Thursday Outlook: Tension Will Rise into Friday's Unemployment Report

September 2, 2009 Lots of rumors swirled around trading desks yesterday regarding Wells Fargo & Co (WFC) which was acknowledged in this WSJ story today. When sellers hit the tape there may be something else in the wind getting attention. Anyway, the rumor was strongly denied but WFC still closed near yesterday's lows.

September 2, 2009 Lots of rumors swirled around trading desks yesterday regarding Wells Fargo & Co (WFC) which was acknowledged in this WSJ story today. When sellers hit the tape there may be something else in the wind getting attention. Anyway, the rumor was strongly denied but WFC still closed near yesterday's lows.

  • Wall Street Breakfast: Must-Know News

    Dell, SEC in settlement talks. Dell (DELL) is in talks to settle a long-running SEC investigation into the company's accounting and other issues, and has set aside a $100M reserve to cover a potential settlement. Dell founder and CEO Michael Dell has also become a probe target, likely in connection to misleading statements, and the investigation has broadened to include the company's dealings with Intel (INTC). The potential settlement prompted Dell to restate its quarterly results, with net income reduced to $341M, and EPS lowered by $0.05/share to $0.17. In after hours trading, shares -2%. BP dividend could take a spill. BP (BP) continues to siphon off more of the oil gushing into the Gulf of Mexico, raising its capture rate to 15,800 barrels on Wednesday, but the company seems to be fighting a losing battle as government officials have since doubled their estimate of the spill's size to potentially as high as 40,000 barrels per day. British Prime Minister David Cameron came out in support of the firm, emphasizing the "economic value" the company brings to the U.S. and U.K., including to the many British income funds that rely on BP's dividend payments. But CEO Tony Hayward, under heavy political pressure, said the company is considering either delaying or reducing the upcoming Q2 dividend. Premarket: BP +5.4% (7:00 ET). UBS faces Luxembourg probe. UBS (UBS) is the target of a preliminary forgery investigation by Luxembourg prosecutors, in connection to how UBS oversaw funds connected to Bernie Madoff. UBS was the custodian for the LuxAlpha and the Luxembourg Investment Fund, both of which had to suspend customer redemptions after Madoff's Ponzi scheme was discovered. LuxAlpha was dissolved four months after Madoff's arrest, after having lost 95% of its approximately $1.4B in assets. Following news of the Luxembourg probe, European shareholder rights group Deminor said it may file a criminal complaint against UBS. Premarket: UBS +2.6% (7:00 ET). Japan at risk of Greek tragedy. Japan's new prime minister, Naoto Kan, warned his country could face a debt crisis similar to Greece's unless it urgently deals with its growing national debt. "Our finances could collapse if trust in national bonds is lost and growing national debt is left alone," he said. The unusually blunt talk is likely meant to help push forward his agenda, which may involve raising taxes. Spain denies aid request. Spanish officials strongly denied a media report that the country had made a request for economic aid from the EU, or was planning to make such a request. ""This is lie. There's no rescue. There's nothing asked for, nor will there be, nothing, but nothing. I don't know where they got this from," said an economy ministry spokesperson. Mortgage fraud crackdown. The FBI is reportedly planning a nationwide crackdown on mortgage fraud, with hundreds of people likely to be arrested as soon as next week for such offenses as inflating home appraisals and encouraging borrowers to submit falsified mortgage documents. The crackdown comes as the FBI prepares to release its 2009 mortgage report on June 17. SEC sets circuit breaker. The SEC approved new rules requiring a pause in trading in any S&P 500 stock that moves 10% or more in a five-minute span. The circuit breaker will begin going into effect today, and "will provide time for buyers and sellers to trade at rational prices," said SEC Chairman Mary Schapiro. The new rules will be on a pilot basis for six months. Geithner grows impatient on China. Testifying before lawmakers yesterday, Geithner signaled that the U.S. was running out of patience with China's currency policy. "The distortions caused by China's exchange rate spread far beyond China's borders," said Geithner, "and are an impediment to the global rebalancing we need." Sen. Charles Grassley was far blunter: "The time is long past for any Treasury Department to admit publicly what everyone else already knows, that China is manipulating the value of its currency in order to gain an unfair advantage in international trade." Lawmakers plan to move forward soon with anti-dumping penalties on goods from China. FBI launches iProbe into data breach. The FBI opened an investigation into the data breach on AT&T's (T) website that exposed 114,000 email addresses of iPad owners (AAPL). The probe is just beginning, and FBI officials wouldn't comment on the focus of the investigation. AT&T and Apple declined to comment as well. FDA panel backs Novartis MS drug. Novartis (NVS) won key support for its one-of-a-kind multiple sclerosis pill, Gilenia, as an FDA panel voted 25-0 that the drug is both effective and safe. Though the FDA is not required to follow the panel's recommendation, it usually does, and a decision is expected by late September. Premarket: NVS +2.7% (7:00 ET). GM in the driver's seat for IPO. General Motors will have to lay the groundwork for its IPO on its own, said the Treasury, with a public offering coming in October at the earliest. "GM must determine that it is, in all relevant respects, ready to become a public company. It is critical that the process of preparing for a potential IPO be managed by GM." The Treasury will be in charge of setting the fees paid to underwriters. Earnings: Thursday After Close Finisar (FNSR): FQ4 EPS of $0.22 beats by $0.02. Revenue of $189M (+75.3%) vs. $183M. Shares +3.6% AH. (PR) National Semiconductor (NSM): FQ4 EPS of $0.33 beats by $0.05. Revenue of $399M (+10.1%) vs. $384M. Shares +1.5% AH. (PR, earnings call transcript) Today's Markets In Asia, Japan +1.7% to 9705. Hong Kong +1.2% to 19872. China +0.3% to 2570. India +0.8% to 17065. In Europe, at midday, London +0.8%. Paris +1.0%. Frankfurt +0.2%. Futures: Dow +0.2%. S&P +0.1%. Nasdaq +0.1%. Crude -0.7% to $74.93. Gold -0.1% to $1221.50. Friday's Economic Calendar 8:20 Fed's Plosser: Economic Outlook 8:30 Retail Sales 9:55 Reuters/UofM Consumer Sentiment 10:00 Business Inventories 10:30 ECRI Leading Index 12:55 PM Fed's Kocherlakota: 'Entrepreneurship and The Economy' Seeking Alpha's Market Currents team contributed to this post.

