April 15th 2011

BAC In Focus
No Dow components scheduled to report earnings on Thursday; but GOOG’s net missed the consensus,
sending it over 5% lower during the after-hours session. On the commodities market, the gold
regained its shine after Goldman Sachs knocked it down earlier this week. Worse-than-expected
jobless claims data was also a negative for the market and thus, positive for the gold. Goldman itself
weighed on the market as it is facing another trouble with the US lawmakers.

The Dow Jones Industrial Average edged 14.16 points higher or 0.12% to 12,285.15, the S&P 500
index nearly unchanged as it settled 0.11 points higher or up 0.01% at 1,314.52. NASDAQ
composite however, slipped 1.3 points to 2,760.22.

Spot gold price jumped $1.4% to end at $1,474.30/oz. while its June futures finished the day at
$1,472.40/oz. leaping $16.80/oz. Factors behind the gold rally were European debt crisis where
there have been talks regarding the need to restructure the Greek debt. Another positive catalyst
was the rising oil prices, a set-back in the interest rates hike expectation due to poor reading on
jobless claims data, and also the decline in the US dollar.

US light crude for May delivery advanced $1.00 to finish the day at $108.11 a barrel, partly
pushed higher by conflicts in Libya and following recent decline in the US gasoline inventory. London
Brent crude for May delivery shed 52c however, as it settled at $122.36.

In Europe, just today Moody’s Investors Service cut Ireland’s credit rating to the lowest investment
grade of Baa3 from Baa1 and attached it with NEGATIVE outlook. Yes, that means more cuts could
be in the cards.

Examining the lineup of the top gainers, we see KFT (+1.7%), KO (+1.53%) and MRK (+1.17%). All
are considered as defensive stocks. As AA missed on revenue, JPM had a portion of its net coming
from loan provision and that it missed revenue as well, the market seems to be losing confidence over
the current earnings season’s capability of providing positive surprises. Yesterday, GOOG not only
missed revenue, but it also facing rising operating costs and thus, sending it spiraling down after the
market digested the results.

JPM was at the bottom of the table with a loss of 2.77%, followed by HPQ which lost 1.87% and DIS
as it shed 1.63%. JPM was still under pressure due to its miss on Q1 revenue. Today, BAC will be next
in the firing line. AA slumped after earnings; JPM suffered the same fate as well as GOOG. So,
would BAC be the next victim?

1 .DJI 12,285.15 (+14.16 ● +0.12%) .SPX 1,314.52 (+0.11 ● +0.01%) .IXIC 2,760.22 (-1.30 ● -0.05%)
 April 15th 2011

Fed Watch
Richmond Fed President Jeffrey Lacker on Thursday said that even in an environment where
unemployment rate is high, inflation can still flare. Lacker pointed at the period of 2003 and 2004
when unemployment rate was high but inflation rose to 3% until 2007. The situation was rather similar
to current environment where hawkish Fed members are outnumbered by dovish ones. The Fed
remains accommodative in its monetary policy despite European Central Bank have started its
tightening cycle a while ago. China has been even more aggressive in stemming the inflationary
pressure by raising Reserve Requirement Ratio and interest rates. Just today, China’s CPI has been
reportedly up in March by 5.4% YoY, beating the consensus of 5.3% and prior reading of 4.9% in
February. Also reported was the Producer Price Index which was rising by 7.4% from a year ago,
also beating the consensus of 7.2%. Food prices dominated the rise as they rose 11.7%. Non-food
rose 2.7%.

In addition, Chinese economy grew 9.7% in Q1, slowing from 9.8% growth in Q4. Still, the market
had anticipated the economy to have grown by 9.5%. Added with soaring retail sales which soared
17.4% and rising fixed-asset investment by 25% YTD, the market is starting to price in another rate
hike in China.

Another central bank having dilemma on its monetary policy is Bank of England. With inflation at
more than twice its inflation target, the bank has been keeping its interest rates steady at 0.50%.

Corporate Highlight
BAC is set to release its earnings on Friday. Before the market opens, BAC is seen reporting net profit
of 27c on revenue of $26.69B. Analysts’ consensus ranges from 15c to 42c for net profit and
$24.24B to $28.81B for the revenue range. It is likely that BAC will have its net profit at par or beat
the consensus while missing the revenue expectations, similar to that of JPM’s. The improvement on net
profit is possibly coming from loan loss provision, just like JPM.

