Wall Street Breakfast: Must-Know News

Paulson: No GSE rescue planned. Treasury secretary Paulson says he has no plans to use congressional authority to inject Treasury capital into government-sponsored mortgage lenders Fannie Mae (FNM) and Freddie Mac (FRE) - despite last week's dismal earnings reports, which he says were no surprise. "Given that Fannie Mae and Freddie Mac are solely involved in housing, that’s their sole business, and given the magnitude of the housing correction we’ve had, it’s not a surprise to me to see...

Paulson: No GSE rescue planned. Treasury secretary Paulson says he has no plans to use congressional authority to inject Treasury capital into government-sponsored mortgage lenders Fannie Mae (FNM) and Freddie Mac (FRE) - despite last week's dismal earnings reports, which he says were no surprise. "Given that Fannie Mae and Freddie Mac are solely involved in housing, that’s their sole business, and given the magnitude of the housing correction we’ve had, it’s not a surprise to me to see those losses." Paulson also downplayed the need for a second stimulus package. Private equity soaks up $8B of RBS's LBO debt. Sources say Royal Bank of Scotland (RBS) is dishing off up to $8B in LBO loans to private-equity firms, who are becoming increasingly aggressive in their pursuit of cheap debt. The buyers - Apollo (AINV), GSO Capital, Blackstone (BX) and TPG - stand to make returns of up to 30%. GSO is also lending money to Blackstone to help it complete LBOs such as its joint acquisition of The Weather Channel, prompting rivals KKR and TPG to seek out their own debt-market partners. "Purchasing debt at big discounts is a terrific one-off opportunity," Morgan Stanley's Mark Bradley says. "But firms like GSO, with their ability to provide all the debt to buy-outs, are going to change private equity in a lasting way." Credit unions: next shoe? Five of the largest U.S. credit unions are reporting big paper losses on mortgage-related securities - a sign housing-market distress is spreading to even the most risk-averse participants. The federal regulator of credit unions thinks losses are likely to be reversed when mortgage markets stabilize, and says the institutions are adequately capitalized. Some worry they're underestimating the depth of their mortgage-market problems. After you finish reading Wall Street BreakfastSeeking Alpha's Market Currentswill keep you current all day long. iPhone apps hot seller - Jobs. Users have downloaded over 60 million iPhone programs from Apple's (AAPL) AppStore, CEO Steve Jobs told the WSJ in an interview. If sales keep up, Apple could bag at least $360M/year in new revenue. Mind you, Jobs thinks bigger than that: "This thing's going to crest a half a billion, soon. Who knows, maybe it will be a $1 billion marketplace at some point in time - I've never seen anything like this in my career for software." UPS downplays TNT deal talk. UPS (UPS) is in initial talks for a €10B buyout of Dutch logistics firm TNT, after recent talk of a FedEx bid (FDX) fizzled. Morgan Stanley (MS) is advising UPS; Goldman Sachs (GS) is advising TNT. A deal would vastly enhance UPS's Europe reach. In a Monday interview with Reuters, UPS downplayed the chatter, saying a deal would devalue its shares. Shares of TNT initially leapt more than 6% Monday, but fell back on UPS's lack of enthusiasm. Naked shorts rule about to expire. The emergency measure that protects a select group of 19 financial stocks from abusive short-selling expires Tuesday. At least two-month is likely to pass before a similar rule under consideration may be imposed. Some say traders may not pick up where they left off: "A message has been sent and I don’t think we’ll see a return to that." Others are less sure: "We remain concerned that during this interim time period our members will continue to be exposed to these 'distort and short'" games, ABA's Sarah Miller says. Waste Management to boost bid for Republic. Sources say Waste Management (WMI) will raise its bid for rival Republic Services (RSG) by about 10% to $6.73B - or $37/share from $34/share. That would be a 33% premium to RSG's share price before the initial bid. Despite initial pessimism, it seems a deal would pass regulatory muster. Republic, meanwhile, is attempting to buy rival Allied Waste Industries (AW) for $6.24B in stock - a move a raised bid from WMI could thwart. Though Republic is smaller than both Waste and Allied, it is considered the top waste-hauler in the country. Update: Confirmed. NBC finds winning combo with TV-Internet Olympic coverage. NBC's (GE) decision to air the Olympics on both TV and the web seems to be paying off. Friday night's taped opening ceremony reached 34.2M viewers, a jump of 35% from the last summer games, and Saturday's network coverage attracted 24.1M viewers, the highest audience for the Summer Olympics in a decade. The NBC webcasts scored high too, with a record 4.8M people watching streaming Olympic video on Saturday. Despite fears that offering Olympic content online would lead to internet piracy and erosion of the television audience, "the early numbers suggest that all of this is fueling more interest," said Gary Zenkel, president of NBC Olympics. Inflation expectations dive. TIPS (Treasury Inflation Protected Securities) traders think the commodities top is in, as inflation expectations fall to a 10-year low. "The bottom line is you've seen a significant turn in commodity prices," RBC's Thomas Tucci says. "Going forward you're more likely to see inflation erode." If I'm the Fed, Cantor Fitzgerald's Brian Edmonds muses, "I feel pretty good about my statement that we expect inflation to moderate over time." American, BA, Iberia pushing for closer ties. American Airlines (AMR), British Airways (BAIRY.PK), and Iberia are seeking permission from the U.S. government to cooperate more closely on trans-Atlantic flights. Antitrust immunity would allow the airlines to cooperate internationally on pricing, scheduling, and marketing. Coming amidst rising fuel costs and stiff industry competition, the airlines see the move as cost-saving and say it will allow travellers a greater choice of destinations and flight connections. However, not all are pleased with the idea of greater airline cooperation; critics argue it will lead to less competition, higher prices and fewer choices. GATX deals for GE Freight. Freight car lessor GATX (GMT) is offering about $3.5B for GE's (GE) rail services unit, sources say. GATX CEO Brian Kenney recently told investors he's looking to invest more aggressively during the economic downturn. JDA Software to buy i2. JDA Software (JDAS) announces a $346M merger agreement to acquire i2 Technologies (ITWO)- a 5% premium on ITWO's Friday close. The merger will create a global leader in the supply chain planning and optimization market. China trade surplus jumps. China's trade surplus widened to $25.3B (+4%) in July, beating analyst estimates by more than $5B. Exports rose 26.9%. The strong numbers are likely to rekindle talk of Beijing allowing yuan gains to accelerate. Stocks plunged 5.2% to an 18-month low, as China overtook Vietnam as the world's worst performer this year. A Goldman note said the Olympics will slow the economy. Earnings: Monday Before Open Clear Channel Outdoor (CCO): Q2 EPS of $0.23 beats by $0.04. Revenue of $915M (+9.3%) vs. $864M. [PR] Today's Markets Asian markets closed mixed on Monday: Nikkei +1.99% to 13,431. Hang Seng -0.12% to 21,859. Shanghai -5.21% to 2,470. BSE +2.22% to 15,504. European markets at midday: London +0.81%. Paris +0.47%. Frankfurt +0.35%. U.S. futures are slightly higher at 7:15 AM. Dow +0.08%. S&P +0.08%. Nasdaq +0.23%. Crude +0.89% to $116.22. Gold +0.56% to $862.60. Monday's economic calendar: 6:00 Fed Survey on Bank Lending Notable pre-open earnings: CNO, HYGS, LINTA, PEIX, RDN, RTK, SYY, VRX Notable post-close earnings: AOB, BE, EXM, FLR, HPT, LDK, MDR, NUAN, POM, SONS, TWTC Seeking Alpha editor Rachael Granby contributed to this post. Get Wall Street Breakfast by email -- it's free and takes only seconds to sign up.

  • Wall Street Breakfast: Must-Know News

    UBS posts Q2 loss, plans to restructure. Swiss banking giant UBS (UBS) reports a Q2 net loss of CHF358M ($329M), including $5.1B in writedowns. Looking ahead to the second half, UBS says it doesn't expect any improvement "in the adverse economic and financial market trends that affected this quarter's results," adding, "UBS will continue its program to reduce personnel levels, costs and risk." As anticipated, UBS said it will begin separating its troubled investment bank from its wealth-management unit - but said it has not plans to sell the I-bank. UBS continued to cut back on its exposure to toxic debt: Subprime holdings fell to $6.7B from $15.6B while Alt-A exposure dropped to $6.4B from $17.1B. Shares rose 2.8% in overseas trading. Cuomo drags three more banks into ARS melee. NY AG Cuomo sent letters to JPMorgan (JPM), Morgan Stanley (MS) and Wachovia (WB), warning them to get on board with auction-rate securities settlements. Morgan Stanley's $4.5B ARS offer fails to impress Cuomo. Morgan Stanley (MS) said it is willing to buy back $4.5B in auction-rate securities, following similar settlements by Citigroup (C), UBS (UBS), and Merrill Lynch (MER). NY Attorney General Andrew Cuomo called Morgan Stanley's (MS) buy back offer "too little, too late." Cuomo is expected to press for fines on top of a more substantive settlement. After you finish reading Wall Street BreakfastSeeking Alpha's Market Currentswill keep you current all day long. IEA breathes a bit easier. The IEA (International Energy Agency) says tight global oil supply that has seen crude rise to record heights this year is easing - but cautions that heavy China consumption and geopolitical tension still have the potential to send prices back up. "In terms of oil fundamentals, crude and product supply tightness has eased," it said. But "we continue to stress the supply uncertainty that's out there. The events over the past week in Georgia and Turkey have only reconfirmed that." The IEA dropped its global demand growth forcast by 100K barrels/day due to a major demand pullback in the U.S. (-3.1% this year and -2% next year). (.pdf) JPMorgan hit with $1.5B writedown. JPMorgan (JPM) warned that credit-market turbulance forced it to take a $1.5B writedown on mortgage-backed assets in July. The firm says mortgage market trading conditions have substantially deteriorated since the beginning of July. Bankers are saying July was the worst month for mortgage-backed bonds since the crisis began. Mitsubishi UFJ plans UnionBanCal buy out. Mitsubishi UFJ Financial Group (MTU) plans to spend $3B to buy out minority investors in U.S. commercial-banking unit UnionBanCal (UB). At $63 per share, Mitsubishi UFJ's offer represents an 8.3% premium on UnionBanCal's Monday closing price. Mitsubishi UFJ has made it clear that it wants a bigger presence in the U.S., and plans to take part in future consolidation of the U.S. banking industry. The bid is the latest in a series of multi-billion dollar deals in the U.S. by Japanese companies that have emerged relatively unscathed from the subprime crisis. Middleby buying TurboChef for $200M. Middleby Corp. (MIDD) announced an agreement to acquire TurboChef Technologies (OVEN) for approximately $200M. TurboChef shareholders, who need to approve the merger, will receive a cash-stock payout combination of $3.67 in cash and 0.0486 Middleby shares for each TurboChef share. TurboChef has greatly expanded its customer base in recent years and is a leader in speed cook technology, a field Middleby believes is in the beginning stages of gaining broader market acceptance. 3M iPhones in first month. After just one month, iPhone 3G (AAPL) sales reportedly top 3M - way ahead of expectations. "They are seeing unprecedented demand," Michael Cote of the Cote Collaborative says. While not commenting on Cote's estimates, Apple did disclose it sold 1 million iPhones during the first three days; it took Apple 74 days to hit the one million mark with the original iPhone. Germany mulls limiting foreign investment. The German government will vote on August 20 on a bill that could be used to prevent foreigners from buying 25% or more in German companies deemed crucial to the country's security. Opponents say it will deter foreign investment. (ETF: EWG) Airlines soon profitable? Airline stocks extended their rally Monday after Morgan Stanley said there's a chance the industry could return to profitability by 2009 if the price of oil stays down. The broker says recent moves by carriers to reduce seats and increase fees could ultimately be a positive for the battered sector. UAL +10%. AMR +8%. CAL +8%. UAUA +5.4%. Fed Survey on Bank Lending. 65% of banks said they tightened credit-card lending, car and consumer loans during the last quarter. 70% say they'll tighten standards on commercial real estate loans. Major loan categories were tighter across the board. Toyota mulls exporting us gas guzzlers. Trying to stay ahead of the auto industry downturn, Toyota (TM) said it is considering downsizing U.S. manufacturing jobs, and may start exporting U.S.-made U.S. pickups and SUVs abroad. Some analysts were puzzled by the proposal; the larger vehicles are not big sellers outside of U.S. borders. Precious metals plunge again. Gold, platinum, and silver hit 7-month lows on concerns of reduced demand for raw materials. Commodities descend Monday into bear territory, with S&P's GSCI index off 22% from its July 3 highs. Blue Chip economists sour on H2 and 2009. They now see Q3 GDP growth of 1.2%, down 0.1% from previous estimates, and Q4 growth of just 0.3% - down 0.3%. Year-end unemployment is seen at 6%. 56% think the U.S. economy is in recession. India production up 3.4%. India's production in six key industries, accounting for a quarter of the country's industrial production, grew 3.4% in June from a year earlier. (ETFs: INP, EPI) Inflation pulls back in China. China's inflation slows to a ten-month low, allowing the government a chance to focus on sustaining economic growth instead of fighting rising prices. (ETFs: FXI, PGJ) Earnings: Tuesday Before Open Fossil (FOSL): Q2 EPS of $0.36 beats by $0.11. Revenue of $353M (+15.2%) vs. $347M. [PR] JA Solar (JASO): Q2 EPS of -$0.01 vs. consensus of $0.15. Revenue of $180M (+170.7%) vs. $170M. [PR] Earnings: Monday After Close Fluor (FLR): Q2 EPS of $0.87 beats by $0.05. Revenue of $5.77B (+36.8%) vs. $5.18B. Sees full-year EPS of $3.39-3.54 vs. $3.29. Shares +3.9%. [PR] LDK Solar (LDK): Q2 EPS of $1.29 beats by $0.87. Revenue of $442M vs. $282M. Sees 2008 revenue of $1.65-1.75B vs. $1.16B. Shares +25.3%.[PR] Napster (NAPS): FQ1 EPS of -$0.10 misses by $0.01. Revenue of $30.3M (-6%) vs. $30.5M. Shares -1.1%. [PR] McDermott International (MDR): Q2 EPS of $0.77 in-line. Revenue of $1.79B (+26.4%) vs. $1.85B. Shares -8.1%. [PR] Safe Bulkers (SB): Q2 EPS of $0.82 beats by $0.21. Revenue of $51.4M (+48.1%) vs. $49.6M. Shares +3.6%. [PR] TravelCenters of America (TA): Q2 EPS of -$0.69 beats by $0.23. Revenue of $2.28B vs. $2.15B. [PR] TW Telecom (TWTC): Q2 EPS of $0.00 misses by $0.01. Revenue of $290M (+2.7%) in-line. [PR] Verasun Energy (VSE): Q2 EPS of $0.15 beats by $0.13. Revenue of $1.01B (+498.7%) vs. $925M. [PR] Today's Markets Asian markets closed lower on Tuesday. Nikkei -0.95% to 13,304. Hang Seng -1.0% to 21,641. Shanghai -0.52% to 2,457. BSE -1.88% to 15,213. Europe at midday: London +0.2%. Paris +0.05%. Frankfurt -0.05%. U.S. futures at 7:10 AM: Dow -0.08%. S&P -0.04%. Nasdaq +0.15%. Crude -0.74% to $113.63. Gold -0.65% to $822.80. Tuesday's economic calendar: 7:45 ICSC Retail Store Sales8:30 Trade Balance8:55 Redbook Chain Store Sales10:00 IBD/TIPP Economic Optimism10:00 Job Openings and Labor Turnover10:30 Fed's Gary Stern on CNBC2:00 PM Treasury Budget5:00 PM ABC Consumer Confidence Index Notable pre-open earnings: CNO, FOSL, GOL, JASO, TJX, UBS, VSE Notable post-close earnings: AMAT, BZP, CREE, DNDN, MELI, NVDA Seeking Alpha editor Rachael Granby contributed to this post. Get Wall Street Breakfast by email -- it's free and takes only seconds to sign up.