  • 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.

  • Wall Street Breakfast: Must-Know News

    Dell settles with the SEC. Dell (DELL) agreed to pay $100M to settle accounting charges by the SEC, and CEO Michael DEll will pay $4M to settle disclosure-related allegations. Regulators had alleged that Dell improperly hid the effect of massive payment from Intel (INTC) earlier this decade that inflated earning and misled investors. Dell neither admitted nor denied wrongdoing. Probe turns to two BP managers. Two BP (BP) managers have been named "parties of interest" in a federal probe of the Deepwater Horizon oil rig disaster, indicating they're potential targets of the investigation. Robert Kaluza, a BP employee overseeing operations on the rig, and Patrick O'Bryan, BP's vice president in charge of drilling, are the first BP employees to be named as targets in the case; five employees of Transocean (RIG) had previously been named. While the probe continues, BP's relief efforts in the Gulf have temporarily ceased, delayed by tropical storm Bonnie which could reach the well site by tomorrow. Premarket: BP +2.3%, RIG +1.5% (7:00 ET). SEC caves on bond ratings. The SEC moved to restore some calm to bond markets, temporarily allowing sales to go forward without credit ratings in bond offering documents. Ratings agencies S&P, Moody's and Fitch are refusing to let bond issuers use their ratings, saying the new financial reform laws create too much risk for them. Since major parts of the bond markets legally require a rating, the SEC will allow a six-month exemption, calling it a "transition period" but giving little guidance as to what will happen at the end of six month. NY sues BofA. The State of New York has sued Bank of America (BAC) on its own, rather than joining an existing class-action suit, over the Merrill Lynch takeover and subprime mortgage exposure. The state, which has one of the nation's largest pension funds, hopes to recover more money in a stand-alone case, potentially as much as tens of millions of dollars. Premarket: BAC +0.7% (7:00 ET). Pay czar to blast bank payments. Pay czar Ken Feinberg is expected to release a report today citing 17 financial firms for making $1.6B in "ill-advised" payments during the financial crisis. Firms on the list are said to include Goldman Sachs (GS), JPMorgan (JPM) and Citigroup (C). However, as Feinberg doesn't have the authority to demand the money be returned, the report is mostly to put political pressure on the firms and to push them to impose more limitations on payouts. Jobless benefits extended. Obama signed a six-month extension of emergency jobless benefits yesterday, just hours after the House approved the $34B measure. The move restores aid to nearly 3M people whose checks had been cut off since the program expired in early June, but puts further pressure on an already-bloated government budget. SEC watchdog broadens Goldman settlement probe. SEC Inspector General David Kotz has broadened an ongoing probe into the agency's settlement with Goldman Sachs (GS) to include the timing of the settlement. Some lawmakers have accused the SEC of playing politics with its lawsuit against Goldman, and the settlement was announced on the same day the Senate passed the financial reform bill. Mattel loses Bratz ruling. A federal appeals court ruled that Mattel (MAT), maker of the Barbie doll, was wrongly granted ownership of the popular Bratz dolls and that rival MGA Entertainment can continue to sell them. The decision could lead to a new trial over control of the franchise that generated $1B in annual sales at its peak. In his ruling, Chief Judge Alex Kozinski wrote "America thrives on competition; Barbie, the all-American girl, will too." Murphy Oil to sell refining business. Murphy Oil (MUR) said it would sell its three refineries to focus on oil and gas exploration and its U.S. retail business. Refiners have been hurt by the global economic slowdown, and Murphy called the refineries "nonstrategic assets." A sale could bring in at least $1.5B. In after-hours trading, MUR rose 2.3%. Green Dot's dapper debut. Prepaid debit-card provider Green Dot (GDOT) priced above its $32-35 range in a $164M IPO, and saw shares rise 22.2% yesterday to $43.99. It's a windfall for owners like Wal-Mart (WMT) and investors have high hopes for Green Dot, which has doubled earnings every year since 2006. However, the excitement may have gotten out of hand, as even at the midpoint of its original IPO range, the stock's P/E of 27 was higher than competitors like Visa (V). Investors unamazed by AMZN earnings report. Shares of Amazon (AMZN) fell over 13% in after-hours trading, following the company's Q2 earnings miss (see details below). An increase in operating expenses contributed to the EPS miss, and discounted merchandise may have played a role as well as Amazon faced increased competition from traditional stores like Wal-Mart (WMT) and over its e-reader from companies like Apple (AAPL) and Barnes & Noble (BKS). U.K. GDP grows 1.1%. The U.K.'s economy grew a much stronger-than-expected 1.1% in Q2, according to a government release earlier this morning, handily beating estimates of +0.6% and marking the fastest growth in four years. The increase