consumer discretionary stocks, financials and industrial companies.

Of the 10 categories of stocks in the S&P 500, the only one that lost considerable ground was utilities _ a safe play for investors during turbulent times and the best-performing category last year.

Cote said the market’s gains could accelerate as investors begin to focus more on economic fundamentals in the United States instead of worries about their exposure to risk.

And the economic news Thursday was good: The number of people seeking unemployment benefits plummeted last week to 352,000, the fewest since April 2008 payday loans guaranteed no fax. The decline added to evidence that the job market is strengthening.

U.S. consumer prices were unchanged last month, a signal inflation is under control. In the housing market, a third straight increase in single-family home building in December was offset by a drop in apartment construction.

France and Spain also held successful bond auctions, easing concerns about the debt crisis in Europe. As global risk factors subside, Cote predicts that markets will see “a strong snap-back rally.”

Bank of America rose 2 percent and Morgan Stanley rose 5 percent after reporting encouraging financial results. Bank of America returned to a profit in the last three months of 2011, while Morgan Stanley’s loss was much less than forecast.

Renewable Energy Group Inc., the nation’s largest producer of biodiesel, edged up 10 cents to $10.10 on its first day of trading. It was the first initial public offering of stock this year.

Trading was halted in shares of Eastman Kodak, the iconic photography company, after it filed for Chapter 11 bankruptcy protection. Kodak could not find a buyer for its trove of 1,100 digital imaging patents.

The Dow’s gain for the day amounted to 0.4 percent. The S&P’s came to 0.5 percent. The Nasdaq added 18.62 points, or 18.62 points, to close at 2,788.33.

Among other stocks in the news:

_ eBay Inc., the online auction company, rose 3.9 percent after it beat Wall Street earnings forecasts and gave a healthy outlook for the year.

_ Southwest Airlines Co. rose 3.1 percent after it said its fourth-quarter net income and revenue jumped. Southwest said it expects strong revenue in the first quarter too, based on passenger-booking trends.

_ Johnson Controls Inc., an auto parts and building equipment maker based in Milwaukee, fell 8.8 percent. Its profit and revenue fell short of Wall Street forecasts. It also cut its forecasts, blaming weaker auto production in Europe, a lower euro and poor demand for batteries.

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PARIS

South Korean President Lee Myung Bak said a new era in inter-Korean relations was possible if the North begins behaving sincerely, after the nuclear-armed nation accused Lee of

Italy’s borrowing costs fell for a second day Thursday but the country’s new premier said his government has more to do before it convinces financial markets it can manage the heavy debts that have made it the focus of the eurozone crisis.

Mario Monti said he was encouraged by bond auctions at which interest costs demanded by bond investors eased. He said his government of technocrats, in office for just a month and a half following the resignation of Silvio Berlusconi, was preparing a package of measures to get the Italian economy moving again, including efforts to boost competition and liberalize the labor market.

“We absolutely don’t consider the market turbulence to be over,” he said at a news conference after the Italian treasury tapped investors for around euro7 billion ($9.2 billion).

The most keenly awaited result from Thursday’s batch of auctions was the euro2.5 billion ($3.3 billion) sale of ten-year bonds at an average yield of 6.98 percent.

That’s lower than the record 7.56 percent it had to pay at an equivalent auction last month, when investor concerns over the ability of the country to service its massive debts became particularly acute.

However, the country’s borrowing rate on the key 10-year bond remains uncomfortably close to the 7 percent level widely considered to be unsustainable in the long run. Greece, Ireland and Portugal all had to request financial bailouts after their 10-year bond yields pushed above 7 percent. In the secondary markets, Italy’s yield continues to hover around the 7 percent mark.

The 17 countries that use the euro are struggling with a crisis over heavy levels of government debt in several countries. Fears of default on those debts mean that bond investors demand ever higher interest. If a country can no longer borrow affordably to pay off bonds that are maturing, it winds up needing a bailout or defaulting.

Markets had grown fearful over the past few months over Italy’s massive debt burden of euro1.9 trillion ($2.5 trillion). Next year alone, the eurozone’s third largest economy has some euro330 billion ($431 bill.

That means Italy has far to go before it convinces markets it will avoid a disastrous default that could cause another banking crisis and sink the European and global economies.

Italy also sold euro2.54 billion ($3.3 billion) of 3 year bonds at an average interest rate of 5.62 percent, far lower than the 7.89 percent rate it had to pay last month. It also raised euro803 million ($1.05 billion) in the 7-year auction at a rate of 7.42 percent and euro1.18 billion ($1.54 billion) in nine-year bonds at a yield of 6.7 percent.