  • Wall Street Breakfast: Must-Know News

    Even more firms may gain access to TARP. Sources say the Treasury may use some of its $700B rescue fund to buy stakes in financing companies such as GE's (GE) GE Capital and CIT Group (CIT). Presently the program only includes publicly-traded banks and insurers, although the Treasury is already mulling opening the door to some privately-held firms. The U.S. government could eventually own even more of the American financial system than first envisioned. Yahoo, Google tone down ad tie-up. Yahoo (YHOO) and Google (GOOG) submitted a revised version of their search-ad pact to the Justice Department in the hope gaining approval. New provisions limit the scope of the deal, including shortening the agreement to two years from ten, and capping Yahoo's revenue from the deal to 25% of its search revenue total; previously there was no cap. The revised plan also gives Google advertisers the ability to opt out of having their ads displayed on Yahoo sites. It's unclear whether the changes will suffice to appease regulators who worry the deal will allow Google (GOOG) to monopolize online advertising. Separately, Yahoo said Monday Microsoft (MSFT) executive Jeff Dossett will take the lead position in its online media properties after veteran Scott Moore left "for other opportunities." UBS posts earnings, warnings. UBS (UBS) confirmed a Q3 profit of 296M Swiss francs ($256.3M) helped by credit and tax gains, with outflows of 49.3B francs from its wealth management unit and 34.4B francs from its asset management unit. The world's largest wealth manager, UBS had already reported much of its Q3 results last month when it announced a capital injection of 6B franc from the Swiss government and said it would unload $60B of risky assets into a central bank fund. UBS noted some positive client money flows in October, but warned 'difficult' market conditions would hurt fee-earning businesses and Q4 results would be weighed down by the accounting effects of transferring risky assets. Shares -2.6% premarket. Outlook sours for RBS. Royal Bank of Scotland (RBS) abandoned its full-year profit forecast after it wrote-down £1B in October against assets connected to Lehman Brothers and Icelandic banks and as bad loans rose. It also posted £1.4B of markdowns in Q3 before new accounting rules allowed it to claim back £1.2B. CEO Stephen Hester said the latest writedowns, coming in addition to £5.9B in H1, show the bank has too much risk and could face a full-year loss. RBS is in line for a U.K. bailout, and the government could own up to 60% of the bank unless investors buy some of the £20B of stock to be issued later this year. Shares -14.9% premarket. Goldman hedge fund down $1B. A flagship Goldman Sachs (GS) hedge fund - Goldman Sachs Investment Partners - has lost almost $1B of its $6B since its launch in January, further evidence of the crisis facing the industry. "We anticipate that these results will lead to net outflows from the hedge fund industry," managers said, although GSIC itself imposed a two-year lock-in at inception. More than half of its 13% Q3 loss was on positions in commodities, basic materials, metals, mining, energy and agriculture. Tough 2009 for JPMorgan. JPMorgan (JPM) CEO Jamie Dimon told employees the firm faces "highly challenging conditions" in 2009, but sees a possible "strong recovery" in 2010. JPM's recent acquisitions of Bear Stearns and WaMu will improve performance in the "longer term," he said. Dimon warned Asia is "going to get worse than you think" as the tidal wave that began with a collapse of the U.S. mortgage market washes over it. Still, longer-term, he sees "very substantial natural growth" in the region. iPod master leaves Apple. Tony Fadell, one of the fathers of the iPod, is leaving Apple (AAPL) for personal reasons, sources say. Former IBM (IBM) executive Mark Papermaster will take his place. During Fadell's tenure, the iPod grew from a curiosity into a major cash cow; Apple sold 54.7M iPods during its most recent fiscal year. But growth has cooled off as saturation becomes a factor in many countries. Still, Apple shows no signs of giving up any of its 70% U.S. market share. Dismal October for automakers. General Motors (GM) said October was likely the auto industry's worst month since WWII after its sales plunged 45%, Ford's (F) fell 30%, Nissan's (NSANY) declined 33%, Honda's (HMC) dropped 25%, while Toyota's (TM) declined by 23%. GM marketing chief Mark LaNeve said he believes there's plenty of pent-up demand, "but until the credit markets open up and consumer confidence improves, the entire U.S. economy, and any industry like autos that relies on financing, will suffer." U.S. auto sales are now down 14.6% YTD. "It's weaker than we were anticipating," J.D. Power's Bob Schnorbus said, warning leaders should take heed: "The auto industry is important to the economy and it should not be taken too lightly." Manufacturing paints bleak picture. The ISM's Manufacturing index fell to 38.9 in October, its lowest level since 1982, and worse than the expected 41.5. The only industries reporting growth were apparel and leather & allied products. Petroleum & coal and nonmetallic mineral products led the laggards. The weaker than expected data increases the risk the current slump will outdo the recessions of 2001 and 1991. Companies are cutting back on investments and hiring as Q3 consumer spending plunged by 3.1% - the biggest decline in 28 years. The survey "indicates a significantly faster rate of decline in manufacturing when comparing October to September," ISM director Norbert Ore said. "It appears that manufacturing is experiencing significant demand destruction as a result of recent events." Prices also rose at a much slower rate: the price index plunged to 37 from 53.5 in September - the lowest level since December 2001. Export orders dropped for the first time in 70 months. September Construction Spending fell 0.3% from August's revised numbers, better than the expected 0.8% drop. Residential private construction -1.3%; non-residential +1.2%. Earnings: Before Open Ameren (AEE): Q3 EPS of $1.17 misses by $0.08. Revenue of $2.06B (+3.2%) vs. $2.29B. Sees full-year EPS of $2.80-3.00 vs. $3.01. Shares -5.3%. (PR) Archer Daniels Midland (ADM): FQ1 EPS of $1.63 vs. consensus of $0.69. Revenue of $21.16B (+65%) vs. $15.98B. (PR) Autodesk (ADSK): Sees Q3 EPS of $0.53-0.55 vs. $0.55 consensus and revenue of $604-607M vs $624M. "The sharp downturn of the global economy is substantially impacting our business... Demand for our products fell dramatically in October in all geographies as the financial crisis worsened. (PR) Cimarex Energy (XEC): Q3 EPS of $2.19 misses by $0.07. Revenue of $576.5M (+67.7%) vs. $568M. (PR) Dean Foods (DF): Q3 EPS of $0.28 misses by $0.03. Revenue of $3.19B (+2.5%) in-line. (PR) Emerson Electric (EMR): FQ4 EPS of $0.88 beats by $0.02. Revenue of $6.7B (+11.1%) in-line. (PR) GrafTech (GTI): Q3 EPS of $0.55 beats by $0.10. Revenue of $316M (+25.7%) vs. $303M. Shares +6.7%. (PR) HCP Inc. (HCP): Q3 FFO of $0.71/share beats by $0.05. Revenue of $270M vs. $242M. Sees full-year FFO of $2.38-2.42 vs. $2.29. (PR) Holly (HOC): Q3 EPS of $1.00 beats by $0.13. Revenue of $1.72B (+42.3%) in-line. (PR) Louisiana-Pacific (LPX): Q3 EPS of -$0.38 misses by $0.08. Revenue of $390M (-17.5%) in-line. (PR) Magna International (MGA): Q3 EPS of $0.17 vs. consensus of $0.90. Revenue of $5.53B (-9%) in-line. (PR) Marvel Entertainment (MVL): Q3 EPS of $0.64 beats by $0.19. Revenue of $182.5M (+47.7%) vs. $146M. Sees full-year EPS of $2.45-2.65 vs. $1.93 and 2009 EPS of $1.00-1.35 vs. $1.94. (PR) Myriad Genetics (MYGN): FQ1 EPS of $0.30 beats by $0.16. Revenue of $74M (+52.4%) vs. $70M. (PR) NiSource (NI): Q3 EPS of $0.03 in-line. Revenue of $1.42B (+11.8%) vs. $1.36B. (PR) PPL Corp. (PPL): Q3 EPS of $0.45 misses by $0.15. Sees full-year EPS of $2.00-2.05 vs. $2.29, and 2009 EPS of $1.60-1.90 vs. $2.17. "Many of the pressures that affected our results in 2008 also are expected to continue into 2009..." (PR) Rowan (RDC): Q3 EPS of $1.00 beats by $0.13. Revenue of $527M (+5%) vs. $540M. "Continuing weakness in capital markets and commodity prices will, eventually, affect customer demand for our products and services, though we have experienced little impact thus far." (PR) St. Joe (JOE): Q3 EPS of -$0.12 misses by $0.12. Revenue of $32.8M (-57.6%) vs. $47.3M. (PR) Talisman Energy (TLM): Q3 EPS of $0.72 beats by $0.08. Revenue of $2.82B (+50.9%) vs. $2.89B. (PR) Tenneco (TEN): Q3 EPS of $0.01 misses by $0.22. Revenue of $1.5B (-3.8%) in-line. (PR) Tenet Healthcare (THC): Q3 EPS of -$0.06 misses by $0.03. Revenue of $2.14B (+5.2%) vs. $2.21B. Shares +14.1%. (PR) W&T Offshore (WTI): Q3 EPS of $0.79 misses by $0.03. Revenue of $290M (+13.6%) vs. $276M. (PR) Earnings: Monday After Close Automatic Data Processing (ADP): FQ1 EPS of $0.54 beats by $0.04. Revenue of $2.18B (+9.5%) in-line. Shares -2.5%. (PR) Coldwater Creek (CWTR): Sees Q3 sales of $225M vs. $265M consensus, and EPS of -$0.07 to -$0.09 vs. $0.03 consensus. "The overall macro-economic environment has proven to be substantially more challenging than anticipated." Shares -5.9%. (PR) Comstock Resources (CRK): Q3 EPS of $1.20 beats by $0.20. Revenue of $169M (+103.7%) vs. $158M. (PR) Embraer (ERJ): Q3 EPS of $0.32 misses by $0.07. Revenue of $1.55B (+8.1%) vs. $1.63B. (PR) EOG Resources (EOG): Q3 EPS of $2.34 beats by $0.10. Revenue of $3.22B (+226.5%). Shares +1.9%. (PR) Forest Oil (FST): Q3 EPS of $1.26 misses by $0.12. Revenue of $474M (+51.5%) vs. $465M. (PR) Herbalife (HLF): Q3 EPS of $0.89 beats by $0.03. Revenue of $M in-line. Sees Q4 EPS of $0.65-0.70 vs. $0.91, and 2009 EPS of $3.50-3.55 vs. $3.71. Shares -13.5%. (PR) MasterCard (MA): Q3 EPS of $2.47 beats by $0.22. Revenue of $1.34B (+23.7%) vs. $1.27B. Gross dollar volume rose 12.3%. "As we are not immune from the long-term effects of the current economic environment, we have significantly accelerated the focus on our cost structure..." Shares +8%. (PR) Mohawk Industries (MHK): Q3 EPS of $1.10 misses by $0.02. Revenue of $1.76B (-9%) in-line. (PR) Open Text (OTEX): Q3 EPS of $0.53 beats by $0.03. Revenue of $183M (+11.4%) vs. $179M. Shares -1.1%. (PR) Pepco Holdings (POM): Q3 EPS of $0.59 misses by $0.11. Revenue of $3.06B (+10.4%) vs. $2.73B. (PR) Pitney Bowes (PBI): Q3 EPS of $0.67 misses by $0.03. Revenue of $1.55B (+2.6%) vs. $1.6B. Sees full-year EPS of $2.75-2.82 vs. $2.85. (PR) St. Mary Land (SM): Q3 EPS of $1.20 beats by $0.08. Revenue of $324M (+31.4%) vs. $329M. Shares +1.2%. (PR) Viacom (VIA): Q3 EPS of $0.62 beats by $0.07. Revenue of $3.41B (+4.2%) vs. $3.32B. Shares +1.5%. (PR) Today's Markets Asia closed mixed Tuesday. Tokyo was the standout, +6.27% to 9,115. Shanghai -0.76% to 1,707. Hang Seng +0.28% to 14,384. BSE Sensex +2.84% to 10,631. European markets posted strong morning gains. London +1.75%. Paris +2.1%. Frankfurt +2%. U.S. futures are markedly higher at 7:00 AM. Dow +1.88% to 9506. S&P +1.96% to 988.50. Nasdaq +2.18%. Crude +1.16% to $64.65. Gold +1.49% to $737.60. Tuesday's Economic Calendar 7:45 ICSC Retail Store Sales8:55 Redbook10:00 Factory Orders5:00 PM ABC Consumer Confidence Index Notable earnings before Tuesday's open: ADM, AEE, AMSC, DF, DNR, EMR, ENTG, EXPD, FE, GTI, HCP, HL, HNT, HOC, JEC, JOE, LPX, MAC, MGA, MYGN, NI, NNN, NXG, PPL, PQ, RDC, TDC, TEN, THC, TLM, VNO, WTI, XEC Notable earnings after Tuesday's close: AMMD, BRE, CBL, DCT, FCH, HRP, JKHY, ME, NHP, PXD, UPL, USU, VTR Seeking Alpha editor Rachael Granby contributed to this post. Get Wall Street Breakfast by email -- it's free and takes only seconds to sign up. After you finish reading Wall Street BreakfastSeeking Alpha's Market Currentswill keep you current all day long.