in output was due mainly to increases in business services and finance and construction. The British economy expanded by 0.3% in the previous quarter. The pound is +1.2% vs. the dollar (7:00 ET). Hungary shuns IMF, ratings agencies hover. Hungary's prime minister Viktor Orban indicated he won't renew a safety net with the IMF and will back out of a commitment to cut the budget deficit to EU-prescribed levels next year. Hungary's belief that it can access capital markets without the IMF is a "myth," said one economist, and Moody's has put Hungary's Baa1 sovereign rating under review for possible downgrade. Earnings: Friday Before Open Ashland (ASH): FQ3 EPS of $1.22 beats by $0.09. Revenue of $2.36B (+16%) vs. $2.30B. (PR) Dover (DOV): Q2 EPS of $0.91 beats by $0.13. Revenue of $1.8B (+29.5%) vs. $1.66B. (PR) Honeywell International (HON): Q2 EPS of $0.60 may not be comparable to consensus of $0.57. Revenue of $8.2B (+41%) vs. $8B. (PR) Schlumberger (SLB): Q2 EPS of $0.68 in-line. Revenue of $5.9B (+7.4%) in-line. (PR) Earnings: Thursday After Close Amazon.com (AMZN): Q2 EPS of $0.45 misses by $0.07. Revenue of $6.6B (+41.3%) vs. $6.5B. Shares -13.7% AH. (PR, earnings call transcript) American Express (AXP): Q2 EPS of $0.84 beats by $0.06. Revenue of $6.9B (+12.6%) in-line. Shares -0.7% AH. (PR) Bucyrus International (BUCY): Q2 EPS of $0.89 misses by $0.08. Revenue of $869M (+19.9%) vs. $943M. (PR) Canadian National Railway (CNI): Q2 EPS of $1.13 beats by $0.14. Revenue of $2.1B (+17.5%) in-line. Shares +0.1% AH. (PR, earnings call transcript) Capital One (COF): Q2 EPS of $1.33 may not be comparable to consensus of $0.88. Revenue of $3.9B (-5.9%) vs. $4B. Shares -2.6% AH. (PR, earnings call transcript) Cheesecake Factory (CAKE): Q2 EPS of $0.39 beats by $0.01. Revenue of $419M (+2.7%) in-line. (PR, earnings call transcript) Chubb (CB): Q2 EPS of $1.41 beats by $0.01. Revenue of $2.9B (+1.4%) vs. $2.8B. Shares -0.1% AH. (PR, earnings call transcript) Compuware (CPWR): FQ1 EPS of $0.06 in-line. Revenue of $207M (-3.7%) vs. $219M. Shares -12.2% AH. (PR, earnings call transcript) Covanta (CVA): Q2 EPS of $0.17 misses by $0.06. Revenue of $435M (+15.7%) vs. $426M. Shares -0.4% AH. (PR) CyberSource (CYBS): FQ1 EPS of $0.23 beats by $0.02. Revenue of $77M (+26.6%) vs. $74M. (PR) E*TRADE Financial (ETFC): Q2 EPS of $0.12 beats by $0.23. Revenue of $534M (-14%) vs. $300M. Shares +7.1% AH. (PR, earnings call transcript) Federated Investors (FII): Q2 EPS of $0.46 beats by $0.07. Revenue of $232M (-24.6%) vs. $237M. (PR) Flextronics International (FLEX): FQ1 EPS of $0.19 beats by $0.01. Revenue of $6.6B (+13.5%) vs. $6.4B. Shares -3.2% AH. (PR, earnings call transcript) Informatica (INFA): Q2 EPS of $0.25 beats by $0.02. Revenue of $156M (+32.7%) vs. $144M. Shares +3.5% AH. (PR, earnings call transcript) Leggett & Platt, Inc. (LEG): Q2 EPS of $0.34 beats by $0.04. Revenue of $874M (+15.4%) vs. $833M. Shares +0.1% AH. (PR) Microsoft (MSFT): FQ4 EPS of $0.51 beats by $0.05. Revenue of $16B (+22.5%) vs. $15.3B. (PR, earnings call transcript) Mosaic (MOS): FQ4 EPS of $0.89 beats by $0.02. Revenue of $1.9B (+16.7%) vs. $2.2B. Shares +2.8% AH. (PR) NCR (NCR): Q2 EPS of $0.35 beats by $0.08. Revenue of $1.2B (+4.7%) in-line. Shares -0.5% AH. (PR, earnings call transcript) Newfield Exploration (NFX): Q2 EPS of $1.06 misses by $0.02. Revenue of $448M (+56.1%) vs. $548M. (PR) PMC-Sierra (PMCS): Q2 EPS of $0.20 beats by $0.01. Revenue of $161M (+30.4%) vs. $159M. Shares -2.6% AH. (PR) QLogic (QLGC): FQ1 EPS of $0.30 beats by $0.01. Revenue of $143M (+16.1%) vs. $144M. Shares -10.4% AH. (PR, earnings call transcript) Rambus (RMBS): Q2 EPS of -$0.11 misses by $0.04. Revenue of $39M (+57.2%) in-line. Shares -3.4% AH. (PR, earnings call transcript) Riverbed Technology (RVBD): Q2 EPS of $0.25 beats by $0.03. Revenue of $126M (+38.8%) vs. $119M. Shares +2.4% AH. (PR, earnings call transcript) SanDisk (SNDK): Q2 EPS of $1.08 beats by $0.18. Revenue of $1.2B (+61.5%) in-line. Shares -7.2% AH. (PR, earnings call transcript) Skyworks Solutions (SWKS): FQ3 EPS of $0.32 beats by $0.02. Revenue of $275M (+44%) vs. $269M. Shares -2.2% AH. (PR, earnings call transcript) STMicroelectronics (STM): Q2 EPS of $0.18 beats by $0.03. Revenue of $2.5B (+27%) in-line. (PR) Synovus Financial (SNV): Q2 EPS of -$0.36 misses by $0.06. Shares -6.6% AH. (PR) Today's Markets In Asia, Japan +2.3% to 9431. Hong Kong +1.1% to 20815. China +0.4% to 2572. India +0.1% to 18131. In Europe, at midday, London -0.2%. Paris +0.4%. Frankfurt +3.1%. Futures: Dow +0.4%. S&P +0.5%. Nasdaq +0.5%. Crude -0.4% to $78.99. Gold +0.2% to $1197.60. Friday's Economic Calendar 10:30 ECRI Leading Index Notable earnings before Friday's open: ALV, ASH, BPOP, DLR, DOV, ERIC, F, HON, IR, JCI, KMB, MCD, MHP, SLB, TROW, VZ, WL Seeking Alpha's Market Currents team 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

