1. society
2. work
3. unemployment

Market Snapshot*
DJIA
17718.54
-292.59
4876.52
-118.2
S&P 500
2061.05
-30.44
10-Year
1.9173%
-12/32
Nasdaq
Wednesday, March 25, 2015
30-Year
2.5004%
-24/32
Euro
$1.09695
+0.0044
$49.21
+1.7
Nymex Crude
Source: SIX Telekurs, ICAP plc
Stocks
U.S. stocks fell for the third session in a row
on Wednesday, further pulling back from
records as downbeat economic data raised
concerns about U.S. growth. Traders said the
surprise decline in durable goods orders set
the negative tone for trading, which was
dominated by short-term investors. Losses
deepened around midday, led by declines in
biotechnology and semiconductor stocks.
The iShares Nasdaq Biotechnology
exchange-traded fund fell 3.6% and the
Market Vectors Semiconductor ETF slumped
4.4%. Biotech stocks have posted strong
gains this year, with the ETF up 13%.
Treasurys
*preliminary values subject to adjustments
Tomorrow’s Headlines
Kraft Foods, Heinz to Merge
Kraft Foods Group Inc. and H.J. Heinz Co., with help from its owner 3G
Capital Partners L.P. and Warren Buffett’s Berkshire Hathaway Inc., have
agreed to merge in a deal that would create the world’s fifth largest food and
beverage company.
The combined company, which will be called the Kraft Heinz Co., will have
revenue of about $28 billion and include well-known brands like Jell-O,
Maxwell House coffee and Planters nuts. The deal comes as Kraft and other
major U.S. food makers struggle with changes in consumer tastes that have
hampered their ability to sell packaged, processed food.
The Wall Street Journal was first to report late Tuesday that the two companies were in talks, with a deal likely to top $40 billion.
U.S. government bond prices fell for the first
time in four days on Wednesday, hurt by
lackluster demand on a $35 billion sale of
five-year Treasury notes. The new five-year
notes, sold at a yield of 1.387%, drew the
lowest demand since July 2009. Traders said
the recent rally in bond prices had sent yields
to less-attractive levels. A $29 billion sale of
seven-year notes is due on Thursday, also
weighing down bond prices. "The auction
was a bit sloppy," said Larry Milstein, head of
government and agency trading at R.W.
Pressprich & Co. in New York.
Shares of Kraft surged 34% in afternoon trading to $82.19.
Heinz shareholders will hold a 51% stake in the combined company, while
Kraft shareholders will hold a 49% ownership stake. Kraft shareholders also
will receive a special dividend of $16.50 a share, representing 27% of Kraft’s
closing price on Tuesday.
continued on page 2
Tomorrow’s Calendar
Forex
The dollar resumed its decline against the
euro and the yen on Wednesday as
investors sought a clearer direction on U.S.
borrowing costs and the economy one
week after the Federal Reserve's policy
meeting. The euro gained 0.4% against the
dollar to $1.0965, on pace to rise for the
sixth time in the past eight sessions. The
dollar retreated 0.2% against the Japanese
currency to Y119.51, maintaining a trading
range around Y120 over the past week.
Commodities
Oil prices pared gains Wednesday after
weekly government data showed domestic
crude supplies added to their record high and
outdid market expectations. Gold prices rose
to their highest level in three weeks on
Wednesday, as weak U.S. data bolstered the
argument the Federal Reserve would likely
take its time before raising interest rates.
Gold for April delivery, the most actively traded contract, closed up 0.5% at $1,197.00 a
troy ounce, the highest settlement since
March 4.
8:30 a.m.
03/21 Unemployment Insurance Weekly Claims Report - Initial
Claims Weekly Jobless Claims (expected 290K), Net Change
(previous +1K), Cont Jobless Claims (prior week) (previous
2417000), Net Chg (prior week) (previous -11K)
8:30 a.m.
U.S. Weekly Export Sales Corn, In Metric Tons (previous 567.1K),
Soybeans, In Metric Tons (previous 347K), Wheat, In Metric Tons
(previous 534.8K)
9:30 a.m.
IMF regular press briefing with Communications Department
Director Gerry Rice
9:45 a.m.