  • Wall Street Breakfast: Must-Know News

    Bernanke's Time has come! Ben Bernanke was awarded Time Magazine's prestigious Person of the Year for 2009 award. "A bald man with a gray beard and tired eyes is sitting in his oversize Washington office, talking about the economy... He just happens to be the most powerful nerd on the planet." Citi wins big tax break. While Citigroup (C) fends off arbitration claims, it is celebrating an IRS decision to forgo collecting billions of dollars in potential taxes to help the bank repay its TARP loans. Tax law allows companies to offset taxable income with prior losses, but limits the transfer of those losses to new ownership so that profitable companies don't buy losers just to avoid taxes. Under the law, the government's sale of its 34% stake in Citigroup, combined with Citi's share sales, qualify as a change in ownership. The IRS ruling (.pdf) stipulates that the government's share sale does not count toward the definition of an ownership change. "I've been doing taxes for almost 40 years, and I've never seen anything like this, where the IRS and Treasury acted unilaterally on so many fronts," a tax expert said. Abu Dhabi attacks Citi share sale. Abu Dhabi Investment Authority – one of the world's top two sovereign wealth funds – wants to rescind an agreement that would otherwise force it to buy Citigroup (C) stock for more than 8X its current price. The fund, which is seeking more than $4B in damages if the deal goes ahead, has claimed "fraudulent misrepresentations" tied to an agreement to buy $7.5B of common stock. Citi said in a statement the claims have no merit. On Monday, Citi said it would sell $17B in shares to help repay $20B in bailout funds. That would trigger losses for the Investment Authority, which purchased Citigroup equity units in November 2007; Citi's shares have dropped 89% since then. Analysts were doubtful ADIA could win in court, but said its goal may be to get Citi to renegotiate the terms of their deal. EU ends 10-year Microsoft battle. The European Commission settled its ten-year antitrust battle with Microsoft (MSFT) without fining the software giant. Microsoft agreed to provide European Windows users with greater choice among web browsers, which could help increase the market share of rival browsers including Mozilla's Firefox, Google's (GOOG) Chrome, Apple's (AAPL) Safari and Opera's browser. The EC charged that Microsoft illegally abused its dominance by bundling its own IE browsers with Windows. Wells Fargo pays $4.5B for JV stake. Just two days after committing to repay $25B in bailout money, Wells Fargo (WFC) said it will pay Prudential Financial (PRU) $4.5B in cash to buy out the insurer's non-controlling stake in their retail brokerage JV. Prudential, which said it planned to divest its stake more than a year ago, said the deal would enhance its capital position and give it greater financial flexibility. Banks get more time on capital rules. Banks around the world could get ten years to transition to new capital rules that will take effect in 2012, sources say. The news lifted shares of some banks, with MUFG (MTU) and Sumitomo Mitsui Financial (SMFJY.PK) surging more than 14% and European banks rising more modestly. This week, the Basel Committee on Banking Supervision is expected to issue new proposals to toughen financial regulations, which had raised concerns about banks scrambling to raise capital quickly. While regulators don't plan to set a specific time frame for the transition period, media reports said it would be at least 10 years, the same period banks were given to transition when Basel II was introduced in 2004. New rules will likely take a broader view on the definition of liquid assets and core capital, while the minimum capital threshold will likely be raised to help buffer against future losses. WaMu accuses JPM of "fire sale". Washington Mutual, once the largest savings & loan in the country, wants a federal court to grill the Fed, the Treasury and a dozen others over its seizure and firesale to JPMorgan (JPM) a year ago. WaMu said the alleged misconduct includes JPM, which it accused of disclosing confidential information to government officials and others in an effort to harm WaMu's credit rating and stock price. WaMu said it has been investigating possible claims since mid-2009. GE's flat future. Just days after making a similar forecast for its finance arm, GE Capital, GE said Tuesday that its 2010 earnings growth will likely be flat as the world economy continues to stabilize, but CEO Jeff Immelt said GE has positioned itself for "solid earnings growth and cash flow growth in the future." Immelt also suggested that, "The worst is behind us in financial services." Analysts currently expect 2010 EPS of $0.89, vs. forecast EPS of $0.99 in 2009. Bernanke downplays inflation risk. High U.S. unemployment and unused manufacturing capacity suggest that there's still plenty of slack in the economy and that inflation will remain low, Fed Chairman Ben Bernanke told a lawmaker in a written statement Tuesday. Bernanke answered 70 questions (.pdf) presented by Senator Jim Bunning, writing, "I continue to expect slack resources, together with the stability of inflation expectations, to contribute to the maintenance of low inflation in the period ahead." The letter was published Tuesday, the same day the FOMC commenced its two-day meeting on monetary policy; most economists expect the Fed to keep rates unchanged. Bunning plans to oppose Bernanke's reappointment when the Senate panel votes Dec. 17. GM speeds up debt repayment. GM is accelerating plans to repay the first $8B of what it owes to the U.S. and Canada by June, interim CEO Ed Whitacre said Tuesday. This is the first time GM has committed to repaying its government loans within a year after it filed for bankruptcy in a U.S. government-directed restructuring. Whitacre also said he hasn't set a time for stepping down yet, but suggested that the search for a new CEO may now be focused internally because of pay constraints. Separately, Whitacre expects to announce a new CFO to replace Ray Young, who will head up GM's international ops, within two weeks. Whitacre also detailed some of the reasons why GM's board split with Fritz Henderson, including his plan to sell Opel: "The board looked at that and said 'this is a valuable asset, why should we sell part of it for something that probably wasn't enough money? We can do something with this." Japan smokes out tobacco companies. Philip Morris (PM), Japan Tobacco and British American Tobacco (BTI), which have long looked to Japan as a cigarette tax haven, could soon get burned. As soon as Friday or early next week, the government may unveil a tax that could add ¥40-60 in taxes to every pack of cigarettes, a monumental sum in a country where salaries are shrinking. Japan Tobacco, the world's No. 3 tobacco maker, has a 65% share of the Japanese market; Philip Morris, the global market leader, has about 25% and BAT the remaining 10%. Credit Suisse to settle with U.S. Credit Suisse (CS) is in advanced settlement discussions to hand over about $536M to the U.S. government to settle claims it helped process payments that gave Iran and other nations access to U.S. financial markets, ignoring country sanctions. Lloyds (LYG) recently paid a $350M settlement along with Credit Suisse and eight other major foreign banks for using a similar technique to disguise illegal money transfers. Mortgage applications inch up. MBA's index of mortgage applications rose 0.3% after an 8.5% gain a week ago. Refinancings were up 0.9%. Over the past week, the average 30-year fixed mortgage rate increased to 4.92% from 4.88%. BAIC nabs Saab assets. As expected, Beijing Automotive bought key Saab assets from General Motors, paying 1.4B crowns ($197M) for the intellectual property rights and equipment to make Saab's 9-5 and to purchase some technology rights to the 9-3. The money will be enough to keep Saab, which has been dangerously short of cash, running for three more months. It also gives the company more time to find a buyer for what's left of the unit. Luxury car maker Spyker is seen as the frontrunner. Buyers shun foreclosed homes. A new survey suggests that U.S. consumers are no longer jumping at foreclosed homes because of worries about hidden costs, but may be willing to dip back in with the help of the government's expanded tax credit. Currently, those somewhat likely to consider buying a foreclosed home are at 43%, after peaking at 55% in May, according to a survey by Harris Interactive. Further demand for foreclosed homes could come from homeowners looking to trade up to a larger house; 24% of homeowners are somewhat likely to consider a trade-up, and 88% of those are somewhat likely to consider a foreclosure. Glass-Steagall under House threat? Glass-Steagall, the 1933 law that separated commercial and investment banks and was repealed in 1999, is up for discussion again in the U.S. House. "As someone who voted to repeal Glass-Steagall, maybe that was a mistake," Majority Leader Steny Hoyer told reporters Tuesday. On Monday, President Obama met with U.S. bank CEOs, urging them to lend more money. Last month, Fed Chairman Ben Bernanke told the Economic Club of New York: "Plenty of firms got into trouble making regular commercial loans, and plenty of firms got into trouble in market-making activities. The separation of those two things per se would not necessarily lead to stability." Geithner says banks stronger now. U.S. Treasury Secretary gave the government a self-congratulatory pat, saying Tuesday that confidence in the financial system is coming back and that private capital will start replacing the government's investment in banks. In comments at the Treasury, Tim Geithner said the government expects to get checks totalling more than $185B in repaid TARP, after Wells Fargo (WFC) said Monday it will repay $25B in bailout money. Geithner trumpeted the success of TARP, saying it had earned more than $15B in income from the sector. He also acknowledged that there's still a lot to do to improve access to credit for small business and to jump-start job creation. Earnings: Before Open Joy Global (JOYG): FQ4 EPS of $1.20 beats by $0.19. Revenue of $964M (-6.6%) vs. $931M. "We see 2009 as the cyclical floor for incoming orders... Our customers are increasing their capital expenditure budgets for 2010." (PR) Earnings: Tue. After Close AAR (AIR): FQ2 EPS of $0.34 beats by $0.04. Revenue of $329M (-7%) vs. $346M. (PR) Adobe (ADBE): FQ4 EPS of $0.39 beats by $0.02. Revenue of $757M (-17%) vs. $753M. Sees Q1 revenue of $800M-850M vs. $798M. (PR, earnings call transcript) Today's MarketsAsia stocks were mixed Wednesday, but Europe markets and U.S. futures have moved higher.

  • Wall Street Breakfast: Must-Know News

    TARP watchdog to probe NY Fed over AIG. According to prepared testimony, TARP Special Inspector Neil Barofsky launched two new investigations into the New York Federal Reserve's actions during AIG's (AIG) bailout. Barofsky will look at whether there was any misconduct related to the public disclosure of the $62.1B paid to counterparties, and will also investigate the NY Fed's level of cooperation with a previous audit of the counterparty payments. In a further development, Geithner, who was head of the NY Fed at the time of AIG's bailout, has said counterparties weren't a consideration in structuring AIG's rescue. However, emails have subsequently shown that counterparties were indeed discussed, and buying out banks' AIG contracts was deemed better "from a financial-stability perspective" than other AIG rescue options being considered. AIG holds onto ILFC unit. AIG (AIG) has decided not to sell its aircraft-leasing unit, International Lease Finance Corp., after concluding the potential profit wouldn't justify the sale of such a key asset. AIG will now have to continue funding the unit's large balance sheet either through cash or new debt-financing while it also works to repay billions of dollars in federal bailout funds. It's unclear whether AIG's decision is connected to reports that Steven Udvar-Hazy, a founder and CEO of ILFC, is planning on leaving the company this week. Merger approved for Live Nation, Ticketmaster. The Justice Department approved the merger of Live Nation (LYV) and Ticketmaster (TKTM), on the condition that Ticketmaster sells its Paciolan unit to a unit of Comcast (CMCSA), that the combined company licenses its primary ticketing software and that it doesn't retaliate against venues that use another provider. The new Live Nation Entertainment will own more than 140 concert venues across the world, and will sell roughly 140M tickets per year to 22,000 concerts. The news sent shares climbing yesterday, with LYV closing up 14.7% and TKTM +15.8%. U.K. exits recession. The U.K. emerged from recession, barely, reporting GDP growth (.pdf) of 0.1% in Q4 2009 vs. the previous quarter. However, the growth rate was far less than the +0.4% expected and has raised concerns that the economy could fall back into contraction. Japan outlook turns negative. Earlier this morning, S&P revised its outlook on Japan to "negative" from "stable," potentially putting at risk Japan's AA long-term rating. The ratings firm cited concerns over "the Japanese government's diminishing economic policy flexibility" and over growing "fiscal and deflationary pressures." Japan's government debt is already among the highest for rated sovereigns, and S&P thinks the debt burden will continue to rise, peaking at 115% of GDP over the next few years. Moody's and Fitch Ratings kept their grades unchanged today, calling Japan's debt burden 'relatively moderate' and expressing confidence that "the market will finance this without putting big upward pressure on yields." Deal will create massive printer firm. Privately held Quad/Graphics Inc. is expected to buy Canadian rival World Color Press for $1.3-1.4B, creating the second-largest commercial printer in North America and posing a threat to industry giant R.R. Donnelley & Sons (RRD). Sources said the firms hope to close the deal this summer, and estimate combined 2010 earnings would be around $875M. Fed mulls new benchmark rate. Federal Reserve officials begin a two-day FOMC meeting today, and one of the items on the agenda is whether to adopt a new benchmark interest rate to replace the one that's been used for the last two decades. Instead of the federal funds rate, officials may choose to use the interest paid on excess bank reserves. Porsche sued by VW short sellers. Porsche is being sued by short sellers of Volkswagen (VLKAY.PK) stock. The group of short sellers claim that Porsche misled investors by denying it planned to acquire Volkswagen and by using manipulative trades to hide its stock positions, and then sent the stock rocketing as short sellers tried to cover their positions. The plaintiffs are seeking to recover more than $1B in damages. White House aims for stimulus, and reduced spending. Gearing up for the State of the Union address tomorrow, the White House released details on a series of initiatives meant to help middle-class families, including a set of tax credits and an automated-IRA system for workplaces. Obama also proposed a three-year freeze on domestic spending accounting for one-sixth of the federal budget. The freeze would save $250B by 2020. In addition, Democratic lawmakers are considering an $80B jobs-stimulus package that would provide tax credits to small and medium-sized businesses that hire workers. Apple's healthy earnings beat. Apple (AAPL) posted better-than-expected quarterly results (see details below), buoyed by strong sales across most of its product lines. However, Apple's results were also helped by new accounting rules allowing the firm to recognize all the revenue for iPhone sales at the time the devices are sold, rather than having to defer that revenue over 24 months. (Read Apple's earnings call transcript) GM's Whitacre chooses himself for CEO. Edward Whitacre, chairman and interim CEO of General Motors, said he will assume the position of permanent chief executive. Whitacre said staying on as CEO hadn't been his original intention but that the firm needs stability and he felt increasingly comfortable in the job. Separately, GM acknowledged it held advanced talks with Spyker Cars, but said it's still moving forward with plans to wind down its Saab unit. China raises select reserve ratios. Asian markets traded heavily down (see details below) following reports that China moved forward today with a planned increase in required reserves for some of its banks. Some banks were also told to suspend new lending for the rest of the month. In another move that surprised markets, the central bank left yields unchanged in its closely watched one-year bill sale, though analysts think this is just a pause in tightening policy and not a reversal. More cyber-attacks. A Chinese human-rights group said it and four other advocacy and news organizations were targeted in cyber-attacks over the weekend. The group said that the hackers were "of unknown origin" but hinted the Chinese government might be to blame. Goldman caps U.K. pay. Goldman Sachs (GS) is capping compensation at £1M ($1.6M) for the company's partners in London, in response to the one-time 50% bonus tax announced by U.K. Prime Minister Gordon Brown last month. Most other firms subject to the tax are spreading the penalty out across a wider swathe of employees, sometimes across their entire workforces. Home sales drop. Existing Home Sales fell 16.7% to 5.45M in December, vs. expectations of 5.78M. The supply of homes rose to 7.2 months. NAR chief economist Lawrence Yun said there were no surprises in the data, but noted that although "sales are on track to rise again in 2010," the labor market "remains a concern and could dampen the housing recovery – job creation is key to a continued recovery in the second half of the year.” Earnings: Tuesday Before Open Baker Hughes (BHI): Q4 EPS of $0.43 beats by $0.08. Revenue of $2.4B (-24%) vs. $2.3B. (PR) Corning (GLW): Q4 EPS of $0.44 beats by $0.02. Revenue of $1.5B (+41%) vs. $1.4B. (PR) DuPont (DD): Q4 EPS of $0.44 beats by $0.03. Revenue of $6.4B (+10%) vs. $6.1B. (PR) MGIC Investment (MTG): Q4 EPS of -$2.25 beats by $1.1. Revenue of $406M (-2%) vs. $394M. (PR) Regions Financial (RF): Q4 EPS of -$0.51 misses by $0.17. (PR) Tellabs (TLAB): Q4 EPS of $0.09 beats by $0.02. Revenue of $389M (-5%) in-line. (PR) Travellers (TRV): Q4 EPS of $2.12 beats by $0.63. Revenue of $6.4B (+11%) vs. $5.2B. (PR) Weatherford International (WFT): Q4 EPS of $0.02 misses by $0.09. Revenue of $2.4B (-8%) vs. $2.3B. (PR) Earnings: Monday After Close Amgen (AMGN): Q4 EPS of $1.05 misses by $0.08. Revenue of $3.8B (+2%) vs. $3.85B. Expects fiscal 2010 capex of about $600M. (PR) Apple (AAPL): FQ1 EPS of $3.67 beats by $1.60. The company elected to adopt required accounting standards changes related to revenue recognition, retrospectively. Revenue of $15.7B (+32%) vs. $12B. Sees Q2 EPS of $2.06-2.18 vs. $1.77, on sales of $11B-11.4B vs. $10.4B. Gross margin of 40.9% vs. year-ago 37.9%. Sold 3.36M Macintosh computers, up 33% from year ago. Sold 8.7M iPhones, up 100% from year prior. Sold 21M iPods, an 8% decline. (10-Q, PR) Atheros Communications (ATHR): Q4 EPS of $0.62 beats by $0.09. Revenue of $186M (+89%) vs. $175M. (PR) Olin (OLN): Q4 EPS of $0.28 may not be comparable to estimates of -$0.05. Net income of $21.8M incorporates $37M of pretax recoveries of environmental costs expensed in prior periods and $1.2M pretax gain from sale of a manufacturing facility. Revenue of $351M (-19%) vs. $330M. (PR) Packaging Corp. of America (PKG): Q4 EPS of $0.16 beats by $0.03. Revenue of $532M (-3%) vs. $510M. Sees Q1 EPS of $0.12 vs. $0.17. (PR) SL Green Realty (SLG): Q4 FFO of $0.87 misses by $0.01. Revenue of $247M (-8%) vs. $239M. (PR) Texas Instruments (TXN): Q4 EPS of $0.52 beats by $0.03. Revenue of $3B (+21%) in-line. Expects Q1 EPS of $0.44-0.52 vs. $0.43, on revenues of $2.95B-3.19B vs. $2.83B. (PR) VMware (VMW): Q4 EPS of $0.31 beats by $0.05. Revenue of $608M (+18%) vs. $554M. Sees Q1 revenue of $580M-600M vs. $530M. (PR) Zions Bancorp (ZION): Q4 EPS of -$1.26 beats by $0.38. Net interest income of $457M (-10%). Net loan charge-offs of $292.1M vs. $381.3M in Q3. (PR) Today's Markets In Asia, Nikkei -1.8% to 10,325. Hang Seng -2.4% to 20,109. Shanghai -2.4% to 3,019. BSE closed. In Europe at midday, London -0.5%. Paris -0.6%. Frankfurt -0.4%. Futures: Dow -0.4%. S&P -0.55%. Nasdaq -0.2%. Crude -1% to $74.49. Gold flat at $1,095.20. Tuesday's Economic Calendar FOMC Meeting, Day 17:45 ICSC Retail Store Sales8:55 Redbook Chain Store Sales9:00 S&P Case-Shiller Home Price Index10:00 Consumer Confidence10:00 FHFA Housing Price Index10:00 State Street Investor Confidence Index10:00 Richmond Fed Mfg.5:00 PM ABC Consumer Confidence Index Notable earnings before Tuesday's open: ABC, BHI, CVG, CBE, GLW, DAL, DD, EMC, FPL, JNJ, MHP, MTG, NVS, NUE, BTU, RF, SHW, TLAB, TRV, X, VZ, WFT Notable earnings after Tuesday's close: ALTR, BXP, CNI, ELY, GILD, IDTI, MCK, MOLX, PTV, QLGC, RFMD, STLD, STM, SYK, TSFG, YHOO Seeking Alpha editors Eli Hoffmann and Jason Aycock contributed to this post.