    NY AG mulls bonus pullback. Sources say New York Attorney General Andrew Cuomo may demand the return of $4B in early bonuses paid to Merrill Lynch employees just before being acquired by Bank of America (BAC). The AG's office is also looking into how much BoA CEO Ken Lewis knew about the accelerated bonuses, whether the companies' shareholders had all the necessary information about Merrill's finances and whether federal bailout loans to BoA were used properly. "No longer will this country stand for wasteful spending of tax dollars on bonuses for executives whose companies have taken huge losses and required taxpayer bailouts," Cuomo said. Obama echoed the sentiment, calling Wall Street bonuses 'shameful' and 'the height of irresponsibility.' Pfizer's pull-out fee. Two days after Pfizer (PFE) announced its plans to buy Wyeth (WYE) for $68B, Pfizer shares are trading near a 12-year low. Perhaps, as one analyst put it, it's because "people seem underwhelmed by the deal, maybe thinking Pfizer made a safe move with Wyeth rather than trying to shoot the lights out with a more aggressive company better able to produce blockbuster drugs." Pfizer is moving forward with the deal full-force, and has committed to paying Wyeth $4.5B as a breakup fee if the lenders pull out of the deal. The lenders could choose to act if Pfizer's operations or credit rating decline significantly. Wyeth will have to pay $2B if it drops the deal to accept a higher bid from a different company. Fannie tries for fewer foreclosures. Fannie Mae (FNM) has reached an agreement with former critic Neighborhood Assistance Corp. of America to help prevent foreclosures by modifying home loans. Bruce Mark, CEO of NACA, had previously called Fannie a 'major roadblock' to foreclosure-prevention efforts, but is now working to reach a similar agreement with Freddie Mac (FRE). NACA, which serves as an intermediary between borrowers and lenders and works with such major lenders as Bank of America (BAC) and Wells Fargo (WFC), helped modify over 20,000 mortgages last year. Madoff transfers. Bank of New York Mellon (BK) will transfer $301.4M to Irving Picard, the trustee liquidating Madoff's brokerage, and JPMorgan Chase (JPM) will transfer $233.5M. In exchange, the banks will be indemnified against any claims brought as a result of the transfers. The move is part of Picard's efforts to gather assets to be returned to defrauded investors. Roche lowers DNA bid. Roche Holding (RHHBY.PK) lowered its bid price for the 44.2% of Genentech (DNA) it doesn't already own to $86.50 per share from $89 per share, and will take the offer directly to shareholders within two weeks. Genentech had previously rejected Roche's $89/share offer as too low, and though the new bid is lower, it still marks a 2.9% premium on Genentech's recent closing price. A full takeover would allow Roche to cut costs, boost earnings and expand in the U.S. market. Amazon profit beat. Amazon (AMZN) reported better-than-expected earnings yesterday (see details below), showing a 9% growth in Q4 profits and 18% growth in sales. The growth has much to do with Amazon's strategy of aggressive discounting, free shipping offers and continued product expansion at a time when most other retailers are scaling back, and CEO Jeff Bezos cited heavy demand for Amazon's Kindle electronic reader. Amazon also forecast strong sales for the current quarter. Toshiba tossed by global recession. Toshiba (TOSBF.PK) fell the most in 34 years in Japanese trading after the company forecast its largest ever annual loss. Facing an industry glut and falling prices as the global economic downturn worsens, Toshiba's net loss will probably reach ¥280B ($3.1B) in the fiscal year ending March 31 vs. earlier estimates of a ¥70B net income. To save ¥300B in the next fiscal year, the company is delaying construction of new factories, firing temporary workers, slashing output and cutting research spending. In light of the lower earnings outlook and the possibility Toshiba might have to seek equity financing, Goldman Sachs cut its rating to Sell from Neutral. Shares -17.4% in Japan. Dell smartphone? Dell (DELL) may move into the smartphone market as soon as next month, sources say, as a way to boost sales while its core PC business gets hit by the recession. At least one of Dell's models includes a touchscreen and no physical keyboard, like the iPhone (AAPL), while another has a keypad that slides out from beneath the screen. Going up against Apple and Research in Motion (RIMM) in the smartphone market would be a bold move, one that Dell has yet to confirm. "We haven't committed to anything," said one spokesman. Japan's recession deepens. Japan's recession showed signs of deepening Friday, with closely watched industrial production plunging 9.6% in December, the second straight month of record decline, and projections of steep drops continuing into 2009. "I've never seen such a steep production fall," Economy Minister Kaoru Yosano said. Meanwhile, joblessness rose to 4.4% from 3.9%, and household spending fell by 4.6%. On Thursday, the government said Japan's economy entered a recession in November 2007, meaning it's been in recession for 14 months. Japan's recent expansion was fueled by exports, and economists say its current recession is being driven by the global downturn rather than domestic factors. The Shedlock-Schiff Affair: A Chronicle. Popular econoblogger Michael "Mish" Shedlock triggered a firestorm this week when he took down outspoken investment advisor Peter Schiff, claiming that although Schiff may have been right about the