Bloomberg Consumer Comfort Index
9:45 a.m.
Mar US Flash Services PMI (previous 57)
10:00 a.m.
03/14 DJ-BTMU U.S. Business Barometer (previous +0%), (52
Wk) (previous +1.1%)
10:30 a.m.
03/20 EIA Weekly Natural Gas Storage Report Total Working Gas
in Storage (previous 1467B), (Net Change) (previous -45B)
11:00 a.m.
Mar Federal Reserve Bank of Kansas City Survey of Tenth District
Manufacturing Manufacturing Activity Index (previous 5), (6 Mon)
(previous 26), Manufacturing Composite Index (expected 1), 6Month Composite Expectations Index (previous 11)
4:30 p.m.
Federal Discount Window Borrowings
4:30 p.m.
Money Stock Measures
4:30 p.m.
Foreign Central Bank Holdings
Copyright © Dow Jones & Company, Inc. All Rights Reserved.
www.dowjones.com
page 1
Wednesday, March 25, 2015 4 p.m. ET
Tomorrow’s Headlines
Communications Commission’s decision this month to
pause its informal “shot clock” for completing the review,
contributed to the decision to revise the time frame.
continued
Durable-Goods Orders Fall 1.4%
Businesses cut orders on big-ticket items and continued to
postpone investment last month, further evidence of the
economy slowing sharply at the start of the year.
Orders for durable goods—products varying from computers to lawn mowers to washing machines designed to last
at least three years—declined a seasonally adjusted 1.4%
in February from a month earlier, the Commerce
Department said Wednesday. Excluding the volatile transportation sector, orders fell 0.4%, the fifth consecutive
monthly decline.
The latest figures suggest U.S. companies remain cautious
about spending amid weak global demand and a strengthening dollar. The disappointing reading also led some economists to lower their estimates for first-quarter economic
growth, suggesting a performance similar to the first quarter
of 2014 in which weather dragged down output before a
bounce-back later in the year.
Crash Jet Black Box
Contains Usable Sounds
A cockpit recording recovered from the Germanwings crash
that left 150 people feared dead has captured the sound of
people speaking during the flight, French investigators said
Wednesday.
The mere recovery of viable voice recordings marks a
breakthrough for investigators as they try to piece together
what went wrong before the Airbus A320 began an
unplanned 10-minute descent that ended in a mountainside
collision, disintegrating the jetliner.
AmEx to Seek Stay in Antitrust Case
Comcast’s proposed $45 billion deal, which would unite the
two largest U.S. cable companies and create a behemoth
in broadband access and pay television, is receiving
intense scrutiny from regulators. Regulators have continued
to ask for large amounts of information from the merging
parties and their competitors.
One major cause of delay has been a dispute between big
TV channel owners and the FCC over the confidentiality of
programmers’ contracts with Comcast and other pay-TV
providers. AT&T Inc.’s $49 billion deal for DirecTV has also
faced delays in the review process due to this dispute,
which is playing out in D.C. federal court. In February, the
court heard arguments in the case, but it hasn’t yet issued
a decision.
Comcast has said that the court case is a “procedural matter” unrelated to the merits of its TWC deal.
Salus Capital Bids On RadioShack
Salus Capital Partners says it has made a “materially superior” offer for RadioShack Corp. at a bankruptcy auction for
the electronic retailer’s assets and wants a bankruptcy
judge to intervene before a winner is a declared.
Lawyers for Salus in a letter to the court Wednesday morning asked a bankruptcy judge to step in “before any effort is
made to declare a winning bidder or to close the auction”
so that its competing bid for RadioShack can be considered.
Salus and a group of liquidators say they have made an
offer for RadioShack that includes more cash—$270 million—than hedge fund Standard General’s bid, which has
only a $16.4 million cash component. Much of the rest of
Standard General’s purchase price is in the form of an offer
to cancel debt owed by RadioShack rather than cash, and
Salus has challenged the validity of those debts.
American Express Co. Chief Executive Kenneth Chenault
said the company plans to seek a stay of a judge’s recent
ruling that could ultimately permit merchants to steer consumers to cheaper cards from Visa Inc. and MasterCard Inc.