  • Wall Street Breakfast: Must-Know News

    Apple: What recession? Apple (AAPL) customers continued to buy up iPhones and Mac computers, seemingly ignoring the recession and helping the company's Q4 results shine. "We are thrilled to have sold more Macs and iPhones than in any previous quarter," Steve Jobs said. Apple easily exceeded analysts' Q4 earnings expectations as back-to-school promotions drove sales: revenue grew 25% to $9.87B versus last year's quarter, while net income surged 47% to $1.67B (see more numbers below). Apple shares rose 7.2% to $203.43 in after-hours trading; the stock has more than doubled this year. Read Apple's earnings call. Lehman's Europe unit readies $90B claim. Lehman's European arm, now managed by PricewaterhouseCoopers, is preparing a new $90B claim against the U.S. parent of the failed bank - bringing the unit's total claims against various Lehman entities globally to $208B. PwC fees for managing the wind-down so far: €168M ($253M). Icahn targets CIT. Corporate raider Carl Icahn turned up the heat on CIT Group (CIT) Monday, slamming the company for unfairly favoring large bondholders with its revised debt exchange offer and saying he was prepared to offer a better deal by lending the company $6B and saving it $150M in fees. In a letter to CIT's board, Icahn said the proposed alternative $6B loan package is "the latest example of incompetent and unconscionable behavior" from CIT's board. Prospective lenders, he says, would get well in excess of what the current syndicated loan market should dictate, in exchange for voting their debt in favor of the company's reorganization plan. Morgan confirms Van Kampen sale to Invesco. Morgan Stanley (MS) confirmed Monday that it's selling its retail asset-management business, including the Van Kampen fund unit, to Invesco (IVZ), for $1.5B in stock and cash, including a 9.4% stake in Invesco. "By taking a minority interest in Invesco, Morgan Stanley will be able to realize significant value in partnership with a world-class player," co-president James Gorman said. The deal, rumored for months and expected to close in mid-2010, will remove some sales limits that Van Kampen managers faced since Morgan's JV with Smith Barney closed. Bernanke warns U.S., Asia to mind the gap. Fed chairman Ben Bernanke called on U.S. and Asian leaders to "avoid ever-increasing and unsustainable imbalances in trade and capital flows," saying the U.S. financial system is currently "overwhelmed" by an inflow of capital. Speaking Monday at a San Fran. Fed conference on Asia, Bernanke warned that while the U.S. trade deficits with developing countries are not as onerous as they were two years ago, they are still a threat to the global economy. World leaders believe global economic growth must begin to depend less on the U.S. consumer. Fed tests exit tool... As global central banks begin to weigh inflation risks, the Fed confirmed Monday it has begun experimenting with "triparty" reverse repo agreements, but says their actual use is not imminent. In a reverse repo, the Fed pledges mortgage-backed securities and Treasurys it bought as collateral for short-term loans, thereby draining cash from the financial system. Reverse repos are normally the domain of the 18 primary dealers; the experiment involves extending that to deals with the $2.5T money-market mutual fund business. ... while Australia says inflation risk looms. The Reserve Bank of Australia believes that the risk to global economic growth is passing, and that the bigger threat is now inflation. "Keeping interest rates at very low levels for an extended period could therefore threaten the achievement of the inflation target over the medium term," according to minutes from its Oct. 6 meeting, released Tuesday. At the meeting, the RBA unexpectedly raised its policy rate by 0.25% to 3.25% - its first such hike since March 2008, and the first in a major developed economy since the start of the financial crisis last year. Galleon faces massive withdrawals. Clients of hedge-fund giant Galleon jumped ship Monday after Friday's arrest of co-founder Raj Rajaratnam, forcing Galleon to unload some of its holdings, including tech stocks. So far, investors have requested $1.3B of the total $3.7B Galleon manages, and two of its brokerage firms - Bank of America (BAC) and Barclays (BCS) - have cut off relations with the firm. In a letter to investors and employees Monday evening, Rajaratnam said the charges "are, without exception, entirely baseless," and vowed to defend the firm. Financial sector fraud on the rise. Fraud is increasing twice as fast in the financial sector as in other sectors, according to Kroll's annual Global Fraud Report, released Monday. In a survey, senior executives said North America had been particularly hit hard by the financial crisis: the average financial services company lost over $15M to fraud over the past three years. The report comes as sources say investigators plan to charge 10 more securities dealers with insider trading, some linked to Galleon Group, which is at the center of one of the biggest-ever undercover operations into illegal trading (see above). Bair speaks up for small banks. FDIC head Sheila Bair warned Monday small community banks are struggling to compete against their too-big-to-fail rivals. "Too big to fail has become worse," she said, "it's become explicit when it was implicit before." Bair contends government guarantees create competitive disparities between large and small banks, because "everybody knows small institutions can fail," making it more expensive for them to raise capital and secure funding. China fires new salvo in trade tussle. In the latest in a series of China-U.S. trade disputes, China's Ministry of Commerce took preliminary measures Monday to impose tariffs of as much as 36% on certain nylon imports from the U.S., saying the imports have damaged the domestic industry. The ruling affects imports of Nylon 6, used to manufacture a variety of products, including toothpaste and chiffon. Affected U.S. firms include BASF's (BASFY.PK) U.S. arm and Honeywell (HON). Group support for Microsoft/Yahoo tie-up. In an open letter, advertising industry heavyweights urged the Department of Justice to fast-track approval of a Microsoft (MSFT) / Yahoo (YHOO) tie-up, saying the potential benefits for advertisers, marketing services agencies, Web site publishers and consumers are "too important to wait for." Google (GOOG) remained more circumspect, perhaps because it doesn't want to alienate customers. Earnings: Before Open Bank of New York Mellon (BK): Q3 EPS of $0.54 beats by $0.06. Revenue of $3.33B (+3.7%) vs. $3.18B. Provision for credit losses goes to $147M from $61M last quarter. (PR) Biogen Idec (BIIB): Q3 EPS of $1.12 beats by $0.08. Revenue of $1.12B (+2.8%) in-line. Shares -1.9% premarket. (PR) BlackRock (BLK): Q3 EPS of $2.10 beats by $0.17. Revenue of $1.14B (-13.2%) in-line. "Improving investor sentiment was the most important factor in third quarter results. Clients are putting money back to work in the markets, driving inflows in equities and bonds, and outflows in money market funds industry-wide." Shares +0.9% premarket. (PR) Brinker International (EAT): FQ1 EPS of $0.17 beats by $0.02. Revenue of $778M (-20.9%) vs. $766M. Cost of sales fell to 28.2% from 28.4% last quarter. (PR) Caterpillar (CAT): Q3 EPS of $0.64 beats by $0.58. Revenue of $7.29B vs. $7.49B. "We believe the third quarter marked the low point for Caterpillar sales and revenues in what has been the toughest recession since the 1930s. We are seeing encouraging signs that indicate a recovery may be underway." Shares +4.4% premarket. (PR) China Mobile (CHL): Q3 net profit of 28.6B yuan ($4.2B), up 2.6% from 27.9B last year, short of consensus of 29.2B. Sales rose 9% to 114.1B yuan. Ebitda rose 5% to 57.8B yuan, short of 58.1B consensus. (Bloomberg) China Telecom (CHA): Q3 profit of 2.39B yuan ($350M), down from 4.6B last year, and well short of consensus of 3.68B. Ebitda profit margin slipped to 41.1% from 42.3%. (Reuters) Coach (COH): FQ1 EPS of $0.44 beats by $0.05. Revenue of $761M (+1.1%) vs. $754M. (PR) Coca-Cola (KO): Q3 EPS of $0.82 in-line. Revenue of $8.04B (-4.2%) vs. $8.11B. "We expect the consumer to continue facing economic uncertainties into 2010 and for consumer sentiment to recover slowly.: Shares -1.2% premarket. (PR) Comerica (CMA): Q3 EPS of -$0.10 beats by $0.43. $311M provision for loan losses, unchanged from Q2. (PR) Diamondrock Hospitality (DRH): Q3 FFO of $0.19 beats by $0.02. Revenue of $138M (-14.6%) vs. $134M. (PR) DuPont (DD): Q3 EPS of $0.45 beats by $0.12. Revenue of $5.96B (-18.3%) vs. $6.14B. Sees full-year EPS of $1.95-2.05 vs. $1.83. "We see overall sequential improvement in our industrial businesses as market conditions begin to firm." (PR) Forest Laboratories (FRX): FQ2 EPS of $0.85 misses by $0.01. Revenue of $963M (+4%) vs. $1B. (PR) Great Atlantic & Pacific Tea Company (GAP): FQ2 EPS of -$1.18 misses by $0.47. Revenue of $2.06B (-5.4%) vs. $2.13B. "The current challenging economy continues to impact our business. The macro headwinds including rising unemployment, intensifying price competition and now also deflation are creating an even more difficult short-term economic environment." Shares -9.7% premarket. (PR) Illinois Tool Works (ITW): Q3 EPS of $0.60 beats by $0.07. Revenue of $3.58B (-19.8%) in-line. Operating margin 13.5% up from 9.9% last quarter. (PR) Invesco (IVZ): Q3 EPS of $0.24 in-line. Revenue of $706M vs. $687M. Shares +3.6% premarket. IVZ announced yesterday it would acquire Morgan Stanley's (MS) retail asset management business, including Van Kampen Investments." (PR) Jefferies Group (JEF): Q3 EPS of $0.42 beats by $0.14. Revenue of $M (+154.5%) in-line. Shares +6.1% premarket. (PR) Journal Communications (JRN): Q3 EPS of $0.02 misses by $0.06. Revenue of $105M (-22.9%) vs. $108M. (PR) LaBranche (LAB): Q3 EPS of -$0.22 misses by $0.27. Revenue of $M in-line. Shares -4.9% premarket. (PR) Lockheed Martin (LMT): Q3 EPS of $2.07 vs. consensus of $1.83. Revenue of $11.06B (+4.5%) vs. $11.4B. (PR) Lexmark (LXK): Q3 EPS of $0.65 beats by $0.20. Revenue of $958M (+6%) vs. $901M. Gross margin 32.7% vs. 32.5%. Sees Q4 EPS of $0.50-0.60 vs. $0.47, revenue "up slightly." Stronger than expected customer demand drove better than expected growth. (PR) Marshall & Ilsley (MI): Q3 EPS of -$0.68 in-line. Average loans and leases fell 6% to $47.1B. "There are some encouraging early signs that credit quality is improving, but we realize it will take a few more quarters to fully address our problem loans." Announces $775M common stock offering. (PR) Parker-Hannifin (PH): FQ1 EPS of $0.45 beats by $0.28. Revenue of $2.24B (-27%) vs. $2.17B. Shares +4.9% premarket. (PR) Pfizer (PFE): Q3 EPS of $0.51 beats by $0.03. Revenue of $11.62B (-2.9%) vs. $11.41B. Sees full-year EPS of $2.00-2.05 vs. $1.98. (PR) Precision Castparts (PCP): FQ2 EPS of $1.54 misses by $0.09. Revenue of $1.3B (-27.6%) vs. $1.4B. "From a top-line perspective, overall sales declines seem to be bottoming out in the second quarter." (PR) Regions Financial (RF): Q3 EPS of -$0.37 misses by $0.12. Revenue of $1.62B (-20.3%) vs. $1.58B. Allowance for credit losses +2.9% to $1.025B. Shares +0.35% premarket. (PR) Sherwin Williams (SHW): Q3 EPS of $1.51 beats by $0.16. Revenue of $2B (-12%) in-line. Sees Q4 EPS of $0.35-0.55 vs. $0.61, and revenue down 8-12% Y/Y. (PR) State Street (STT): Q3 EPS of $1.05 beats by $0.01. Revenue of $2.24B (-19.3%) in-line. Shares -0.75% premarket. (PR) UAL (UAUA): Q3 EPS of -$0.43 beats by $0.51. Revenue of $4.43B (-20.3%) in-line. Shares +8.1% premarket. (PR) UnitedHealth (UNH): Q3 EPS of $0.89 beats by $0.12. Revenue of $21.7B (+7.6%) vs. $21.56B. (PR) United Technologies (UTX): Q3 EPS of $1.14 beats by $0.02. Revenue of $13.38B (-11.3%) in-line. "Order rates for most of our businesses have largely stabilized, although the shape of recovery is still uncertain." (PR) Western Union (WU): Q3 EPS of $0.33 beats by $0.01. Revenue of $1.31B (-4.6%) in-line. Says recent stabilization trends are encouraging. (PR) Earnings: Mon. After Close Apple (AAPL): FQ4 EPS of $1.82 beats by $0.40. Sales of $9.87B vs. $9.2B. Sees FQ1 EPS of $1.70-1.87 vs. consensus of $1.91 on sales of $11.3-11.6B, in line. Sold 3.05M Macs, 10.2M iPods, and 7.4M iPhones during quarter. Gross margin 36.6%. Shares +5.9% AH. (PR) Atheros Communications (ATHR): Q3 EPS of $0.46 beats by $0.08. Revenue of $157M (+13%) vs. $147M. Shares +2.1% AH. (PR) Boston Scientific (BSX): Q3 EPS of $0.19 beats by $0.05. Revenue of $2.03B (+3%) vs. $2.04B. Sees Q4 EPS of $0.17-0.21 vs. $0.17. Expects full-year adjusted EPS of $0.75-0.79 vs. $0.56. Shares -7% AH. (PR) JDA Software Group (JDAS): Q3 EPS of $0.40 beats by $0.04. Revenue of $96M (-3%) vs. $92M. Shares -2.8% AH. (PR) Lincare (LNCR): Q3 EPS of $0.53 beats by $0.01. Revenue of $393M (-3%) vs. $391M. Shares -0.8% AH. (PR) Packaging Corp. of America (PKG): Q3 EPS of $0.25 in-line. Revenue of $554M (-11%) vs. $549M. Sees Q4 EPS of $0.13 vs. $0.17. Shares -7.4% AH. (PR) Steel Dynamics (STLD): Q3 EPS of $0.30 beats by $0.07. Revenue of $1.2B (-54%) vs. $1.1B. Shares +2.6% AH. (PR) Texas Instruments (TXN): Q3 EPS of $0.42 beats by $0.03. Revenue of $2.9B (-15%) vs. $2.8B. Sees Q4 EPS of $0.42-0.50 vs. $0.40. "Our balance sheet is strong and has allowed us to opportunistically make investments in Analog and Embedded Processing throughout this downturn that should provide returns for years to come." Shares +2% AH. (PR) UDR Inc. (UDR): Q3 FFO of $0.31 beats by $0.01. Rental income of $150M (+2%) vs. $149M. Lowers full-year FFO guidance to $1.14-1.20 from $1.23-1.35, vs. consensus of $1.27. Shares -0.5% AH. (PR) Volterra Semiconductor (VLTR): Q3 EPS of $0.19 misses by $0.01. Revenue of $29.7M (-3%) in-line. Shares -10.3% AH. (PR) Werner (WERN): Q3 EPS of $0.26 beats by $0.06. Revenue of $429M (-27%) vs. $428M. Shares +3.3% AH. (PR) Zions Bancorp (ZION): Q3 EPS of -$1.41 misses by $0.17. Revenue of $753M (+29%) vs. $633M. Shares -1.1% AH. (PR) Today's MarketsAsian markets were mostly higher Tuesday, while Europe stocks were mostly lower. Nasdaq futures are well higher on the strength of Apple's (AAPL) blowout Q4; other indexes are flat.