U.S. economy imploding, clients who had invested in his funds in the hopes of profiting from his prophecies had seen their accounts decimated. Big Picture author Barry Ritholtz predicted Shedlock's post would set off fireworks "via a major media outlet." He was right. Today, WSJ's Right Forecast by Schiff, Wrong Plan? does exactly that. "Peter Schiff predicted a collapse of the U.S. financial system. The bust-up he didn't foresee was the one that made mincemeat of investors who took his advice in 2008." Meanwhile, Schiff responds, saying that "the crisis is just beginning and the movements thus far in the dollar, commodities, and foreign stocks, are mere head fakes. Once the speculators have been flushed from the markets, the underlying long-term trends I have been following should return in earnest." More joblessness. Initial jobless claims remained elevated, with 588,000 this week after last week's (revised) 585,000 - vs. consensus of 575,000. Continuing claims +66.5K to 4.63M. Durables drop. Durable Goods Orders -2.6% in December, worse than the 2% drop expected. November's numbers were revised to -3.7% from -1%. Ex-transport: -3.6% vs. -2.7% consensus. It's the fifth consecutive monthly decrease. Inventories +0.4% to $343.5B, the highest on record, and up 17 of the last 18 months. Fewer new home sales. New home sales in December fell 14.7% to 331,000 from Nov. - well short of the 397,000 consensus. November was revised to 388,000 from 407,000. Median price $206,500 vs. $246,900 a year ago. Total new home sales for 2008: 482K down 37.8% from 776K last year. Earnings: Friday Before Open AMETEK (AME): Q4 EPS of $0.66 in-line. Revenue of $624M (+6.9%) vs. $660M. Sees Q1 EPS of $0.54-0.58 vs. $0.59. (PR) Cemex (CX): Q4 revenue of $4.5B vs. $4.79B consensus. Majority net loss of $707M vs. +$538M a year ago. (PR) Honeywell (HON): Q4 EPS of $0.97 in-line. Revenue of $8.71B (-6.1%) vs. $8.97B. Reaffirms 2009 guidance. (PR) Honda (HMC): FQ3 net profit sagged 90% to ¥20.24B vs. consensus of ¥19.75B. Operating profit of ¥102B down from ¥276B a year ago. Sales of ¥2.533T (-17%). Lowers full-year net profit outlook to ¥80B from ¥185B. Shares -9.2% in Tokyo. (DJ) Earnings: Thursday After Close Amazon.com (AMZN): Q4 EPS of $0.52 beats by $0.13. Revenue of $6.7B (+18.2%) vs. $6.44B. "We're particularly grateful for the unusually strong demand for Kindle in the fourth quarter." (PR) Ariba (ARBA): FQ1 EPS of $0.21 beats by $0.08. Revenue of $86.1M (+11.8%) vs. $86.8M. (PR) Broadcom (BRCM): Q4 EPS of $0.08 misses by $0.19. Revenue of $1.13B (+9.7%) vs. $1.07B. Sees Q1 revenue of $800-875M vs. $953M. (PR) CA Inc. (CA): FQ3 EPS of $0.43 beats by $0.05. Revenue of $1.04B (-5.3%) vs. $1.07B. While customers are closely scrutinizing all IT investments, we are seeing considerable interest in our enterprise software as it enables them to increase the effectiveness and cost efficiency of their IT infrastructures..." (PR) Chubb (CB): Q4 EPS of $1.58 beats by $0.06. Revenue of $M in-line. Sees 2009 EPS of $4.80-5.20 vs. $5.62. "We are encouraged by the improved rate environment in the fourth quarter... and there are good reasons to believe that this trend will continue into 2009." (PR) Eastman Chemical Company (EMN): Q4 EPS of $0.05 misses by $0.30. Revenue of $1.35B (-22.5%) vs. $1.4B. "Capacity utilization likely reached its lowest point in December. We anticipate that our capacity utilization will improve through the first quarter due to a modest increase in demand." (PR) Juniper Networks (JNPR): Q4 EPS of $0.321 in-line. Revenue of $923M (+14.1%) vs. $936M. (PR) KLA-Tencor (KLAC): FQ2 EPS of -$0.12 misses by $0.06. Revenue of $397M (-37.6%) vs. $394M. (PR) Monster Worldwide (MWW): Q4 EPS of $0.27 in-line. Revenue of $291M vs. $312M. (PR) PerkinElmer (PKI): Q4 EPS of $0.48 beats by $0.06. Revenue of $495M (+3%) vs. $516M. (PR) PMC-Sierra (PMCS): Q4 EPS of $0.07 misses by $0.01. Revenue of $120.8M (-2.3%) vs. $119.7M. (PR) Rambus (RMBS): Q4 EPS of -$0.10 beats by $0.13. Revenue of $37.6M (-7.2%) vs. $29.9M. (PR) SunPower (SPWRA): Q4 EPS of $0.70 beats by $0.13. Revenue of $401M (+78.7%) vs. $397M. "Long-term solar market fundamentals remain in place and we are encouraged by the commitment to renewable energy by President Obama and Congressional leadership." (PR) Varian Medical Systems (VAR): FQ1 EPS of $0.56 beats by $0.05. Revenue of $509M (+12.8%) vs. $501M. Sees FQ2 EPS of $0.59-0.62 vs. $0.64. (PR) Today's Markets Asia markets closed mixed Friday. Nikkei -3.1% to 7,994. Hang Seng +0.9% to 13,278. Shanghai closed. BSE +2% to 9,424. Europe is lower at midday. London -0.45%. Paris -1.1%. Frankfurt -1.1%. U.S. futures have moved back into negative territory. Dow -0.3% to 8086. S&P -0.4% to 839.50. Nasdaq -0.35%. Crude +0.8% to $41.77. Gold +1.7% to $920.50. 30-year Treasurys -0.2%. 10-year +0.11%. 5-year +0.04%. 2-year +0.03%. Friday's Economic Calendar 8:30 GDP Q4 Advance 8:30 Employment Cost Index 9:45 NAPM Chicago Business Barometer 9:55 University of Michigan Consumer Sentiment 3:00 PM Farm Prices Notable earnings before Friday's open: ACI, AME, AXL, CVX, GCI, HON, IVZ, PCAR, PG, SPG, XOM Notable earnings after Friday's close: none. Seeking Alpha editor Eli Hoffmann contributed to this post.