Court Casts Doubt on
Alabama Redistricting Plan
In an investor meeting, Mr. Chenault also defended the
company’s decision to fight an antitrust lawsuit filed by the
Justice Department in 2010 that led to the judge’s ruling
last month. The federal judge determined that AmEx’s rules
for merchants violate antitrust laws.
The Supreme Court ruled Wednesday that Alabama may
have illegally concentrated African-American voters into a
handful of legislative districts, reviving claims the electoral
map adopted by the state’s Republican-controlled legislature violated the Voting Rights Act.
Comcast Pushes Back Closing
for Time Warner Cable Merger
Cable giant Comcast Corp. said Wednesday its expects its
merger with Time Warner Cable Inc. to close in the middle
of the year, a delay from its earlier guidance that it would
be completed in early 2015.
In a blog post, Comcast Executive Vice President David
Cohen said recent regulatory delays, including the Federal
The decision, by a 5-4 vote, comes two years after the high
court by the same margin weakened the 1965 voting law
by ending federal supervision of Alabama and other states
that historically discriminated against minorities.
Justice Anthony Kennedy, who joined conservatives in
2013, sided with liberals Wednesday who found a lower
court made legal errors when it upheld the Alabama plan.
A three-judge federal district court previously had sided with
the Alabama Legislature.
Copyright © Dow Jones & Company, Inc. All Rights Reserved.
www.dowjones.com
continued on page 3
page 2
Wednesday, March 25, 2015 4 p.m. ET
Evans: Fed Shouldn’t
Raise Rates This Year
Tomorrow’s Headlines
continued
ECB Lifts Ceiling on Greek
Emergency Loans
The European Central Bank on Wednesday increased the
amount of money Greek banks can borrow under an emergency lending program, extending a lifeline for the country’s
banks as its government continues tense negotiations with
its creditors over its bailout program.
The ECB raised the amount the Greek central bank can
lend its banks to 71.1 billion euro ($77.8 billion) from 69.8
billion euro the previous week, according to a Greek bank
official. Under the emergency-liquidity assistance program,
or ELA, the Greek central bank lends money to its country’s
financial institutions. The loans carry a higher interest rate
than standard ECB loans, and the credit risk stays with
Greece.
SEC Completes Startup
Stock-Sale Rules
U.S. securities regulators took long-awaited steps
Wednesday to ease the ability of startups and privately held
companies to raise cash in public markets.
The Securities and Exchange Commission voted 5-0 to
complete rules allowing firms to raise as much as $50 million from the general public, advancing one of the last
major provisions from a 2012 law designed to ease red
tape on smaller companies.
The changes would update the SEC’s Regulation A, which
currently allows private companies to sell up to $5 million of
public stock but which isn’t widely used. Companies have
shunned the securities because of the cost and complexity
of having to comply with both federal and state laws to
issue them, coupled with the relatively small issuance cap
of $5 million.
US, Iraq Consider Airstrikes
to Liberate Tikrit
Iraqi officials are considering asking a U.S.-led coalition to
launch airstrikes to liberate the Iraqi city of Tikrit from
Islamic State militants, according to a spokesman for the
president, after a more than three-week offensive in the city
stalled without foreign assistance.
Khalid Shwani, a spokesman for President Fouad
Massoum, said Iraqi military leaders were meeting with
U.S. military officials to study whether to request the
airstrikes.
“Now the U.S. military advisers and Iraqi military leaders
are having meetings to study the outcome of having international coalition airstrikes against Islamic State strongholds in Tikrit,” said Mr. Shwani on Wednesday. “In light of
the results of this study, Iraq will determine its position on
whether or not to ask for airstrikes.”
Overly weak inflation and a lack of evidence suggesting
price pressures are about to heat up means the Fed
shouldn’t raise interest rates this year, Federal Reserve
Bank of Chicago President Charles Evans said in a speech
Wednesday.
“I think economic conditions are likely to evolve in a way
such that it will be appropriate to hold off on raising shortterm rates until 2016,” Mr. Evans said. While the economy
is growing and adding jobs at a very healthy clip, inflation
remains well under the 2% level targeted by the Fed, and
that argues for caution, he said.