Thursday’s results come a day after Italy raised euro10.7 billion ($14 billion) in a pair of auctions, again at sharply lower rates than those it was forced to pay just a month ago.

The sharp decline in Italy’s borrowing costs over the past couple of days suggests that commercial banks from the 17 countries that use the euro may have diverted some money they tapped from emergency loans from the European Central Bank last week to buy the bonds of heavily indebted governments.

It may also suggest rising investor confidence in Italy’s recent efforts to reduce its long-term debt through tax increases, pension changes and spending cuts.

Monti’s technocratic government got parliamentary approval last week for more spending cuts and tax increases intended to save the country from financial disaster. One of the most controversial aspects of the austerity package is reform of Italy’s bloated pension system.

Economists say the long term problem is the country’s weak growth, since stronger growth both increases tax revenues and shrinks the size of debt relative to the economy. European Central Bank head Mario Draghi has said Italy must undertake deeper economic reforms to improve its economic performance.

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The euro slid below $1.30 on Wednesday for the first time since the early days of 2011 and Italian borrowing rates rose ominously, as the optimism from a dramatic European summit last week fades with the realization that the continent’s underlying debt problems remain unsolved.

Italy’s last bond auction of the year Wednesday showed the heavily indebted country facing even higher rates to get investors to lend it their cash. The eurozone’s third-largest economy paid 6.47 percent interest to borrow euro3 billion ($3.95 billion) for five years at a bond auction, up from 6.30 percent just a month ago.

Higher rates are a sign that last week’s agreement to tighten the rules against eurozone governments piling up debt has failed to restore confidence.

That’s evident in the performance of the euro too, which has suffered an acute bout of selling since Friday’s deal. On Wednesday, it traded below $1.30 for the first time since January 12, hitting a low of $1.2968.

As experts from the different capitals start the laborious work of putting the deal into practice through a new treaty, the questions continued about the financial steadiness of governments, banks and the eurozone economy, which is showing signs of sinking back into recession. Industrial production fell a further 0.1 percent in October, yet another sign of weakness many think will lead to a recession that will only make repaying debt harder.

“The process of negotiating the final deal to suit all will only add to doubts about its relevance in the long run _ meanwhile the immediate crisis continues,” said Elisabeth Afseth, an analyst at Evolution Securities.

While praised as a step toward preventing another buildup of debt in coming years, last week’s deal does not provide a convincing resolution to the crisis. It does not reduce current debt levels and offered little reassurance that eurozone governments will be able to find the money they need to roll over those debts in the coming few months.

It did not convince markets there is a financial backstop big and flexible enough to support Italy and Spain, the latest focus of the two-year old debt crisis that began in October 2009 when Greece admitted its finances were much worse than it had previously said.

Greece, Ireland and Portugal have all needed bailouts as fear of default spread from country to country and drove up their borrowing rates, eventually cutting them off from bond markets.

The summit did come up with a commitment from EU governments to loan up to euro200 ($264 billion) to the International Monetary Fund, which in turn could help out the eurozone.

Leaders also agreed to activate a new euro500 billion ($659 billion) euro backstop fund, the European Stability Mechanism, a year ahead of time in July. But since the existing rescue funds, which have the same financing caps, would expire once the ESM comes into force, the overall amount of money available from the eurozone to help out struggling governments will remain the same payday loans no teletrack.

The fund is still considered too small to convincingly backstop Italy, which has euro1.9 trillion ($2.5 trillion) in outstanding debt. That leaves many economists saying that eventually the European Central Bank will have to step up its so-far limited purchases of government debt.

They say only a clear statement by the ECB that it will buy as much debt as needed to keep borrowing costs down can convince markets. That is because the ECB has the power to buy bonds with newly-created money.

The bank however has held off, with ECB head Mario Draghi saying governments must cut deficits and take steps to improve growth themselves to win back bond market confidence _ and not rely on central bank bailouts.

The current limited bond buys have eased some of the pressure on Italy, but the bank says they are only intended to steer short term interest rates, which is its main job.

Draghi must also contend with fierce opposition to printing money to fund large-scale bond purchase from Germany’s Bundesbank central bank, which is part of the ECB.

Bundesbank head Jens Weidmann is the leading critic of the idea, saying that creating new money would violate the bank’s legal mandate, since the EU treaty requires it to fight inflation as its first priority.

The debt treaty does provide some assurance governments are working together to address the euro’s flaws in the long-term. But it will not be signed until March at the earliest, and a text must first win approval from the 17 eurozone governments and nine others that the EU hopes will sign. Britain has said it will not.

The first draft of the new treaty is expected to be circulated among European capitals sometime next week, EU officials say, but governments will likely try to keep its content confidential until some of the more tricky issues have been resolved.