  • Wall Street Breakfast: Must-Know News

    JPMorgan hit with record fine. JPMorgan's (JPM) London unit was fined a record £33.3M ($48.9M) by the U.K.'s Financial Services Authority for failing to properly separate billions of dollars of client money from the firm's accounts. "This penalty sends out a strong message to firms of all sizes that they must ensure client money is segregated in accordance with FSA rules," the FSA said in a statement. "Firms need to sit up and take notice of this action - we have several more cases in the pipeline.” Xstrata shelves projects over Aussie tax. Xstrata (XSRAF.PK) suspended $5.4B in coal and copper projects in Australia in response to the country's proposed mega-mining tax, which would tax mining profits at a 40% rate. Xstrata's decision brings the value of shelved projects to $20B in just a month. Though the news puts extra pressure on the Australian government to water down its proposal, it could also backfire and hurt Xstrata, which derived nearly 39% of its 2009 net profit from Australian operations. Value rises for AIG's Asian unit. AIA, AIG's (AIG) Asian unit, could be worth $34B-36B after an initial public offering, said sources, a substantial rise from earlier estimates of $15B-20B. AIG CEO Robert Benmosche said the company has several options to consider after a deal with Prudential (PUK) fell through, but an IPO for the unit seems the most likely, and could launch as soon as this October. Premarket: AIG +1.45% (7:00 ET). BP 'not prepared' for spill, pressure grows. BP (BP) CEO Tony Hayward called it "an entirely fair criticism” to say the company had not been fully prepared for a deep-water oil leak. The firm's latest efforts to contain the Gulf of Mexico leak have not gone well, as a saw became stuck during a risky operation meant to cut the leaking pipe. Meanwhile, political pressure continues to intensify, with two senators calling for BP to suspend dividend payments until the company has a clearer idea of its liability and cleanup costs; analysts believe the spill could ultimately cost BP as much as $37B, and just yesterday BP agreed to pay $360M to construct six sections of a proposed barrier off Louisiana. Premarket: BP +4.1% (7:00 ET). Buffett defends ratings agencies. Testifying before the Financial Crisis Inquiry Commission yesterday, Warren Buffett warned lawmakers not to single out the ratings agencies for criticism or to enact overly reactive reforms. Moody's (MCO) managers "made a mistake that 300 million other Americans made" in overestimating housing-related assets, said Buffett, who has held a stake in Moody's since 2000. Moody's CEO Raymond McDaniel also testified, calling his company's inaccurate ratings of mortgage-related investments "deeply disappointing." FCIC Chairman Phil Angelides slammed the ratings service as a "triple-A factory." Nasdaq adds new circuit breaker. Hoping to prevent a flash crash repeat, the Nasdaq stock market said it will launch its own circuit breaker system to halt trading when markets crash. "Our performance on May 6 wasn't exemplary to be frank," said a Nasdaq executive. "We want to take responsibility for the fact that there were aberrant executions on our market." While the move will bring Nasdaq more closely in line with the New York Stock Exchange, it could also complicate efforts to create market-wide safeguards. AT&T shifts away from unlimited data plans. AT&T (T) announced yesterday that it will no longer sell unlimited internet data plans to new customers with smartphones and iPads (AAPL), opting instead for usage-based pricing that charges heavy bandwidth users more. Analysts said the move will bring some much-needed common sense to the wireless industry, and likely marks the beginning of the end for unlimited data plans. In regular trading yesterday, AT&T +1.85%. Car sales regaining health. Carmakers saw major sales gains in May, with several firms posting double-digit growth. Notably, Toyota significantly lagged its peers, suggesting the firm's discounts are attracting far fewer customers. Among the highlights: Chrysler's (FIATY.PK) May sales +33% to 104,819 vehicles, breaking the 100K mark for the first time in more than a year. Ford's (F) sales +21.9%. GM's sales +16.6%. Toyota's (TM) sales +6.7%. Wide support for Astellas' tender offer. Japan's Astellas Pharma said investors tendered around 87% of OSI Pharmaceuticals' (OSIP) shares. Shareholder support for Astellas' offer was widely expected after the company sweetened its offer to $4B ($57.50/share) last month. However, Astellas is still 3% short of the stake it needs to complete its purchase, and is therefore opening a second offer period from June 4-7. Gerdau Ameristeel soars on Gerdau SA offer. Shares of Gerdau Ameristeel Corporation (GNA) shot up 54% yesterday after Gerdau SA (GGB) offered to acquire the 33.7% of Gerdau Ameristeel shares it doesn't already own for $11/share. The deal values Gerdau Ameristeel at around $1.7B. Kindle, coming to a Target near you. Amazon (AMZN) will begin selling its Kindle e-reader in Target (TGT) stores as of this Sunday. Previously, the device was only available via Amazon's website, but increased competition from Apple's (AAPL) iPad and Barnes & Noble's (BKS) Nook likely prompted the move. Earnings: Thursday Before Open Joy Global (JOYG): FQ2 EPS of $1.15 beats by $0.38. Revenue of $896M (-3%) vs. $755M. (PR) Suntech Power (STP): Q1 EPS of $0.11 misses by $0.02. Revenue of $588M (+86.3%) in-line. (PR) Earnings: Wednesday After Close Hovnanian (HOV): Q2 EPS of -$0.36 beats by $0.28. Revenue of $319M (-19.9%) vs. $352M. Shares -2.3% AH. (PR) Today's Markets In Asia, Japan +3.2% to 9914. Hong Kong +1.6% to 19787. China -0.7% to 2553. India +1.7% to 17022. In Europe, at midday, London +1.7%. Paris +2.2%. Frankfurt +1.7%. Futures: Dow +0.4%. S&P +0.4%. Nasdaq +0.3%. Crude +0.6% to $73.27. Gold -0.4% to $1217.50. Thursday's Economic Calendar 5:00 Monthly retail same-store sales 6:00 Monster Employment Index 7:30 Fed's Lockhart: Economic Outlook 8:15 ADP Jobs Report 8:30 Initial Jobless Claims 8:30 Productivity and Costs 10:00 ISM Non-Manufacturing Index 10:00 Factory Orders 10:30 EIA Natural Gas Inventory 11:00 EIA Petroleum Inventories 11:15 Fed's Bernanke: Small Business Financing 1:15 PM Fed's Hoenig Speaks to Bartlesville (OK.) Chamber of Commerce 4:30 PM Money Supply 4:30 PM Fed Balance Sheet 8:45 PM Fed's Fisher: Current Issues in Banking Notable earnings before Thursday's open: JOYG, STP Notable earnings after Thursday's close: SAI Seeking Alpha editors Eli Hoffmann and Jason Aycock contributed to this post.

