Stock Picks: HSBC and DE Down

HSBC (HBC) shares were more than 5% lower Friday as investors balked at its exposure to troubles in Dubai.

Dubai World, the city-state’s largest corporate entity, asked creditors for a six month stay on repayment of $60 billion in debts, smacking stocks around the world sharply lower Thursday and Friday as default concerns weighed on investors.

HSBC and Standard Chartered (STAN) have the largest exposure to the debt, according to Goldman Sachs analysts, with HSBC attached to $611 million.

Bottom Line: It’s too early to say what the implications will be for HSBC or the broader markets and whether this pullback will be met as another buying opportunity, but investors are clearly spooked.

Deere (DE) shares were down with the broad market decline on Friday. Sales of tractors, combines and other agricultural mainstays weakened in the fourth quarter and Deere says it expects farmers to remain cautious about new purchases. The company does forecast improvement in 2010. For the fiscal year ending Oct. 31, Deere says expects net income of about $900 million, vs. $873.5 million in 2009.

That forecast undercut expectations. Even so, Barclays, UBS and RW Baird all increased their price targets for the farm equipment manufacturer. Barclays and UBS raised their targets to $60 and $55, respectively, while RW Baird increased its target to $53 from $44.

Crop prices are getting closer to their highs from earlier this year, despite the fact that the global economy is near the bottom of the worst coordinated recession in 75 years, wrote Jeffries analyst Stephen Volkmann in a note on Friday. And any recovery would be good for Deere.

The Bottom Line: “Quite simply, the global ag markets have almost no additional capacity to meet the demand that will come with even a modest economic recovery,” writes Volkmann. “The solution, in our view, will involve reinvestment in global ag infrastructure, including machinery.”