BAC is currently under pressure from regulatory side regarding its mortgage business. Recently, along
with other banks, US regulators urged the banks to conduct changes in their mortgage operations. In
turn, this would mean BAC won’t be able to conduct foreclosures after mortgages have been
modified. A month ago, while giving way to other banks to declare dividends and shares repurchases,
BAC’s dividend proposal was denied by the Federal Reserve. The victims of the bank’s improper
mortgage practices would also have to be compensated by BAC. Compensations and legal fees
always sap corporate money and not only that, they also hurt corporate image and investors’
sentiment.

2 .DJI 12,285.15 (+14.16 ● +0.12%) .SPX 1,314.52 (+0.11 ● +0.01%) .IXIC 2,760.22 (-1.30 ● -0.05%)
 April 15th 2011

Corporate News
BA joins Raytheon to work on a bid for US Army and Navy Air-to-Ground Missile contract.
DD won its legal fight over a lawsuit filed by Parkersburg which alleged that DD’s C8 has caused
harm to its residents. The court ruled that the chemical does not have the potential to harm the
residents, though.
Goldman said that DELL and HPQ PC shipments fell as Q1 PC shipments declined 3.2% YoY,
worse than Goldman’s forecast of 2% growth. April quarter is seen at risk for both DELL and
HPQ.
INTC is said to plan a joint platform with GOOG’s Android in Q3 as well as collaborating with
Asustek and Acer to launch netbook with price tags below $199. INTC however, has been
downgraded by Roth Capital from Buy to Neutral as PCs are currently cannibalized by tablets.
INTC eventually will lose sales as a result while ARM Holdings will be the benefactor of the
phenomena.
JNJ recalls (again!) 57,000 bottles of TOPAMAX due to odor. According to Washington Post,
Obama’s proposal on healthcare would require pharmas to provide rebates for drugs while
giving the Secretary of Health and Human Services the authority to cut Medicare spending if it
grows more than 1% beyond GDP rise.
JPM may not be the darling for some investors right now, but Goldman Sachs sees the stock as
having a significant upside potential. According to GS, JPM has a price target at $54, reiterating
its “Buy” stance on JPM.
KFT will sell its Gevalia coffee at more than 20,000 retailers beginning in August, going head-to-
head with Starbucks.
MSFT’s revenue estimate has been lowered by Barclays from $16.43B to $16.33B for Q3FY11.
EPS estimate has been kept at $0.57. Meanwhile, Credit Suisse estimates on the software giant
remains at OUTPERFORM with price target kept at $36. CS lowered MSFT’s March quarter
revenue from $16.6B to $16.3B with EPS estimates also lowered from 60c to 58c. PC shipment in
2011 has been revised down as well from 8.4% to 2.8%. For FY11, EPS estimate has been
lowered from $2.60 to $2.57. EPS for 2012 and 2013 have been revised down from $2.90 and
$3.33 to $2.81 and $3.25.
XOM has reached an agreement with Sinopec to supply 2 million tonnes of LNG from Papua New
Guinea each year. In another deal, XOM also agreed with PetroChina to supply 2.25 million
tonnes of LNG from its Gorgon gas field in Australia.

3 .DJI 12,285.15 (+14.16 ● +0.12%) .SPX 1,314.52 (+0.11 ● +0.01%) .IXIC 2,760.22 (-1.30 ● -0.05%)
 April 15th 2011

Stock Focus: Kraft Foods, Inc.

KFT
Last Apr 14th Resistances 33.00 33.84 34.98 37.77 38.18
$32.95 1.70% Supports 32.67 32.20 30.43 30.21 29.80
WTD MTD Outlook
4.04% 5.07% POSITIVE
POSITI
YTD 12-Month Price Tgt
4.57% 11.32% 34.98

KFT soared on Thursday, reaching the peak at $32.96, setting itself on track to hit September 2008’s
peak at $34.97. As indicators indicate, EMAs are rising, MACD is positive and rising, while RSI has
entered the OVERBOUGHT area. Here’s what may happen: KFT is hitting the first resistance at 33.00
before it pulls back, probably around $32.67 to $32.20 before it resumes its ascend towards
$33.84 and $34.98 afterwards. What could be the key hurdle for KFT? Commodity prices.