  • Weekly Street Sentiment: Market Continues Up, But Sell-Side Sentiment Eases Lower Again

    Broad, but Small, Gains in Market Last WeekNot surprisingly, given some favorable economic news last week, the market rose for the fifth week in a row. All the major indexes were up about 1% last week and were up about 5% for the first quarter of the year. All ten Dow Jones industries were up in price last week, although the gain for four (Consumer Goods, Technology, Health Care, and Financials) were each well under 1%. Leading the way with gains of about 4% were the two commodity industry groups (Oil & Gas and Basic Materials).Sell-Side Sentiment Weakening in Most IndustriesLast week, sell-side sentiment declined for the third week in a row. Although the decline in each of the last two weeks has been under 1%, the emerging pattern is of concern. Like the week before, the downward revisions in sell-side sentiment were broadly based across industry groups. The decline was 3% or more in five industries, and 1% or more in two additional. The only industry with a significant rise in sentiment was Telecomm, up 8%, but that merely offset a 7% drop the week before.Last Week was a Good Week for Economic NewsThe market dodged a bullet last week when the all important jobs numbers were announced on Friday. As expected, unemployment was unchanged at 9.7%. Additions to payrolls, qt 165k, were a bit below expectations, but unlike the 23k decline in private payroll additions announced the day before by ADP, the government numbers showed an addition to private payrolls. The market should be satisfied with the 165K, since part of the shortfall in the overall results was a lower than expected number of census workers added. Weather disruptions in March may have played a role, as well.The rest of the economic news last week was mostly favorable. The ISM manufacturing number, consumer confidence, auto sales, and factory orders exceeded expectations. Only personal income, which was unchanged from the month before, fell short of expectations.Treasury Auction Deserves Attention Next WeekBelieve it or not, Tiger Woods teeing off at the Masters on Thursday is not the biggest event of the week. There may not be much economic news to compete with Tiger's return to golf, but interest rates will be the real thing to focus on. The Wednesday Treasury auction of 10-year notes bears attention, given the poor reception of the auction two weeks ago and the upward pressure on rates after the mostly favorable employment data reported last week. Rates on the 10-year note hit 3.94% last Friday, creeping close to the psychological 4.00% level. Higher long-term rates usually mean lower price-earnings ratios for equity markets.It may be a light week for economic news next week, but given the ongoing concern over housing, Monday's report of February pending home sales may have market impact. A decline is expected. Of course, any data reports that shed light on consumer spending attract the interest of investors. This week, mainly on Thursday, many retailers and restaurants will report same store sales. They likely will confirm the surprisingly strong same store sales results of February.The first quarter is now history for most companies, but earnings report season does not hit full stride until the week of 19 April. Meanwhile, the pre-announcement phase of earnings season cranks up next week. Pre-announcements have been off to a good start, with the ratio of negative to positive pre-announcements at 1.5 running less negative than the 2.1 average. Expect that to continue.The ongoing pain of discussion of the financial crisis and how to prevent a reoccurrence grinds on next week. The Financial Crisis Inquiry Commission opens hearings on Wednesday, followed soon by the return of Congress and its again taking up Senator Dodd's regulation bill. The President is reportedly pushing for a bill on his desk by May, so don't ignore this potential drag on the markets in coming weeks.Consumer Services Sell-side Sentiment Now in Decline, But Telecomm Back on Upward TrendConsumer Services had been the poster child for positive sell-side sentiment since the beginning of 2009. It had been in a long-term positive sentiment trend since October 2008 as well as in a shorter term positive trend since December 2009. A week ago, we noted that it appeared poised for a down side breakout from those positive trends. Last week, that reversal was resoundingly confirmed with a 6% decline in sentiment. Although the sell-side may like Consumer Services less than before, it still has the most positive sell-side sentiment of any industry group.A week ago, Telecomm looked like its big bounce in sentiment off the mid-January 2009 low that followed the huge December 2008 swoon was turning into a dead cat bounce. It dramatically reversed course last week when sentiment rose 8%, so the bounce is firmly back on its upward trend. On a stock price basis, the Telecomm industry has been the weakest performer year-to-date with a decline of 