  • Wall Street Breakfast: Must-Know News

    JPMorgan, Morgan Stanley take back $7B in ARS. JPMorgan (JPM) and Morgan Stanley (MS) settled with regulators Thursday, agreeing to buy back at part more than $7B in illiquid auction-rate securities that were marketed as near-cash equivalents. They will also will pay damages to retail clients who sold their holdings for a loss. "The industry is taking responsibility for correcting a problem they helped create and that's a good thing," NY AG Andrew Cuomo said. "The fundamental goal has been to return money into the hands of investors and that's what these deals do." JPM rose 3%; MS +1%. Economists expect GSE bailout. A WSJ survey of economists finds chances are better than 50/50 (59%) that the Treasury will ultimately prop up Fannie Mae (FNM) and Freddie Mac (FRE) with taxpayer money, despite Secretary Hank Paulson's insistence to the contrary. "Blank checks almost always get filled in and cashed," one says wryly. One-third think the GSEs should be nationalized now. FNM +7%; FRE +8%. After you finish reading Wall Street BreakfastSeeking Alpha's Market Currentswill keep you current all day long. Bank funds still draw. Funds that invest in banks are attracting more money, even as they post their biggest losses in almost five decades. Financial ETFs raised $8.6B since January - while banks in the S&P 500 lost 54% from their 2007 records. Robert Leiphart of Birinyi Associates explains "When people say, 'It's the worst it's ever been,' it's usually the bottom and the time to start to buy." Not everyone is so bullish: some are investing in bank funds to hedge short positions on financial stocks. Oil speculators: Slippery target. New data show oil market speculators are playing a more prominent role than previously understood. A recent reclassification of large market players bumped speculators' share of trade to 49% from 38%, a development that will bolster calls to increase regulation - and will force authorities to gain a better understanding of who's in the market and why they're there. Pickens still an oil bull. Despite oil's recent pullback, T. Boone Pickens says crude will not drop below $100 due to America's heavy dependence on foreign oil. Yesterday the NY Post reported Pickens' hedge fund, BP Capital, which manages about $7B in assets, plunged 35% in July. BP suffers Russia blow. A Moscow labor court banned TNK-BP (BP) CEO Robert Dudley from holding executive office in Russia for two years. BP's Russian JV partners "are getting away with nothing short of murder... they can terrorize BP, making any excuse to wrestle control of their joint venture," Oppenheimer analyst Fadel Gheit said. "You cannot run a company long distance like that." If TNK-BP is forced to take on a new CEO, Russian stakeholders will be in the driver's seat to make the choice. Google-powered smartphone by Christmas. A Google-powered (GOOG) phone is finally here, almost. T-Mobile (DT) will be the first carrier to offer a mobile phone powered by Google's Android software, and the phone is expected to go on sale in the U.S. before Christmas - possibly as early as October. The high-end phone is expected to compete with Apple's (AAPL) iPhone and other smartphones from Palm (PALM), RIM (RIMM), Microsoft (MSFT), and Nokia (NOK). The phone will have a touch screen, like the iPhone, and will also have a full five-row keyboard that slides out. Soros Fund buys big stake in Petrobras. Soros Fund Management bought an $811M stake in Petroleo Brasileiro [Petrobras](PBR) in Q2, making the Brazilian oil company its largest holding at 22% of the fund. Soros has been increasing his mining and commodities holdings, and in November Petrobras announced the discovery of a new oil field, the largest such find in the Americas in over thirty years. Share of Petrobras, however, have fallen 28% since June 30, marking a $235M loss in value for the fund. More newspaper downsizing. Gannett (GGI) said it is cutting jobs 1,000 jobs at its Community Publishing division. McClatchy (MNI) said it will freeze wages for all employees for one year. GGI +10.6%. MNI +2.6%. GM rises 10.6% on downsizing, Volt plans. GM (GM), struggling to turn profitable as demand falls for its cars and trucks, said Thursday it will cut capacity by 500,000 vehicles between now and 2010, moving production away from trucks, with minimal capital investments. It also said it will finalize the design of the all-electric Chevy Volt by mid-September, and hopes to have 50 prototypes by the end of 2008. Global picture gets gloomier. Four of the world's five top economies (U.S., euro-zone, Japan, U.K. Not: China) are now flirting with recession, a trend that will pressure multinational corporations and stock market investors who until recently thought the global marketplace had decoupled from the U.S. "The global economy is sputtering amidst a widening in the slowdown from the United States to Western Europe and Japan," JPMorgan economist David Hensley says, noting emerging economies are also beginning to feel the squeeze. Most recent data points: 0.2% GDP contraction in the euro-zone; 5.6% inflation in the U.S. CPI jumped to 5.6% Y/Y, way higher than the 5.1% consensus. Core CPI also exceeded expectations; +0.3% vs. +0.2%. Prices increased 0.8% from June, double economist consensus of 0.4%. Economist Keith Hembre says we've probably seen the peak of the inflation readings, at least in the near-term. Some anomalous readings are likely to reverse out in coming months. Weekly jobless claims were 450,000, down 10K from last week (revised to 460K from 455K), but 15K above consensus. The four-week moving average jumped by 19,500 to 440,500. Existing Home Sales fell 16% to 4.91M in Q2, the NAR says. Prices fell by 7.6% to $206,500 as surging foreclosures drove bargains. Foreclosures and short sales (homes sold for less than the unpaid mortgage balance) accounted for 1/3 of all Q2 sales. China's factory and property spending growth accelerates, with urban fixed-asset investment jumping 26.8% in H1 (vs. an expected 26.6%). The latest of several indicators underscoring the strength of the world's fastest-growing major economy. Earnings: Before Friday's Open Abercrombie & Fitch (ANF): Q2 EPS of $0.88 beats by $0.02. Revenue of $846M (+5.1%) vs. $851M. Sees 2009 EPS of $4.95-5.00 vs. $5.36. [PR] New York & Company (NWY): Q2 EPS of $0.14 beats by $0.05. Revenue of $296M (+3.8%) vs. $284M. [PR] Earnings: After Thursday's Close Agilent Technologies (A): FQ3 EPS of $0.57 beats by $0.03. Revenue of $1.44B (+5.1%) in-line. Sees FQ4 EPS of $0.58-0.62 vs. $0.64. Shares +0.4%. [PR] Autodesk (ADSK): Q2 EPS of $0.56 beats by $0.04. Revenue of $619.5M (+17.8%) vs. $606M. Shares +8.9%. [PR] Kohl's (KSS): Q2 EPS of $0.77 beats by $0.04. Revenue of $3.73B (+3.8%) in-line. Sees Q3 EPS of $0.51-0.56 vs. $0.57. Shares +4%. [PR] Nordstrom (JWN): Q2 EPS of $0.65 beats by $0.01. Revenue of $2.29B (-4.3%) vs. $2.31B. Sees Q3 EPS of $0.49-0.54 vs. $0.56. Shares -2.1%. [PR] Today's Markets Asia Friday: Nikkei +0.48% to 13,019. Hang Seng -1.09% to 21,161. Shanghai +0.56% to 2,451. BSE Sensex -2.44% to 14,724. Europe markets are higher at midday. London +0.1%. Paris +0.6%. Frankfurt +0.3%. U.S. futures: Dow +0.32%. S&P +0.31%. Nasdaq +0.29%. Crude -1.57% to $113.21. Gold -3.23% to $788.20. Silver -9.9% to $12.82. Friday's Economic Calendar 8:30 Empire State Mfg Survey9:00 Treasury International Capital 9:15 Industrial Production10:00 UofM Consumer Confidence Notable earnings before Friday's open: ANF, JCP Seeking Alpha editor Rachael Granby contributed to this post. Get Wall Street Breakfast by email -- it's free and takes only seconds to sign up.

