3:21 pm Manufacturing Activities Continue to Strengthen in September

The ISM Manufacturing Index increased to 56.2 in September from 55.7 in August. That is the strongest reading since April 2011. The Briefing.com consensus expected the index to fall to 55.0. Production levels improved modestly as the related index increased to 62.6 in September from 62.4. After reaching its highest point since April 2011, the new orders index fell from 63.2 in August to a still elevated 60.5 in September. Future production trends will continue to be highly reliant on new orders growth as the level of backlogs contracted for a fifth consecutive month. The Order Backlog Index, however, did manage a slight improvement as the index increased to 43.0 from 42.5. The Employment Index increased to 55.4 in September from 53.3 in August.

09:49 am S&P Consumer Discretionary Index +0.43% and in line with broader market

The consumer discretionary group is in-line with the broader market in early trade. The retail group is also in the green with the Retail HOLDRS Trust (RTH) 0.5% and the SPDR S&P Retail ETF (XRT) 0.5%.

 Trading higher following earnings/guidance: WAG +3.7%. Trading lower following earnings/guidance: DMND -6.4% Other notable mentions: Leaders: JCP 1.2% (discloses its proceeds before expenses from offering of 84 mln shares of common stock was $786.24 mln, downgraded to Hold at Argus), AMZN 1.3% (creating 70,000 full-time seasonal jobs in the U.S. to fulfill holiday orders), TIF 1.1% (Tiffany & Co's $326 mln Tokyo building has been sold to Softbank founder, according to reports), PNRA 0.6% (higher despite Barron's profiles cautious view on Panera Bread), SWHC 0.6% (completes $100 million stock repurchase, authorizes additional $15 million)... Laggards: RH -2.8% (management is scheduled to present tomorrow at 10:25 AM), RUE-0.5% (Dealbook discusses how the RUE LBO deal could not go through ), WMT -0.5% (announces new large-scale centers dedicated to filling online orders)

 Analyst related: Upgrades: DECK 2.8% (upgraded to Buy from Hold at Canaccord Genuity), FLWS 1.6% ( upgraded to Buy from Hold at Brean Capital), UA 2.1% ( upgraded to Neutral from Underweight at JP Morgan; tgt raised to $77), NKE flat (upgraded to Buy at Argus)... Downgrades: RRGB -2.5% BWLD -0.8% DFRG -3.4% FRGI -2.5% and TAST -0.7% (downgraded to Outperform from Strong Buy at Raymond James), FINL -1.6% (downgraded to Sell from Neutral at Goldman).. Misc: OWW -1.1% (initiated with a Sector Perform at RBC Capital)

07:46 am Merck shares little changed following workforce reductions/cost savings annoucements

Merck (MRK $47.70 +0.09) announced a global initiative to sharpen its commercial and R&D focus. The multi-year initiative will enable Merck to better target its resources behind those opportunities that have the potential to deliver the greatest return on investment, including bolstering its pipeline and implementing a more agile operating model, with a significantly reduced, more flexible cost structure.

Restructuring highlights:

• The co expects to realize approximately $2.5 billion in annual net cost savings by the end of 2015 and estimates that $1.0 billion, or 40 percent, of the savings will be realized by the end of 2014.
• The company anticipates that the substantial majority of savings will come from marketing and administrative expenses and R&D. These savings are off of the company's full-year 2012 expense levels.
• By the end of 2015, the workforce reductions, combined with pending, previously announced reductions of ~7,500, will result in a decrease of about 20 percent in Merck's total global workforce of 81,000 employees.
• Total pre-tax costs for the new restructuring program are estimated to range between $2.5-3.0 bln. The co estimates that ~2/3 of these costs will result in cash outlays, primarily related to separation expense, and ~1/3 are non-cash, primarily related to accelerated depreciation of facilities to be closed or divested.

Guidance reaffirmed:

• The company reaffirmed guidance for fiscal year 2013 with EPS of  $3.45-3.55 versus which is line with expectations.
• The company expects to record charges relating to the new restructuring program of approximately $900 million to $1.1 billion in 2013, a majority of which will be recorded in the third quarter.