Mr. Evans’ comments came from the text of a speech prepared for delivery in London. The official is a voting member of the rate-setting Federal Open Market Committee.
The FOMC met last week in a gathering that continued to
prepare the way for an increase in what are now near-zero
short-term rates. Most central bankers support such a
move this year, believing that growth is likely to continue
and that inflation, currently weighed down by temporary
factors like a sharp drop in oil, will rise back to the desired
level over time.
ECB’s Weidmann Flags Risks
of Interest-Rate Policy
European Central Bank Governing Council member Jens
Weidmann flagged risks to the ECB’s policy of keeping
interest rates at historically low levels, saying that the central bank must watch closely signs of an increasing desire
for risk on asset markets.
“In my view, monetary policy can’t shrug its shoulders if
there are signs of speculative excesses on asset markets,”
said Mr. Weidmann in a text of a speech to be delivered
Wednesday here.
“The strong and in part rapid price increases on European
stock and bond markets in the past weeks and months indicate a strongly rising risk appetite, that we as central
bankers must watch carefully,” he said.
Yemen’s President
Flees Southern City
Western-backed President Abed Rabbo Mansour Hadi has
fled the port of Aden on a boat after Houthi militants drew
closer to seizing the southern city where he had been holed
up amid an intensifying assault, local officials said
Wednesday.
A convoy of Saudi Arabian diplomatic officials helped Mr.
Hadi escape, according to local officials and Houthi
spokesman Mohammed Al Bukhaiti.
The Shiite-linked Houthi militant group recently seized control of Yemen’s capital, San’a, and forced Mr. Hadi from
power. He fled the capital to Aden, where he enjoys support
from local security forces.
Copyright © Dow Jones & Company, Inc. All Rights Reserved.
www.dowjones.com
page 3
Wednesday, March 25, 2015 4 p.m. ET
Copyright Dow Jones & Co., Inc.
Talking Points
Tomorrow's News Today is made
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subscribers. No further redistribution is
permitted without written permission
from Dow Jones. Tomorrow’s News
Today is intended to provide factual
information, but its accuracy cannot
be guaranteed. Dow Jones is not a
registered investment adviser, and
under no circumstances shall any of
the information provided be construed
as a buy or sell recommendation or
investment advice of any kind.
The Kraft Family Tree
Few corporations in American history can claim a more complicated family tree
— one that includes Philip Morris, General Foods and RJR Nabisco. The tree
will get another branch if its just-announced deal to merge with H.J. Heinz Co.
goes through.
1903: James L. Kraft begins selling cheese from a horse-drawn wagon in
Chicago. By 1914, his company begins manufacturing cheese on its own.
1924: The company changes its name to Kraft Cheese Co. from J.L. Kraft &
Bros. Co. and goes public on the Chicago Stock Exchange.
1928: Kraft merges with Phenix Cheese, which makes Philadelphia cream
cheese.
1930: Kraft is acquired by National Dairy Products Corp.
1969: National Dairy Products Corp. changes name to Kraftco Corp.
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1985: Cigarette maker R.J. Reynolds merges with snack company Nabisco
Brands, owner of brands such as Ritz and Oreo, in a $4.9 billion deal to form
RJR Nabisco. RJR Nabisco will soon become the target of the most legendary
corporate raid of all time, but more on that later.
1980: Kraft Inc. merges with Dart Industries Inc., maker of Duracell batteries and
Tupperware.
1985: As part of a long diversification away from tobacco, cigarette company
Philip Morris pays $5.6 billion to buy General Foods, owner of Oscar Mayer hot
dogs, Entenmann’s pastries, Jell-O, Sanka coffee and Kool-Aid.
1986: Kraft spins off its non-food businesses. It also acquires Tombstone Pizza
Corp.
1988: Kraft sells its Duracell battery business to buyout firm Kohlberg Kravis
Roberts.
1988: Philip Morris buys Kraft for about $13 billion to combine the General
Foods and Kraft brands under one roof.