  • Wall Street Breakfast: Must-Know News

    Stress tests may reveal banks' capital needs. As the May 4 reveal date for stress tests draws closer, officials are considering releasing assessments for each of the 19 banks and may require those that need more capital to disclose how they plan to raise additional funds. Under that scenario, lenders would have to specify whether they want to convert government preference shares, issue more stock or rely on an additional bailout. The push for disclosure is meant to help the public better discern between the health of individual banks. Sources say regulators want the banks to have at least 3% tangible common equity. Lewis: Fed, Treasury urged Merrill silence. According to a recently obtained copy of CEO Ken Lewis' February testimony to New York's attorney general, Bernanke and then-Treasury chief Paulson pressured Bank of America (BAC) to stay silent on its increasingly troubled deal to acquire Merrill Lynch. Despite an obligation to disclose any material financial hits to shareholders, officials pressed Lewis to keep quiet during government-funding negotiations to ensure important financial institutions wouldn't fail. Publicizing Merrill's losses would have allowed Bank of America's shareholders the opportunity to stop the deal and let Merrill collapse. Counter-counter-offer on Chrysler debt. After rejecting a too-rich counter-offer from Chrysler creditors, the Treasury has reportedly raised its own offer in an effort to reach a deal with lenders by the end of the month. The new deal would see lenders get $1.5B of first-lien debt and a 5% equity stake in a restructured Chrysler in exchange for the $6.9B of debt they now hold. The Treasury had previously suggested lenders write off all but $1B of the debt and receive no stock. GM to miss debt payment, idle plants. Trying to avoid bankruptcy ahead of the government's June 1 deadline, General Motors (GM) may rush to close dealerships, scrap models and could idle most of its plants for around two months this summer. The moves could help GM break even with annual sales as low as 10M vehicles. Meanwhile, CFO Ray Young said the company doesn't plan to pay off $1B of debt due June 1, and will instead swap the debt for shares or rely on bankruptcy protection. The tougher public stance towards bondholders is meant to lay the groundwork for what promises to be an ugly debt-for-equity swap GM expects to launch by next week. Hard times for Hartford. Hartford Financial Services (HIG) is said to be seeking bids from rivals including Travelers Companies (TRV) for its flagship property insurance business. Sources said Hartford has been shopping the unit after losses in its life division led to credit downgrades, and that damage from the financial crisis may ultimately lead to a breakup of the insurer. The property unit is estimated to be worth $4B-$8B. Obama meets with credit card chiefs. Obama will meet with executives from the credit card industry today, one day after a congressional panel approved legislation to curb credit card fees and limit consumer penalties. The American Bankers Association is concerned such restrictions will tighten the availability of consumer credit and make it more expensive. Bank of America (BAC), American Express (AXP), Citigroup (C), Wells Fargo (WFC), JPMorgan Chase (JPM), Capital One (COF), Visa (V) and Mastercard (MA) will be among the 13 companies represented. NY cracks down on pension agents. New York State's public pension fund will ban the use of middlemen who help private-equity funds and other investors secure its business. The state is investigating whether these middlemen, called placement agents, were involved in a scheme to receive illegal payments from firms trying to win state business. As one of the nation's largest public pension funds, New York's decision could prompt other states to follow suit. Morgan mulls TARP repayment. Despite reporting a larger-than-expected quarterly loss, Morgan Stanley (MS) CFO Colm Kelleher said the company will 'consider' repaying $10B to the government. The statement comes less than a month after CEO John Mack told employees 'it's the wrong time' to return the money. Morgan Stanley had a Tier 1 ratio of 16.4% at the end of March, or 12.9% if the bank repays TARP funds. Shares +2.9% premarket (7:00 ET). Credit Suisse profit beat. Credit Suisse (CS) posted a better-than-expected Q1 profit, bouncing back from several quarterly losses in 2008. The bank saw a net profit of 2B Swiss francs ($1.72B), more than double analysts' forecasts. Though short on details for its 2009 outlook, the bank said it is "in a position to weather the storms and perform well when market opportunities arise." Shares +10.5% premarket (7:00 ET). Apple shines on iPhone sales. Apple's (AAPL) quarterly earnings easily beat consensus estimates (see details below) as strong sales of iPods and iPhones held up despite the weak economy. Profit was also helped by declining commodity prices for key product components like aluminum and memory chips. This was the company's first quarter since CEO Steve Jobs went on medical leave. eBay gets okay on Gmarket buy. eBay (EBAY) won regulatory approval from South Korea's antitrust watchdog to proceed with its planned purchase of Gmarket (GMKT). A majority of Gmarket shareholders have already agreed to the cash tender offer. Glaxo to release study after long delay. GlaxoSmithKline (GSK) will release the first study comparing its cervical cancer vaccine with Merck's (MRK) blockbuster Gardasil at a May 10 medical meeting. The fact that the results are being released 14 months after the study concluded and at a relatively unknown meeting have left investors and analysts puzzled. Freddie CFO takes his own life. Acting CFO of Freddie Mac (FRE) David Kellerman was found dead in his home in what appears to be a suicide. Kellerman had worked at the mortgage giant for 16 years. House prices rise slightly (.pdf). FHFA's House Price Index showed U.S. home prices rose 0.7% in February M/M, bringing the twelve-month total to -6.5%. January's previously reported 1.7% gain was revised down to 1.0%. Earnings: Thursday Before Open AmerisourceBergen (ABC): FQ2 EPS of $0.95 beats by $0.06. Revenue of $17.31B (-2.5%) vs. $17.93B. Sees full-year EPS of $3.18-3.30 vs. $3.19. (PR) Alexion Pharmaceuticals (ALXN): Q1 EPS of $0.16 beats by $0.02. Revenue of $81M (+78.7%) vs. $82M. (PR) AU Optronics (AUO): Q1 EPS of -$0.71 misses by $0.04. Revenue of $1.5B (-66.7%) in-line. Expects utilization rates to improve substantially in Q2. (PR) AutoNation (AN): Q1 EPS of $0.23 beats by $0.07. Revenue of $2.47B (-35.6%) vs. $2.74B. Says it reduced debt by $500M in Q1, and remains in compliance with all debt covenants. Sees sales improving in H2. (PR) Black & Decker (BDK): Q1 EPS of $0.22 beats by $0.14. Revenue of $1.07B (-28.2%) vs. $1.16B. Sees full-year EPS of $1.50-1.90 vs. consensus of $1.79. (PR) Bunge (BG): Q1 EPS of -$1.76 misses by $2.25. Revenue of $9.2B (-26.2%) vs. $11B. (PR) Canadian Pacific Railway (CP): Q1 EPS of C$0.39 misses by C$0.09. Revenue of C$1.07B (-6.6%) vs. C$1.04B. "The unprecedented temporary decline in traffic in some of our key markets (as measured by carloads), particularly potash (-70%), Canadian coal (-30%), and automotive (-43%) has resulted in more than 2,400 employee layoffs to date." (PR) Celestica (CLS): Q1 EPS of $0.13 beats by $0.04. Revenue of $1.47B (-20%) vs. $1.51B. Q2 guidance in line. (PR) CIT Group (CIT): Q1 EPS of -$1.30 misses by $0.84. Tier-1 capital ration 9.3%. (PR) CME Group (CME): Q1 EPS of $3.20 in-line. Revenue of $647M (+3.5%) vs. $656M. Average rate per contract increased 12% to $0.83. (PR) ConocoPhillips (COP): Q1 EPS of $0.56 beats by $0.14. Revenue of $30.7B (-44.1%) vs. $26.34B. Shares +4.3% premarket. (PR) CONSOL Energy (CNX): Q1 EPS of $1.08 beats by $0.15. Revenue of $1.22B (+18.8%) in-line. "Energy companies with less than stellar financial positions could find it very difficult to obtain reasonable financing terms to maintain their operations. We believe that this will impact supply and could set the stage for higher coal and natural gas prices as early as '10." Shares +3.5% premarket. (PR) Cooper Industries (CBE): Q1 EPS of $0.47 beats by $0.01. Revenue of $1.26B (-18.7%) vs. $1.32B. Sees Q2 EPS of $0.50-0.60 vs. $0.60 and full-year EPS of $2.30-2.60 vs. $2.40. (PR) Danaher (DHR): Q1 EPS of $0.72 misses by $0.01. Revenue of $2.63B (-13.2%) vs. $2.67B. (PR) Diamond Offshore Drilling (DO): Q1 EPS of $2.51 beats by $0.29. Revenue of $886M (+12.7%) vs. $878.5M. (PR) EMC (EMC): Q1 EPS of $0.16 in-line. Revenue of $3.15B (-9.2%) vs. $3.25B. Sees global IT spending down in the low-double-digits for 2009. Expects $450M in cost reductions, up from a previous estimate of $350M, but says margins will decline due to weaker IT spending. (PR) ENSCO International (ESV): Q1 EPS of $1.56 beats by $0.04. Revenue of $514M (-9.6%) in-line. (PR) Exelon (EXC): Q1 EPS of $1.20 beats by $0.07. Revenue of $4.75B (+3.6%) vs. $4.62B. Reaffirms full-year EPS guidance. Shares +0.4% premarket. (PR) Fifth Third Bancorp (FITB): Q1 EPS of -$0.04 beats by $0.23. Tier 1 capital ratio of 10.9%. Tangible equity ratio of 7.9%. (PR) Goodrich (GR): Q1 EPS of $1.35 beats by $0.28. Revenue of $1.7B (-2.8%) in-line. Sees full-year EPS of $4.50-4.75 vs. $4.63, and revenue of $6.9B vs. $7.1B consensus. (PR) Hershey Foods (HSY): Q1 EPS of $0.38 beats by $0.03. Revenue of $1.24B (+6.5%) vs. $1.19B. Reaffirms 2009 net sales growth of 2-3%. Sees EPS increasing at less than its long-term objective of 6-8%. (PR) JetBlue Airways (JBLU): Q1 EPS of $0.08 beats by $0.05. Revenue of $793M (-2.8%) vs. $810M. Operating margin of 9.3% vs. 2.2% a year ago. First profitable Q1 since 2005. Shares +9.9% premarket. (PR) L-3 Communications (LLL): Q1 EPS of $1.66 beats by $0.03. Revenue of $3.64B (+3.7%) in-line. Reaffirms full-year guidance. (PR) Logitech (LOGI): FQ4 EPS of -$0.20 misses by $0.26. Revenue of $408M vs. $496M. Gross margin fell to 25% from 35.6% last quarter. "Our sales were negatively impacted by the combination of weak consumer demand and the accelerating reset by our channel partners of their weeks of supply." Shares -11.3% premarket. (PR) Marriott International (MAR): Q1 EPS of $0.24 beats by $0.10. Revenue of $2.5B (-14.8%) in-line. Issues downside EPS guidance for Q2 of $0.20-0.23 vs. $0.26 consensus. Maintains guidance for FY '09 of $0.88-1.02 EPS. (PR) Marshall & Ilsley (MI): Q1 EPS of -$0.44 misses by $0.11. Revenue of $M in-line. Q1 loan-loss provision of $478M. Shares +5.6% premarket. (PR) National-Oilwell Varco (NOV): Q1 EPS of $1.13 beats by $0.07. Revenue of $3.48B (+29.6%) vs. $3.29B. "Though the pace of new capital equipment orders has slowed in the short run, we believe investment in drilling equipment will resume, to enable the industry to explore new oil and gas frontiers. Nevertheless market conditions remain very challenging, and the timing of a recovery is uncertain." Shares -4.4% premarket. (PR) NII Holdings (NIHD): Q1 EPS of $0.43 beats by $0.07. Revenue of $M (+961%) in-line. Shares +2.3% premarket. (PR) Novartis (NVS): Q1 earnings of $1.96B ($0.87/share) vs. consensus of $1.89B. Sales fell 2% to $9.71B. Sees drug sales up mid-to-high single-digits. Shares +4.7% premarket. (Bloomberg) Occidental Petroleum (OXY): Q1 EPS of $0.50 beats by $0.13. Revenue of $3.07B (-49%) vs. $3.18B. Production was up almost 8% in Q1. (PR) Philip Morris (PM): Q1 EPS of $0.74 beats by $0.05. Revenue of $5.6B (-5.5%) vs. $5.48B. Reaffirms full-year guidance of $2.85-3.00 vs. consensus of $3.02. (PR) PNC Financial Services (PNC): Q1 EPS of $1.03 beats by $0.61. Revenue of $3.9B (+112.6%) vs. $3.5B. (PR) Potash (POT): Q1 EPS of $1.02 beats by $0.16. Revenue of $922.5M (-51.2%) vs. $975.5M. Issues downside EPS guidance for Q2 of $1.10-$1.50 vs. $2.21 consensus, and FY '09 EPS of $7.00-$8.00 vs. $9.65. (PR) RadioShack (RSH): Q1 EPS of $0.34 beats by $0.12. Revenue of $1B (+5.6%) vs. $0.94B. Comps were up 5% vs. Q1 2008. (PR) Raytheon (RTN): Q1 EPS of $1.11 beats by $0.10. Revenue of $5.88B (+9.9%) vs. $5.6B. Full-year guidance in line. Shares +2.4% premarket. (PR) Royal Caribbean Cruises (RCL): Q1 EPS of -$0.17 beats by $0.17. Revenue of $1.33B (-7.2%) in-line. Sees full-year EPS of $1.35 vs. consensus of $0.97. Shares +13.5% premarket. (PR) Sigma-Aldrich (SIAL): Q1 EPS of $0.68 beats by $0.04. Revenue of $519M (-8.8%) vs. $532M. Full-year guidance in line. (PR) Suncor Energy (SU): Q1 EPS of $0.24 beats by $0.12. The decrease in earnings was primarily from lower price realizations, with benchmark commodity prices significantly weaker in Q1 '09 vs. Q1 '08. (PR) SunTrust Banks (STI): Q1 EPS of -$0.46 beats by $0.19. Revenue of $2.24B (+16.3%) vs. $2.06B. Majority of loss was due to a $715M goodwill impairment charge. Tier-1 ratio estimated at 11%, up 13 points from last quarter. (PR) Supervalu (SVU): FQ4 EPS of $0.87 beats by $0.08. Revenue of $10.82B (+4.2%) in-line. (PR) Thermo Fisher (TMO): Q1 EPS of $0.62 misses by $0.08. Revenue of $2.26B vs. $2.42B. Sees full-year EPS of $2.80-3.10 vs. $3.15, and revenue of $9.6-9.9B vs. $10.14B. "Our customers are clearly delaying their capital purchases in the current environment." Shares -7.6% premarket. (PR) Union Pacific (UNP): Q1 EPS of $0.72. beats by $0.06. Revenue of $3.42B (-20%) vs. $3.55B. "The difficult economic conditions continue to affect our business volumes. During this challenging time, we are reducing costs across the board..." Shares +2.7% premarket. (PR) UPS (UPS): Q1 EPS of $0.52 misses by $0.04. Revenue of $10.94B (-13.7%) vs. $11.44B. Sees Q2 EPS of 0.45-0.55 vs. consensus of $0.65. "Economic indicators tell us recovery in the U.S. might begin late this year, but more likely not until 2010." Shares -3.7% premarket. (PR) US Airways (LCC): Q1 EPS of -$2.28 beats by $0.10. Revenue of $2.46B (-13.6%) in-line. "Our first quarter loss reflects the weakness in the global economy that has negatively impacted revenues throughout our industry. The steps we have taken to adapt to this environment are having a significant positive impact, though, as evidenced by our significant improvement in earnings excluding special items and fuel hedges." Shares +6% premarket. (PR) Zimmer (ZMH): Q1 EPS of $0.95 beats by $0.01. Revenue of $993M (-6.3%) vs. $1B. Sees full-year EPS of $3.85-4.00 vs. $3.88. (PR) Earnings: Wednesday After Close Apple (AAPL): FQ2 EPS of $1.33 beats by $0.24. Revenue of $8.16B vs. $7.96B. Sees FQ3 EPS of $0.95-1.00 vs. consensus of $1.12, and revenue of $7.7-7.9B vs. $8.28B. Mac sales of 2.22M (-3% Y/Y). iPod sales 11M (+3%). iPhone sales 3.79M (+123%). (PR) Alliance Data Systems (ADS): Q1 EPS of $1.19 beats by $0.09. Revenue of $480M (-3.8%) vs. $488M. Sees Q2 EPS of $1.05 vs. $1.22. (PR) eBay (EBAY): Q1 EPS of $0.39 beats by $0.05. Revenue of $2.02B (-7.8%) vs. $1.94B. (PR) Equifax (EFX): Q1 EPS of $0.58 beats by $0.04. Revenue of $453M (-10%) vs. $448M. (PR) F5 Networks (FFIV): FQ2 EPS of $0.38 in-line. Revenue of $154M (-3.1%) in-line. Says Feb. sales were particularly slow, but March improved significantly. (PR) Leggett & Platt (LEG): Q1 EPS of $0.06 misses by $0.01. Revenue of $718M (-28.1%) vs. $807M. Sees full-year EPS of $0.60-0.90 vs. $0.72, and revenue of $2.9-3.3B vs. $3.39B. (PR) Lam Research (LRCX): FQ3 EPS of -$0.71 misses by $0.05. Revenue of $174.4M (-71.6%) vs. $175.9M. (PR) Noble (NE): Q1 EPS of $1.62 beats by $0.16. Revenue of $896M (+4%) in-line. (PR) Novellus Systems (NVLS): Q1 EPS of -$0.47 beats by $0.04. Revenue of $98.9M (-68.6%) vs. $101.7M. Says it's cautiously optimistic order activity has stabilized. (PR) Pactiv (PTV): Q1 EPS of $0.69 beats by $0.23. Revenue of $766M (-5.2%) vs. $732.5M. Sees Q2 EPS of $0.54-0.58 vs. $0.51 and full-year EPS of $2.15-2.25 vs. $1.89. "Compared with the first quarter of last year, we benefited from lower raw material costs, as well as lower logistics costs, and improved productivity." (PR) Robert Half International (RHI): Q1 EPS of $0.06 in-line. Revenue of $823M (-32.8%) vs. $844M. (PR) SLM Corp. (SLM): Q1 EPS of -$0.03 vs. consensus of $0.12. Loss was partly the result of ongoing dislocation in the commercial paper market. (PR) VMware (VMW): Q1 EPS of $0.25 beats by $0.05. Revenue of $470M vs. $474M. Sees Q2 revenue flat to down vs. a year ago. (PR) Xilinx (XLNX): FQ4 EPS of $0.26 beats by $0.08. Revenue of $395M (-17%) vs. $383M. (PR) Yum! Brands (YUM): Q1 EPS of $0.48 beats by $0.08. Revenue of $2.22B (-8.1%) vs. $2.33B. Sees full-year EPS of $2.10 vs. $2.08. Says Q2 likely to be its most challenging quarter. (PR) Today's MarketsOverseas markets moved higher Thursday, giving a boost to futures.