4 .DJI 12,285.15 (+14.16 ● +0.12%) .SPX 1,314.52 (+0.11 ● +0.01%) .IXIC 2,760.22 (-1.30 ● -0.05%)
 April 15th 2011

Price Performance - as of Apr 14th 2011

Code Last Dy WTD MTD YTD 12-Mos
AA 16.55 0.00% -7.65% -6.29% 7.54% 23.23%
AXP 45.88 -0.48% -0.86% 1.50% 6.90% -0.52%
BA 72.30 0.24% -1.59% -2.20% 10.79% -0.18%
BAC 13.13 -1.06% -2.60% -1.50% -1.57% -26.36%
CAT 107.58 -0.05% -2.04% -3.39% 14.86% 58.00%
CSCO 17.17 -0.46% -2.72% 0.12% -15.13% -36.24%
CVX 104.88 1.03% -4.36% -2.43% 14.94% 28.78%
DD 54.11 0.54% -2.33% -1.56% 8.48% 35.82%
DIS 41.02 -1.63% -1.77% -4.80% 9.36% 11.35%
GE 20.00 0.30% -0.94% -0.25% 9.35% 6.04%
HD 37.84 0.45% 1.01% 2.10% 7.93% 7.41%
HPQ 40.36 -1.87% -0.84% -1.49% -4.13% -22.34%
IBM 164.97 0.62% 0.56% 1.17% 12.41% 27.88%
INTC 19.58 -1.01% -2.20% -2.97% -6.89% -14.27%
JNJ 60.02 0.70% 0.94% 1.30% -2.96% -6.66%
JPM 44.97 -2.77% -3.99% -2.45% 6.01% 5.61%
KFT 32.95 1.70% 4.04% 5.07% 4.57% 11.32%
KO 68.31 1.53% 1.55% 2.97% 3.86% 27.80%
MCD 77.07 0.23% 1.35% 1.29% 0.40% 9.18%
MMM 92.94 0.09% -0.30% -0.60% 7.69% 4.82%
MRK 33.86 1.17% 0.56% 2.57% -6.05% -3.37%
MSFT 25.42 -0.82% -2.49% 0.12% -8.92% -16.76%
PFE 20.49 0.15% 0.15% 0.89% 17.02% 22.55%
PG 63.30 0.49% 2.26% 2.76% -1.60% 1.83%
T 30.29 0.36% -1.37% -1.05% 3.10% 16.23%
TRV 59.63 -0.50% 0.08% 0.25% 7.04% 17.52%
UTX 83.98 -0.27% -0.98% -0.79% 6.68% 12.05%
VZ 37.71 0.05% -0.03% -2.15% 5.39% 30.48%
WMT 53.50 -0.24% 1.83% 2.79% -0.80% -0.26%
XOM 83.44 0.34% -2.92% -0.82% 14.11% 23.12%

5 .DJI 12,285.15 (+14.16 ● +0.12%) .SPX 1,314.52 (+0.11 ● +0.01%) .IXIC 2,760.22 (-1.30 ● -0.05%)
 April 15th 2011

Analysts' Upgrades & Downgrades

Ratings Price Target
Code House
Previous Current Previous Current
INTC Roth Capital Buy Neutral - -
JPM FBR Capital Outperform Outperform $53.00 $56.00
n Reiterate n Upgrade n Downgrade n Initiation
US Economic Calendar
Date Time Report Period Actual Forecast Previous
12-Apr 8:30 AM Trade balance Feb -$45.8B -$42.9B -$47.0B
12-Apr 8:30 AM Import prices Mar 2.7% 2.0% 1.4%
12-Apr 2:00 PM Federal budget Mar - n/a -$65B
13-Apr 8:30 AM Retail sales Mar 0.4% 0.5% 1.1%
13-Apr 8:30 AM Retail sales ex-autos Mar 0.8% 0.7% 1.1%
13-Apr 10:00 AM Inventories Feb 0.5% 0.7% 1.0%
13-Apr 10:00 AM Job openings Feb 3.1M n/a 2.8M
13-Apr 2:00 PM Beige book
14-Apr 8:30 AM Jobless claims 9-Apr 412K 380K 382K
14-Apr 8:30 AM Producer price index Mar 0.7% 0.8% 1.6%
14-Apr 8:30 AM Core PPI Mar 0.3% 0.2% 0.2%
15-Apr 8:30 AM Consumer price index Mar 0.4% 0.5%
15-Apr 8:30 AM Core CPI Mar 0.2% 0.2%
15-Apr 8:30 AM Empire state index Apr 17.0 17.5
15-Apr 9:15 AM Industrial production Mar 0.6% 0.0%
15-Apr 9:55 AM Consumer sentiment Apr n/a 67.5

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.

6 .DJI 12,285.15 (+14.16 ● +0.12%) .SPX 1,314.52 (+0.11 ● +0.01%) .IXIC 2,760.22 (-1.30 ● -0.05%)