1988: After a fierce bidding war engulfing some of the biggest Wall Street banks
and investors in the world, KKR in 1988 wins a $25 billion takeover of RJR
Nabisco, the deal chronicled in the business tome “Barbarians at the Gate.”
(More soon on what this has to do with Kraft.)
1995: Kraft General Foods is reorganized and a number of business lines are
sold, including confections, bakery products and tablespreads. Brands included
in these sales are Entenmann’s, Freihofer’s, Parkay and Touch of Butter
2000: Philip Morris adds Nabisco Holdings, which RJR Nabisco had just left as a
separate company. The Nabisco purchase was eventually valued at around
$19.2 billion. The cigarette giant then combines Nabisco with Kraft.
2001: Philip Morris spins off a small portion of its stake in Kraft Foods, which
becomes publicly traded.
2007: Echoing the breakup of RJR Nabisco years earlier, Altria Group (the
renamed Philip Morris), completes a spinoff of its majority stake in Kraft. Under
pressure from investor Nelson Peltz, Kraft also agrees to sell its Post line of
cereal — Grape-Nuts, Honey Bunches of Oats and more — to Ralcorp.
2010: Kraft closes a roughly $19 billion purchase of U.K. candy company
Cadbury after a lengthy fight. Kraft also sells its Digiorno frozen pizza line to
Nestle. Warren Buffett, whose Berkshire Hathaway Inc. was the largest shareholder of Kraft at the time, called both transactions “dumb.”
continued on page 5
Copyright © Dow Jones & Company, Inc. All Rights Reserved.
www.dowjones.com
page 4
Wednesday, March 25, 2015 4 p.m. ET
Zero-Based Budgeting - Corporate
Catchphrase Du Jour
Talking Points
continued
2011: Ralcorp decides to split its Post Foods cereal and private-label food businesses into two publicly traded companies. The deal throws a curveball into ConAgra Foods Inc.’s
attempt to buy the entire company.
2012: Under pressure from Trian Fund Management LP.,
Kraft decides to split in two, spinning off its mature North
American grocery business to highlight its global snackfood business. The larger global business—which
includes Oreo, Cadbury, Wheat Thins, and other brands—
is named Mondelez International Inc. The smaller company, dubbed Kraft Foods Group Inc., gets the Kraft cheese
products, Maxwell House coffee, Jell-O, and Planters
nuts, among other brands.
2012: After the Post cereal spinoff, ConAgra Foods Inc.
agrees to acquire Ralcorp for $4.95 billion, making it the
largest private-label food manufacturer in the U.S.
2013: Heinz sells itself for $23 billion to 3G Capital Partners
and Warren Buffett’s Berkshire Hathaway Inc.
2015: Kraft Foods Group and Heinz agree to merge, in a
deal that would create teh third-largest food and beverage
company in North America. Berkshire will contribute $10 billion to pay a special dividend for Kraft shareholders, and
will collectively own just over half the combined company,
which will be publicly traded.
Kraft Foods Group Inc. employees may want to start boning up on an arcane business term: zero-based budgeting.
The cost-cutting technique, which requires managers to justify their spending plans from scratch every year, is a critical
part of 3G Capital Partners LP’s blueprint for rejuvenating
consumer-goods companies.
Kraft on Wednesday agreed to merge with H.J. Heinz
Co.—with the help of Heinz owner 3G and Warren
Buffett’s Berk-shire Hathaway Inc.—to create one of the
world’s largest food makers. The combined company,
Kraft Heinz Co., will apply zero-based budgeting at Kraft
just as Heinz did after 3G bought the ketchup maker in
2013, 3G managing partner and Heinz Chairman Alex
Behring told reporters Wednesday. The tool will be “an
integral part of the integration process here,” he said.
Zero-based budgeting requires managers to plan each
year’s budget as if no money existed the previous year,
rather than the typical method of adjusting prior-year spending. That forces them to justify the costs and benefits of each
outlay every 12 months. The method seeks to uncover savings in a range of areas—from cutting staff and jettisoning
multimillion-dollar conferences to tackling more mundane
elements of corporate life like printing and copying. The goal
is to bolster profit margins and free cash to invest in more
promising strategies and products.
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page 5