  • Wall Street Breakfast: Must-Know News

    AIG bonus uproar continues. According to a letter New York Attorney General Andrew Cuomo sent to Congress, among the recipients of a so-called retention bonus paid to AIG employees, eleven people no longer work for the insurer and 73 employees received bonuses of $1M or more. As public outcry over the payments continues, Geithner told congressional leaders that the U.S. will recoup executive bonuses paid by AIG (AIG) by deducting the amount from the next $30B aid installment. He also said the government will accelerate the 'wind down' process of restructuring AIG. A bipartisan group of Senators has proposed taxes totalling 70% on bonuses at AIG and other firms receiving emergency federal funds. (Read Geithner's letter to Congress (.pdf))(Read Cuomo's letter to Congress (.pdf)) China cans Coke bid. China has rejected Coca-Cola's (KO) $2.3B bid for China Huiyuan Juice Group (CYUNF.PK), arguing the biggest foreign takeover of a Chinese company would have been 'negative for competition.' The Ministry of Commerce was concerned Coca-Cola might have used its 'dominant position' in the carbonated drinks market to raise prices and limit choices for Chinese consumers while making it more difficult for smaller rivals to survive. The decision will block Coca-Cola, which already controls more than 50% of China's soda market, from expanding its share of China's fast-growing juice market. Sun shines on potential IBM deal. IBM (IBM) is reportedly in talks to buy Sun Microsystems (JAVA) in a deal that would boost IBM's presence in software, on the internet and in finance and telecommunications markets. Both firms make computer systems that aren't reliant on Microsoft's (MSFT) Windows software and their product lines are less dependent than rivals' on Intel's (INTC) microprocessor technologies. If a deal goes through, IBM will likely pay at least $6.5B in cash for the acquisition, a premium of over 100% on Sun's closing price yesterday. Sources say talks could still fall apart, but a deal could go through as early as this week. Premarket: IBM -2.1%, JAVA +62.4% (7:00 ET). NJ sues Lehman execs. New Jersey Attorney General Anne Milgram has filed a lawsuit against 18 Lehman Brothers executives, saying the firm's misrepresentations resulted in $118M in losses for the state. Among the executives named are CEO Dick Fuld, former CFO Christopher M. O'Meara and former president Joseph M. Gregory. The state is also suing Ernst & Young, Lehman's longtime accountants, for allowing Lehman to improperly account for and disclose its true financial condition. Wagoner wavers on bankruptcy view. General Motors (GM) CEO Rick Wagoner has softened his stance on the possibility of bankruptcy, suggesting the company could possibly emerge from a Chapter 11 filing. While Wagoner maintains that '99%' of GM's problems can be solved without a bankruptcy that would be expensive and difficult, he conceded the possibility that bankruptcy could work. GM is currently in talks with the United Auto Workers union over labor costs and with bondholders about reducing debt; signaling that bankruptcy isn't completely off the table could strengthen GM's bargaining power in both of those negotiations. Patent kindles dispute. Discovery Communications (DISCA) has filed a lawsuit against Amazon (AMZN), claiming the Kindle e-book reader violates a patent Discovery registered in 2007. The company is suing for damages and future royalties, but will not try to halt sales of the popular device. Tax break for Madoff victims. The IRS announced unprecedented tax relief for victims of Ponzi schemes, allowing many of those affected to deduct up to 95% of their losses immediately. The move is a significant relaxation of longstanding limits on how much tax relief can be claimed by victims of investment scams. In broad terms, Ponzi scheme victims who aren't suing to recover their losses can deduct up to 95% of their losses less any recoveries from the SIPC. Individuals pursuing third-party recoveries can deduct 75% of relevant investments. Victims will also be able to make deductions for phantom income accrued over the years in addition to their principal investments. Sony slashes dividend. Sony (SNE) cut its dividend payment by 15% to ¥42.5 ($0.43) per share vs. the ¥50 it had previously projected. The reduced payment will help Sony conserve cash as it tries to cope with "the deterioration of the global business environment." Sony has projected a record ¥260B operating loss for this fiscal year. iPhone software update. Apple (AAPL) updated its iPhone software, providing developers with a range of new tools to make programs for the company's App Store, and giving developers more flexibility in how they can charge users for content. The update also includes several features phone users said were long overdue, including the ability to copy and paste text. The updates underscore how software has become an increasingly important way for Apple to continue profiting from the iPhone and adds to speculation that Apple plans to launch a new iPhone model this year. Nokia knocks down job count. Trying to save money as demand slumps, Nokia (NOK) announced plans to cut 1,700 jobs, or around 3% of its workforce. The company will also stop designing phones for the Japanese market. The moves are part of Nokia's efforts to trim its annual operating expenses by €700M ($907M) by the end of 2010. More layoffs at Caterpillar. Caterpillar (CAT) plans to fire 89 people, lay off 2,365 workers and close a plant in Georgia as demand for its construction equipment tumbles. Most of the layoffs are in addition to the 22,100 cuts Caterpillar announced in January. The company has said it may post a quarterly loss, its first in 16 years, and sales could drop 22% in 2009 to $40B. Retail sales dip. Retail chain store sales decreased 0.1% from a week ago, ICSC reported, and declined 1.4% Y/Y. ICSC chief economist Michael P. Niemira noted "the sales pace weakened over the last week as colder temperatures and wetter conditions around the nation slowed customer traffic." According to Redbook, national chain store sales were flat in the first two weeks of March as "sales picked up modestly in the second week, but remained below plan for the week and month to date." Sales fell 1.1% Y/Y. Housing starts jump. Housing Starts climbed 22.2% in February to 583K from January's 477K (revised) vs. 450K consensus. Building permits +3% to 547K vs. 500K consensus. Completions +2.3% to 767K. It's unclear whether the jump is a sign of healing, or a troublesome indication of the failure to prune inventories. However, considering housing starts hit record low levels (the worst since 1960) just last month, Barry Ritholtz said it's hardly a sign of a turnaround. He noted that gains were mainly in multi-family units; single-family starts were little changed. Mortgage apps rise. Mortgage applications rose 21.2% from a week ago, MBA reported, on a seasonally adjusted basis. The average interest rate on 30-year fixed-rate mortgages decreased to 4.89% from 4.96%. PPI inches up. Producer Price Index +0.1% in February from the month before vs. consensus of +0.4%. Core PPI +0.2% vs. +0.1%. Year-over-year PPI -1.3% vs. +0.1%, and core +4.0% vs. +3.8%. Led by higher energy prices, this marked the second month in a row of inflation at the wholesale level. BoJ holds rates steady. Bank of Japan kept its interest rates unchanged at 0.1% and will purchase more government bonds to ease financing conditions. Earnings: Wednesday Before Open General Mills (GIS): FQ3 EPS of $0.79 misses by $0.09. Revenue of $3.5B (+3.9%) in-line. (PR) Earnings: Tuesday After Close Adobe (ADBE): FQ1 EPS of $0.45 beats by $0.01. Revenue of $786M (-11.7%) vs. $784M. "We believe the major market trends driving our business remain intact, and we will continue to focus on innovation and investing in new growth businesses to increase the strategic value we provide our customers." (PR) Darden Restaurants (DRI): FQ3 EPS of $0.80 beats by $0.12. Revenue of $1.8B (-0.7%) in-line. Sees full-year EPS of $2.66-$2.74 vs. $2.52. (PR) Guess? (GES): Q4 EPS of $0.67 beats by $0.16. Revenue of $561M (+9%) vs. $529M. Sees Q1 EPS of $0.26-0.30 vs. $0.34 and revenue of $425-445M vs. $481M. (PR) Today's Markets Asia markets closed with another day of solid gains, despite correcting after a bullish open. Nikkei +0.29% to 7,972. Hang Seng +1.86% to 13,117. Shanghai +0.24% to 2,224. BSE +1.27% to 8,977. Stocks are higher in Europe, with the exception of the U.K. which was spooked by worse than expected joblessness and talk the IMF will revise its U.K. growth forecast lower. London -0.3%. Paris +0.7%. Frankfurt +1.2%. Stock futures are lower after an unremarkable overnight session. Dow -0.6% to 7309. S&P -0.6% at 771. Nasdaq -0.3%. Crude -1.4% to $8.40. Gold -0.6% to $911. Wednesday's Economic Calendar 7:00 MBA Mortgage Applications 8:30 Consumer Price Index 10:00 AIG's Liddy testifies before Congress 10:30 EIA Petroleum Status 2:15 PM FOMC Decision Notable earnings before Wednesday's open: GIS Notable earnings after Wednesday's close: CTAS, NKE, ORCL Seeking Alpha editor Eli Hoffmann contributed to this post.

