WALL STREET JOURNAL

The Wall Street Journal reported that is is not yet certain whether Merrill Lynch (MER) will need to raise money. If it does, selling common stock could be expensive due to a 12-month protection the bank offered the investors that bought $12B in common and preferred shares earlier this year and selling assets like its interest in Bloomberg may present a different problem…The Wall Street Journal also reported that investigators from the European Union are probing deeper into the pharmaceutical industry in an effort to determine whether drug companies have used unfair tactics to increase prices and block competition. Investigators have reportedly ask for views on direct-to-pharmacy distribution channels, which Pfizer (PFE) and AstraZeneca (AZN) recently established in Britain…

FINANCIAL TIMES

After Anheuser-Busch (BUD) said it would reject InBev’s $46B bid as “financially inadequate,” InBev said it would launch a hostile bid. According to court documents, the Financial Times reported that InBev is preparing to launch a proxy battle seeking the removal of Anheuser’s entire board…The Financial Times also reported that soaring energy prices are forcing U.S. consumer goods company Procter & Gamble (PG) to rethink how it distributes products. The company may consider shifting manufacturing sites closer to consumers in order to lower its transport bill…

If Merrill Lynch needs to raise more capital choices are few-WSJ

If as expected Merrill Lynch’s (MER) losses continue to mount raising additional capital may be much more difficult than it was when CEO John Thain took over the firm, according to the Wall Street Journal’s “Heard on the Street”. Yesterday two key analysts cut their earnings expectations for Merrill. Over the past 52 weeks the stock is down over 60%. Second quarter write-downs could be about $4.2B. Merrill could sell more common stock or sell off assets, including interests in Bloomberg and BlackRock (BLK), but each move comes with complications. But Thain may have no choice with the firm’s survival at stake.

U.S. equity futures now point to a lower open; Personal income, spending up
Stock futures are pointing to a lower open as crude oil prices continue to hit record highs. Oil crossed the $142 a barrel level earlier and the futures fell. Investors received some economic data from the Commerce Department, namely the personal income and spending reports which showed personal income rose 1.9% versus an expected increase of 0.4%, and spending rose 0.8% versus an expected increase of 0.7%. The numbers had a positive effect on the futures, but oil prices remain in the forefront.

IGT downgraded to Equal Weight from Overweight@MSCO
Morgan Stanley lowered IGT estimates citing reduced share gains and weakening gaming operations.

CHL downgraded to Neutral from Buy@MLCO

WYNN downgraded to Underweight from Hold@KEYB
KeyBanc said the Las Vegas gaming market continues to be pressured by the slowing economy and higher fuel prices and that believes Macau is still strong, but not as strong as many anticipated. The firm downgraded WYNN based on lowered WYNN estimates and negative group psychology. Target $70.

Coal-$QL: Price Has Gone Parabolic
We noted the extreme rise in Coal last week and the importance this plays in power generation. Approximately 55% of the electricity in the US is generated by coal-fired plants. Although Crude Oil gets the attention, it is the price of Coal, not Crude, that has gone exponential. This week alone as of yesterday, Coal was up +8.28% for the week. For the year-to-date, up +133.9%. The impact on businesses this summer is likely to be extreme. Those that would be particularly sensitive are, for example, online companies that cannot idle plant. Being always-on is going to carry a significant price tag.

Forest Oil-FST upgraded to Buy from Hold@DBAB
Deutsche Bank upgraded shares to reflect the company’s improved free cash flow profile, strong production growth outlook and exposure to two emerging North American shale plays. Target raised to $88 from $65.

KB Home-KBH reports Q2 EPS ($3.30) vs.