07:26 am Lexicon shares soar 21% following positive results from Type 2 diabetes drug

Lexicon Pharma (LXRX $2.90 +0.52) announced that LX4211 successfully met the primary endpoint of reducing post-prandial glucose, in a study of patients with type 2 diabetes and moderate to severe renal impairment. Reducing elevated post-prandial glucose, high blood sugar levels after meals, is a key objective of diabetes therapy. In a placebo-controlled, proof-of-concept study, LX4211 provided clinically meaningful and statistically significant reductions in post-prandial glucose in diabetes patients with moderate to severe renal impairment.

Importantly, these effects were maintained in a sub-group with the most advanced renal impairment, pre-defined as those with glomerular filtration rate less than 45 ml/min/1.73 m2. LX4211 also produced significant elevations in GLP-1, a hormone involved in control of glucose and appetite. Renal impairment occurs in approximately 30% of patients with type 2 diabetes and represents a major unmet medical need with limited treatment options. In this multicenter study, 30 patients with poorly controlled type 2 diabetes and moderate to severe renal impairment were randomized to either placebo or a 400 mg dose of investigational drug LX4211 taken orally once per day before breakfast.

Patients' post-prandial glucose was measured after a standardized meal both at baseline before treatment and after one week of therapy. In addition to achieving the primary efficacy objective of post-prandial glucose reduction, there were no serious adverse events observed in the study and no discontinuations of LX4211 due to adverse events. Lexicon plans to present full results of the study at scientific congresses in 2014.

07:23 am Hyperdynamics shares plunge 9% following news of DOJ investigation

Hyperdynamics (HDY $4.01 -0.41) announced that in September 2013 it received a subpoena from the United States Department of Justice (DOJ) requesting that the Company produce documents relating to its business in Guinea. In 2006, a Production Sharing Contract was signed by the Company and the government of Guinea granting rights to an oil and gas concession offshore Guinea. The Company understands that the DOJ is investigating whether Hyperdynamics' activities in obtaining and retaining the concession rights and its relationships with charitable organizations potentially violate the U.S. Foreign Corrupt Practices Act or U.S. anti-money laundering statutes. The Company has retained legal counsel to represent it in this matter and is cooperating fully with the government. The Company is unable to predict when the investigation will be completed, what outcome may result and what costs the Company will incur in the course of the investigation.

07:21 am Diamond Foods shares fall 7% following disappointing outlook commentary

Diamond Foods (DMND $21.72 -1.83) reported fourth quarter earnings of $0.09 per share, excluding non-recurring items, which is better the expected, while revenues fell 10.8% year/year to $199.8 million, in line with the pre-announcement range of $196-201 million.  

Adjusted EBITDA was $24.6 mln compared to $21.8 mln in the prior year period, an increase of 12.5%. EBITDA is a non-GAAP financial measure. Please refer to the tables in this press release for a reconciliation of all non-GAAP financial measures.Co reported Q4 Gross margin was 26.6%.  

"We remain intently focused on these productivity initiatives to help support our future brand innovation and to address potential commodity headwinds in fiscal 2014. In addition, we believe the proposed settlement of the securities class action lawsuit is an important first step in our ability to normalize our capital structure."  

Outlook: In the first quarter, the Company expects to face significant sales and contribution headwinds including costs associated with the Emerald re-launch and lower walnut supply. Despite expected increases in tree nut costs, fiscal 2014 is expected to be a year of earnings improvement as additional benefits from the execution of the multi-year turnaround strategy are realized.

07:20 am Paychex shares little changed following better than expected earnings

Paychex (PAYX $40.34 -0.30) reported first quarter earnings of $0.44 per share, excluding non-recurring items, which is better than expected, while revenues rose 5.1% year/year to $607.9 million which is slightly better than expected The outlook for the fiscal year ending May 31, 2014 is unchanged. HRS revenue growth is expected to remain in line with recent experience. Payroll service revenue 3-4%. HRS revenue 9-10% Total service revenue 5-6% Net income 8-9% Operating income, net of certain items, as a percent of total service revenue is expected to be approximately 38% for fiscal 2014. Net income growth for fiscal 2014 is expected to benefit from a strong comparison in the fourth quarter as a result of the impact of the settlement of a state income tax matter in fiscal 2013, which reduced diluted earnings per share by approximately $0.04 per share. This settlement is not expected to have an impact on the effective income tax rate for fiscal 2014.

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