  • Wall Street Breakfast: Must-Know News

    Top AIG execs threaten to quit over pay. Five top AIG (AIG) executives are reportedly ready to quit over worries about the government clipping their pay packages. Pay czar Kenneth Feinberg has already reduced compensation for AIG's top 13 employees by 57%, and is currently working on the next 75; sources say some Fed and Treasury officials have urged Feinberg to ease up. The uprising was apparently initiated by AIG general counsel, Anastasia Kelly; she's joined by the heads of one of AIG's international life-insurance businesses, its financial-services division, its international property-and-casualty-insurance businesses, and its U.S. property-casualty business. A key point of contention is the so-called golden-parachute severance payments executives are currently eligible for. Citi, Treasury at odds over TARP exit. Citigroup (C) may have to wait before shaking itself free of the Treasury's 34% stake, because the Treasury is concerned such a sale might weaken the bank's cause with investors should it need to raise capital. Citi is trying to convince the government to allow it to repay its remaining $20B in TARP loans within the next ten days, short of which it will be forced to wait until mid-January, but the Treasury wants to wait until the bank and regulators agree on a broader plan to repay all obligations under that plan, including government guarantees on $301B of devalued securities and other assets. Treasury sees smaller TARP loss. The Treasury has done such a good job in stabilizing the U.S. financial system that the projected long-term cost of the TARP is now at least $200B less than previous estimates, according to a Department official. The administration had estimated that taxpayers would have to shoulder $341B in costs under the program, but higher-than-expected returns on the Treasury's investments to stabilize the system have more than halved that number. In a speech Tuesday, President Obama is expected to talk about using leftover TARP funds for job creation, although he may hit resistance from Republicans who want to use such funds for deficit reduction. Publishers look to close digital ranks. In an effort to exert greater control over their financial futures, five print publishers have teamed up in a new digital venture, sources say. The venture, to be announced this week, will create a digital store and common technology and advertising standards to sell titles on electronic readers. The venture is spearheaded by Time Inc. (TWX) and includes News Corp. (NWS), Conde Nast Publications, Hearst and Meredith (MDP). The partners are all paying an initial ante, but are as yet unclear on a number of key issues. "Now that this transition is underway, the big thing is to figure out what is going to work for consumers, how you make the best offerings and get them out there, and underneath that how it is delivered," one executive said. BIS sounds risk alarm. The Bank for International Settlements stated in its latest quarterly report, published over the weekend, that banks may once again be lured to take big risks because of rock-bottom interest rates. The study found evidence of a significant link between an extended period of low interest rates prior to the financial crisis and banks' risk-taking, which it said could consequently fuel new asset price bubbles. BIS also noted the volume of international debt securities issued in Q3 fell 16% from Q2, to $1.998T while net issuance almost halved to $475B. Total turnover in exchange-traded derivatives was stable at $425T, which is about 60% of the volume seen before the financial crisis. BHP, Rio ink iron ore JV. Mining giants BHP Billiton (BHP) and Rio Tinto (RTP) signed an agreement over the weekend to combine their iron ore operations in Western Australia, a deal they say will save them $10B a year. But the deal faces significant regulatory hurdles due to concerns about excessive dominance of the iron ore market. Originally outlined in June, the deal was formalized Saturday; the companies anticipate completion of the deal in the second half of 2010. The statement made no mention of any payment from BHP to Rio Tinto, which has the larger iron ore production, but a figure of $5.8B had been proposed in earlier negotiations. Under the plan, each company would own 50% in their combined Western Australian iron ore assets, but would continue to market the ore separately. Chevron makes 'clean' push in Australia. Chevron (CVX) entered an agreement worth $82B to supply liquid natural gas to Tokyo Electric Power Co. out of Australia, where its Wheatstone venture is based. Chevron and competitors are investing heavily in Australia as they angle for a larger slice of the LNG market. The deal will help vault Chevron up 14 notches in 2016 to the No. 6 spot in global rankings. Payback time for U.K. banks? While U.S. politicians grouse about bank ingratitude, the U.K. government is contemplating more direct action: making banks pay taxes that could raise anywhere between several hundred million pounds over one year to more than £1B a year for 2-3 years in taxes. The measure, which could be announced as soon as Wednesday, would apply to U.K. banks such as Barclays (BCS), HSBC (HBC), Royal Bank of Scotland (RBS), as well as the British arms of overseas firms, such as Goldman Sachs (GS), JPMorgan (JPM) and Deutsche Bank (DB). However, timing of such a move remains uncertain amid "formidable practical obstacles." Intel cans Larrabee. Intel (INTC) said it's yanking plans to sell a consumer version of its much-touted, much-delayed multi-core graphics chip - Larrabee - which was meant to establish a new area of competition with Nvidia (NVDA) and AMD (AMD). Intel said it had decided not to offer the chip at all as a conventional product, though it will make it available as a platform to help programmers design new applications that can carry out computing tasks in a parallel fashion. "The silicon and software development are behind where we hoped to be at this point in the project," an Intel spokesman said. Intel said it will provide an update about future versions some time next year. Amazon denies store report. Amazon.com (AMZN) said it has no plans to open walk-in stores in London or anywhere else, contrary to a report over the weekend that said the internet e-commerce giant was looking to cash in on so-called "click and collect" shopping. Kuwait turns profit on Citi. The Kuwait Investment Authority, the Gulf country's sovereign wealth fund, said it sold a $4.1B stake in Citigroup (C) and that it made a $1.1B profit (37.7% return) in the process. The authority converted its preferred shares to common shares after working out a deal with the bank, selling all of the shares for $4.1B. The KIA invested $3B in Citi and another $2B in Merrill in 2008 as Wall Street lenders turned to outside investors to replenish capital hit by subprime-mortgage losses. SWFs have been unwinding their investments in Western banks after stocking up on big names when share prices hit rock bottom during the global financial crisis. Hershey gets sweet with Nestle. Hershey Foods (HSY) has been in contact with Switzerland-based Nestle (NSRGY.PK) about teaming up to buy Britain's Cadbury in a counter-move to Kraft's hostile offer, sources say. As expected, Kraft launched a formal unsolicited £10.2B ($17B) bid on Friday. Hershey said in a Nov. 18 regulatory filing it was “reviewing its options.” In a statement this morning, Cadbury said it will formally respond to the Kraft offer on December 14. GM cedes JV control to SAIC... In a trade-off it hopes will give it a higher stake in another China JV, General Motors said it has agreed to let China's SAIC take control of their JV, where SAIC will now have a 51% stake. GM said the transfer was necessary to help SAIC consolidate earnings from the Shanghai GM joint venture, which local financial regulations barred as a 50/50 partnership. In return, GM hopes to get a higher stake in the producer of Wuling micro minivans, a JV owned by GM, SAIC and the government of Guangxi province in southwestern China. GM, which has a 34% stake in the venture, is planning to expand in Hong Kong and then India early next year. ...and hires recruiter for CEO job. As GM scrambles to find new growth models, it has hired a recruiter, Spenser Stuart, with orders to find a permanent CEO who has extensive global, manufacturing and turnaround experience. Importantly, the automaker is hoping to attract someone with operating experience in Asia because "next year, GM expects to sell more cars in Asia than North America," a source said. Sources said GM also wants someone who can work well with U.S. government agencies and prepare the now private manufacturer for an IPO. Early Monday, GM appointed Tim Lee as president of GM International, succeeding Nick Reilly - thought to be the beginning of a major overhaul to the carmaker's ranks. Apple adds Lala to iTunes list. Apple (AAPL) confirmed it bought Lala Media, the fast-streaming online music company that lets users pay just $0.10 to access music. While terms were undisclosed, one report said Apple got away with a big discount. The technology gives users permanent access to web songs that can be streamed but cannot be downloaded to a user's computer hard drive or to portable players like iPods. The three-year-old company is developing an iPhone application that would greatly expand the service's reach, by making Lala web songs available on the go via the phone's wireless internet connection. Geithner: Goldman would have failed. Treasury Secretary Timothy Geithner said Goldman Sachs (GS) executives were wrong when they claimed in an interview the firm would have survived without government help at the peak of the crisis. "None of them would have survived," Geithner said over the weekend. He also directed more barbs at Wall Street's compensation culture, saying: "We have to end that era of irresponsibly high bonuses." Today's MarketsOverseas markets were mixed Monday. Stock futures have moved lower overnight, while Treasurys are poised to carry significant gains into the week's first session.

  • Wall Street Breakfast: Must-Know News

    New proposals to rein in banks. With its healthcare reform under siege, the White House is once again taking aim at the banking sector. Obama will propose new rules today to limit the size of financial firms and their trading activities, specifically addressing firms' proprietary trading in order to reduce excessive risk-taking. Sources say the new regulations will be reminiscent of Depression-era curbs, and could significantly impact big banks' bottom lines. JPMorgan edges in on RBS Sempra. JPMorgan (JPM) is reportedly in exclusive talks to buy the RBS Sempra (RBS, SRE) commodities joint venture. JPMorgan, Deutsche Bank (DB) and Australia's Macquarie (MQBKY.PK) had all submitted bids of around $4B, but JPMorgan was reportedly willing to pay the most and RBS is looking for a transaction that can close quickly. A deal would make JPMorgan the fourth key bank in commodities trading, along with Goldman Sachs (GS), Morgan Stanley (MS) and Barclays (BCS). Sun shines on Oracle deal. EU antitrust regulators unanimously approved Oracle's (ORCL) purchase of Sun Microsystems (JAVA) this morning, saying they're "satisfied that competition and innovation will be preserved on all the markets concerned" and "Oracle's acquisition of Sun has the potential to revitalise important assets and create new and innovative products." Premarket: ORCL +1%, JAVA +0.2% (7:00 ET). More on AIG's data non-disclosure. New details continue to surface about AIG's (AIG) non-disclosure of counterparty payments. Apparently, the insurer submitted four rounds of regulatory filings over the course of six months, with more than 1,000 redactions, as the New York Federal Reserve pushed AIG to withhold data. The final version included more than 400 redactions, with the omitted data sealed until 2018. Meanwhile, the New York Fed has provided over 250,000 pages of documents in response to a subpoena, but lawmakers say the submission is "incomplete" and is missing key documents on AIG's credit-default swaps. Alcon fights back on Novartis deal. Alcon's (ACL) directors publicly slammed Novartis' (NVS) offer to acquire remaining Alcon shares, calling the proposal "grossly inadequate" and "offensive." Under the terms of the offer, Novartis would pay Nestle (NSRGY.PK) 20% more for its Alcon stake than minority shareholders would receive for theirs. A prolonged battle will likely ensue. Gen Re pays up for AIG fraud. The SEC charged reinsurer General Re (BRK.A) for its role in accounting frauds by AIG (AIG) and Prudential Financial (PRU). General Re will pay $12.2M to settle the charges, $19.5M to a fraud fund as part of a non-prosecution agreement and $60.5M to settle a class-action lawsuit on behalf of injured AIG shareholders. General Re will also forfeit $5M in fees it received for helping AIG falsify its financial statements. Buffett unhappy with Cadbury deal. Warren Buffett came out staunchly against Kraft's (KFT) $19.6B acquisition of Cadbury (CBY), calling it a "bad deal" and raising questions about how Kraft CEO Irene Rosenfeld planned to pay for it. Buffett plans to maintain Berkshire Hathaway's (BRK.A) 9.4% stake in Kraft, but said Kraft's recent moves have left him feeling "poorer." Pension fund takes aim at corporate governance failures. A pension fund that campaigns against corporate governance failures is taking aim at some high profile companies, including Citigroup (C), Goldman Sachs (GS) and IBM (IBM). All told, the pension fund will attend the upcoming annual shareholder meetings of 33 firms and has submitted proxy proposals on issues including bank bonuses, splitting the chairman and CEO positions and giving shareholders a "say on pay" for executives. World Bank sees mixed forecast. In its latest report (.pdf), the World Bank acknowledged that the global economy is recovering more quickly than anticipated but warned a double-dip recession is possible "if the private sector continues to save in order to restore balance sheets." The global growth forecast for 2010 was raised to 2.7% from 2%, with the 2011 forecast left unchanged at 3.2%. Estimates of the contraction in 2009 were lowered to 2.2% from 2.9%. NYT: No longer free. The New York Times (NYT) unveiled a plan to start charging readers for online content using a metered model, in which readers can access several free articles per month but must pay a monthly or annual fee for additional access. The plan, which will go into effect in 2011, is potentially risky, as a rise in subscription revenue may be overshadowed by a fall in viewers and, by extension, a fall in advertising revenue. China's economy boils and bubbles. China's economy grew 10.7% in Q4 from the year before, while consumer prices accelerated rapidly, rising 1.9% in December Y/Y vs. a 0.6% increase in November. Overall, the economy grew 8.7% in 2009, beating the 8% target Beijing had set. The new data points make it more likely that Chinese officials will crack down to keep the economy from overheating. iPhone may dump Google for MSFT. Apple (AAPL) is reportedly in talks with Microsoft (MSFT) to replace Google (GOOG) as the default search engine on the iPhone. Sources say the two firms have been negotiating for weeks, a reflection of the growing rivalry between Apple and Google. Icahn bets on Las Vegas. Activist investor Carl Icahn made the winning bid to purchase the bankrupt and unfinished Fontainebleau Las Vegas Resort. Icahn offered $156.5M, betting that the Las Vegas Strip will eventually experience a turnaround. Exxon deal raises concerns. Exxon Mobil (XOM) has come under fire for its planned $30B purchase of XTO Energy (XTO). Lawmakers are concerned about reduced-competition issues and a possible increase in the controversial technique of hydraulic fracturing, a method that would be central to the combined company's efforts. Nokia: Never get lost again. Taking a cue from Google (GOOG), Nokia (NOK) will begin offering free maps on its cellphones, including turn-by-turn directions covering 74 countries in 46 languages. The move is bad news for makers of personal navigation devices, but a Nokia executive said simply that "having this as a free functionality is inevitable for the industry." MGM mulls bankruptcy. MGM has received several first-round bids to sell itself, but is considering a prepackaged bankruptcy along with the sale to help clean up a balance sheet weighed down by $3.7B in debt. Initial bids, which are non-binding, have come in under $2B. Russia diversifies into Canadian dollar. Russia's central bank announced yesterday that it has begun buying Canadian dollars and securities as part of its efforts to diversify its foreign exchange reserves. Analysts believe other emerging market central banks may follow suit in diversifying away from the U.S. dollar and into other commodity-linked currencies and assets, including the Australian dollar. As of December, Russia's forex reserves stood at $439B and were evenly split between dollars and euros. Housing starts decline. Housing Starts fell 4% in December to 557K, short of the 573K expected and the 574K registered last month. Permits rose 10.9% to 653K vs. 590K expected and 589K last month. Producer prices inch up. The Producer Price Index rose 0.2% in December vs. 0% expected and +1.8% in November. The Core PPI was flat vs. +0.1% expected and +0.5% last month. Earnings: Thursday Before Open Continental (CAL): Q4 EPS of -$0.03 beats by $0.04. Revenue of $3.2B (-8%) in-line. Shares +0.6% premarket (7:00 ET). (PR) Fifth Third Bancorp (FITB): Q4 EPS of -$0.20, may not be comparable to first call consensus of -$0.31. Tangible common equity ratio of 6.45%. Tier 1 common ratio of 7%. (PR) Knight Capital Group (NITE): Q4 EPS of $0.33 beats by $0.02. Revenue of $302M (-4%) vs. $293M. (PR) UnitedHealth (UNH): Q4 EPS of $0.81 beats by $0.08. Revenue of $21.7B (+6.5%) in-line. (PR) Earnings: Wednesday After Close eBay (EBAY): Q4 EPS of $0.44 beats by $0.04. Revenue of $2.4B (+16%) vs. $2.3B. Payments business unit grows revenue 28%; Marketplaces unit +15%. Sees 2010 EPS of $1.63-1.68 vs. $1.60. (PR) Logitech (LOGI): FQ3 EPS of $0.32 beats by $0.05. Revenue of $617M (-2%) vs. $603M. "Improved sell-through in all of our retail regions ... We are also very pleased with our return to year-over-year profitability growth in Q3, driven by the substantial improvement in gross margin." (PR) Seagate Technology (STX): FQ2 EPS of $1.03 beats by $0.38. Revenue of $3B (+33%) vs. $2.85B. (PR) Skyworks Solutions (SWKS): FQ1 EPS of $0.27 beats by $0.02. Revenue of $245M (+17%) vs. $241M. Sees FQ2 EPS of $0.21 vs. $0.19, on revenue of $225M vs. $215M. (PR) SLM (SLM): Q4 EPS of $0.60 may not be comparable to estimate of $0.44. Net interest income after provision for loan losses of $320M (+99%). (8-K) Starbucks (SBUX): Q4 EPS of $0.32 beats by $0.04. Revenue of $2.7B (+4%) vs. $2.6B. Raises 2010 EPS outlook to $1.05-1.08. “Solid comparable store sales growth, combined with our continuing focus on controlling operating costs, drove significant operating margin improvement in both our U.S. and International business segments.” (PR) Total System Services (TSS): Q4 EPS of $0.31 beats by $0.01. Revenue of $431M (flat) vs. $435.5M. Sees FY10 EPS of $0.95-0.97 vs. $1.21, on revenues of $1.61B-1.65B vs. $1.76B. (PR) Xilinx (XLNX): FQ3 EPS of $0.38 beats by $0.03. Revenue of $513M (+12%) vs. $492M. Sees Q4 revenue up 3% to down 1%. (PR) Today's Markets In Asia, Nikkei +1.2% to 10,868. Hang Seng -2% to 20,863. Shanghai +0.2% to 3,159. BSE -2.4% to 17,051. In Europe at midday, London +0.1%. Paris +0.5%. Frankfurt +0.3%. Futures: Dow -0.1%. S&P flat. Nasdaq -0.15%. Crude -0.05% to $77.70. Gold -0.8% to $1,103.10. Thursday's Economic Calendar 8:30 Jobless Claims 10:00 Leading Indicators 10:00 Philly Fed Business Outlook 10:30 EIA Natural Gas Inventory 11:00 EIA Petroleum Inventories 4:30 PM Fed Balance Sheet 4:30 PM Money Supply Notable earnings before Thursday's open: APH, CAL, CMA, ESI, FCS, FITB, FNFG, GS, KEY, LM, LUV, NITE, PCP, PNC, PPG, SBIB, TCB, UNH, UNP, XRX Notable earnings after Thursday's close: ACS, AMD, AXP, BNI, BXS, COF, ED, ELX, GOOG, IGT, ISRG, PBCT, WDC Seeking Alpha editors Eli Hoffmann and Jason Aycock contributed to this post.

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