The biggest among these is how the new accord will interact with the existing Treaty of the European Union and whether it can rely on EU institutions, such as the European Commission and the European Court of Justice, to enforce the new budget rules.

Governments and national parliaments are also likely to watch closely how much sovereignty they are transferring to Brussels or their fellow euro members and whether their own constitutions will be affected.

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Gabriele Steinhauser is Brussels contributed to this report.

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Lowe’s is planning to stick by its decision to yank its ads from a reality TV show about American Muslims despite the growing opposition the home improvement chain is facing over the move.

California Sen. Ted Lieu put a statement out on Sunday that he is considering calling for a boycott of Lowe’s Cos., sparking criticism of the chain from both inside and outside of the Muslim community.

On social media web site Twitter, actor Kal Penn is began directing people to a petition on signon.org in support of the TLC cable network show, “All-American Muslim.” By Monday afternoon, there were about 9,200 signatures.

On Monday, U.S. Representative Keith Ellison of Minnesota, who is Muslim, released a statement condemning Lowe’s for choosing “to uphold the beliefs of a fringe hate group and not the creed of The First Amendment.”

And Democratic state Rep. Rashida Tlaib of Detroit, the first Muslim elected to the Michigan Legislature, voiced her concerns directly with the company. She wrote a letter to Lowe’s CEO Robert Niblock.

“I told them I was extremely disappointed that you give credibility to these hate groups,” Tlaib said. “People of Muslim faith are being attacked. It’s disappointing, disheartening.”

Meanwhile, Lowe’s, based in Mooresville, N.C., said it stands by its Sunday statement that it pulled the ads after the show became a “lightning rod for people to voice complaints from a variety of perspectives - political, social and otherwise.” The company also said that “dozens” of other advertisers pulled their advertising from the show.

“All-American Muslim” premiered last month and chronicles the lives of five families who live in and near Dearborn, Mich., a Detroit suburb with a large Muslim and Arab-American population. TLC spokeswoman Laurie Goldberg said “All-American Muslim,” which airs on Mondays on TLC and ends its first season on Jan. 8, has garnered a little over a million viewers per week.

“We stand behind the show All American Muslim and we’re happy the show has strong advertising support,” she said.

Lowe’s stopped running commercials during “All-American Muslim” after a conservative group known as the Florida Family Association e-mailed companies to ask them to stop advertising on the show. The group said the program is “propaganda that riskily hides the Islamic agenda’s clear and present danger to American liberties and traditional values.”

Florida Family Association, based in Tampa, Fla., said that more than 60 advertisers that it e-mailed, from Amazon to McDonalds, have also stopped advertising on the show. But so far, Lowe’s is the only major company to confirm that it pulled ads from the show.

Amazon and McDonald’s and other advertisers did not immediately return calls seeking comment.

Meanwhile, Atlanta-based Home Depot, which was cited by Florida Family Association as a company that stopped advertising, said Monday it never intended to run any ads during the show. But spokesman Stephen Holmes said one commercial ran “inadvertently and without our knowledge.”

The controversy highlights the fine line companies must walk when they select shows to advertise on.

Branding expert Laura Ries said Lowe’s made two mistakes. The first was advertising during a show that could be construed as controversial. The second was pulling advertising too quickly.

“For a big national brand like Lowe’s, they’ve always got to be incredibly careful when advertising during any show that could be deemed controversial,” she said. “Will it seriously damage the brand in the long term? Probably not. But it is a serious punch in the stomach.”

Overall, analysts said the furor is unlikely to damage Lowe’s brand in the long term.

“For a company that generates $50 billion in annual revenue, I don’t view this as something that will have a meaningful impact,” said Morningstar analyst Peter Wahlstrom. “I’m hopeful this blows over and I’m certain management is as well.”

Still, some worry Lowe’s ad flap could do damage to Muslims living in the Metro Detroit area.

Florida pastor Terry Jones held an anti-Islam rally earlier this year outside Dearborn City Hall after being barred from protesting outside a Muslim mosque in the city. A burning of the Quran in March at Jones’ church in Florida led to a series of violent protests in Afghanistan that killed more than a dozen people.

“Metro Detroit and Dearborn have been the focal point of a number of anti-Muslim movements,” said Dawud Walid, executive director of Council on American-Islamic Relations’ Michigan chapter. “There are organized forces in our society that want to marginalize American Muslims to the point where they don’t want to see any portrayals of Muslims that regular Americans can connect to.”

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Corey Williams in Detroit, Rachel Zoll in New York and Mitch Stacy in Tampa, Fla., contributed to this report.

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