Stocks Lower as Government Shutdown Continues! U.S. equities received a Yellen boost at the open but that was not enough to keep the averages in the positive territory as investors sold into the rally. Yellen’s nomination as Fed chief will still have to run the guantlet of confirmation hearings, which are more than likely to retain a partisan bias in the current climate despite her obvious qualifications. In Asia the N-225 rallied 1.03%, while the Shanghai Comp rose 0.62% and in Europe the Euro Stoxx 50 rose 0.4% with the Milan MIB continuing to outperform at over 1.0%. The Dow is 28-points firmer, S&P gained 4-points and NASDAQ is 8-points higher, all below earlier highs. In corporate earnings news, Alcoa earnings were supportive as well, boosting its shares 3%, while Costco same-store sales rose 3%. Yum! Brands tanked over 7% after delays were reported to its earnings rebound in China. Meanwhile, the dollar is stronger pushing gold and commodities lower. The budget deadlock has markets in a holding pattern. Due to lack of economic data, earnings will be driving the market in the next few days.
Men’s Wearhouse soaring, rejects takeover bid from JoS. A. Bank – Shares of men’s suits retailer Men’s Wearhouse (MW) are jumping after the company received an unsolicited takeover bid from its competitor, JoS. A. Bank (JOSB), which Men’s Wearhouse rejected. WHAT’S NEW: Men’s Wearhouse reported this morning that its board had rejected a $48 per share all-cash takeover offer from JoS. A. Bank. The board believes that the offer "undervalues Men’s Wearhouse and its strong prospects for continued growth and value creation," the retailer stated. Men’s Weahouse is confident that its strategic plan will create more value for shareholders than the takeover offer, stated the company’s CEO, Doug Ewert. ANALYST REACTION: In a note to investors, Stifel Nicolaus analyst Richard Jaffe wrote that the offer would create significant operational synergies, and enable the combined company to offer compelling products and great value across various price points. Specifically, JoS. A. Bank. would benefit from Men’s Wearhouse’s strong tuxedo rental business and its more fashionable merchandise, as well as Ewert’s "extensive expertise" in merchandising and operations, Jaffe contended. Jos. A Bank may also look to buy Destination XL (DXLG), the largest U.S. retailer of men’s Big & Tall apparel, added Jaffe, who kept a Buy rating on Jos. A Bank. WHAT’S NOTABLE: In June, Women’s Wear Daily reported that Jos. A Bank was bidding for Fifth & Pacific’s (FNP) Lucky Brand division, which specializes in denim. A financial player was also interested in Lucky, the website added. PRICE ACTION: In morning trading, Men’s Wearhouse soared 24.5% to $43.90, Jos. A. Bank climbed 7.5% to $44.80, Destination XL added 1.6% to $6.50, and Fifth & Pacific fell 1.5% to $25.25..
Yum! Brands sinks after results miss expectations – Shares of Yum! Brands (YUM) – which operates and franchises KFC, Pizza Hut and Taco Bell restaurants – are falling after the company reported weaker than expected third quarter results. WHAT’S NEW: Yum’s third quarter profits and revenue both came in below analysts’ expectations. Moreover, the company reported that its same-store sales in China, where it obtains about 75% of its revenue, sank 11% in September, versus the same period in 2012. Sales at KFC restaurants in China still haven’t recovered from worries about the company’s poultry supplies, which surfaced in China in December 2012, Yum! reported. As a result of the weaker China sales and a higher than expected tax rate, Yum! now expects its profits to fall by high-single to low-double-digit percentage levels during its fiscal year, versus its previous guidance for a mid-single digit decline. BULLISH TAKE: In a note to investors, Oppenheimer analyst Brian Bittner predicted that analysts would cut their estimates for Yum! and question the company’s 2014 prospects. However, he stated that the company reported lower than expected profits mostly due to its elevated tax rate. Additionally, Bittner still thinks that Yum’s China business can recover in 2014, and he advises long-term growth investors to buy the stock on today’s weakness. BEARISH TAKE: Yum!’s China business is being hurt by competition and more cautious consumers, as well as quality issues, Jefferies analyst Andy Barish wrote. He kept a Hold rating on the shares. TODAY’S PRICE ACTION: In mid-morning trading, Yum! fell $5.85, or 8.2%, to $65.45. OTHERS TO WATCH: Other large fast-food companies include McDonald’s (MCD), Burger King (BKC), Wendy’s (WEN), and Dunkin’ Brands (DNKN).