4%, so maybe it's time is coming.No Industries Now Look Poised For an Upside BreakoutA month or so ago, sell-side sentiment was strongly rising for the Consumer Services and Technology industry groups. Industrials and Telecomm seemed to be breaking into upward trends. Over the last few weeks, Consumer Services, Tech, and Industrials slipped out of their upside trends. Industrials and Tech appeared recently to have even broken into downtrends. Despite downward revisions of 3% and 1%, respectively, last week, both now are showing small hints of possibly arresting those downtrends. It would take several weeks of upward revisions for each to get back on upward trends.The Oil & Gas industry had bounced off the lower side of its downward channel, but with sentiment dropping 3% last week, it is hard to show much positive enthusiasm for the industry.Financials Not Alone in Having Negative Sentiment TrendsThe sell-side just can't seem to warm up to the Financial Industry. Sentiment for the group has been steadily declining for five months. It has the lowest sentiment rating of any of the ten industry groups. It is probably the industry group with the greatest degree of uncertainty on first quarter earnings, although the year-over-year earnings improvement will clearly be huge.In addition to Consumer Services now joining Financials in the downtrend category, Consumer Goods, and Basic Materials are also in the category.Stocks to WatchOver the last week, the following stocks had the largest bullish and bearish sentiment shifts amongst the sell-side.Bullish:Bearish:Disclosure: No positionsDerived from the aggregated analysis of thousands of actual trade ideas and data being sent in real-time from the sell-side to the buy-side, the above data has been extracted directly from all information transmitted in the past week by sell-side representatives from more than 300 firms submitting information to portfolio and asset managers worldwide via the First Coverage platform. Disclaimer: First Coverage's Weekly Street Sentiment (“WSS”) is derived from sources believed to be reliable, but which we furnish “AS IS” and “WITH ALL FAULTS.” We do not warrant or guarantee the suitability, timeliness, sequence, accuracy, or completeness of WSS. THERE ARE NO WARRANTIES OF ANY KIND, EXPRESSED, IMPLIED OR STATUTORY (INCLUDING, WITHOUT LIMITATION, SUITABILITY, TIMELINESS, TRUTHFULNESS, SEQUENCE, ACCURACY OR COMPLETENESS), ANY IMPLIED WARRANTIES ARISING FROM TRADE USAGE, COURSE OF DEALING, OR COURSE OF PERFORMANCE, OR THE IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE OR PURPOSE. THERE ARE NO WARRANTIES, EXPRESSED OR IMPLIED, AS TO THE RESULTS TO BE OBTAINED FROM USE OF WSS. Any analysis, observation or other opinion that WSS may contain is, and must be construed solely as, a statement of opinion and not a statement of fact, indication of preference or recommendation of any nature. Content contained in WSS is not intended to and does not constitute investment advice and no investment adviser-client relationship is formed.

  • Wall Street Breakfast: Must-Know News

    Citi makes Senate friends on cramdowns. In an about-face for one of the nation's largest mortgage lenders, Citigroup (C) dropped its opposition to a Senate bill that would allow judges to order mortgage 'cramdowns,' setting new repayment terms for mortgage holders in bankruptcy court. Aimed at helping millions of homeowners with underwater mortgages, the bill marks a major shift of power from lenders to debtors, leaving banks worried that cramdowns will encourage bankruptcies even among those able to pay. By way of explaining Citi's swift turnaround on the issue, CEO Vikram Pandit cited 'today's exceptional economic environment,' and Citi's opposition was dropped on the condition no future mortgages would be included in the law. Legislators had sought out Citi's support, hoping banking industry support would help the bill be approved more quickly, and Citi was duly applauded for 'being open-minded' and 'playing a major leadership role.' Senate Democrats hope to include the bill in Obama's stimulus plan. Treasury's critics get louder. In the harshest criticism to date of the Treasury's handling of TARP, a congressional oversight panel is releasing a draft report today noting 'significant gaps' in Treasury's ability to track billions of dollars of taxpayer money. According to the report's charges, the Treasury has failed to reveal its strategy for stabilizing the financial system, has done nothing to help homeowners and hasn't answered questions asked by a government watchdog. The report also faults the Treasury for having no standards for measuring the success of the program. Obama forecasts bleak future without stimulus. Obama painted a grim picture of the country's economic future sans immediate stimulus action, saying he doesn't "believe it's too late to change course but it will be if we don't take dramatic action as soon as possible." Without a rapid fiscal stimulus package, he warned, the economy will become 'dramatically worse,' unemployment could reach double-digits and the recession 'could linger for years.' The speech marked the launch of what is expected to be an aggressive campaign to raise public support for the stimulus plan. (Read the full text of Obama's speech) How much will Madoff investors see? Based on the value of Madoff's brokerage, and assets including real estate, boats and jewelry, scammed investors may have access to as little as $1B of Madoff's money to satisfy as much as $50B in claims. The bulk of any refunds would likely come from other clients who withdrew money from Madoff recently, and government payouts (SIPC, tax refunds). According to one calculation, average Madoff victims might eventually get back $0.20 on the dollar. Small, direct Madoff clients could get back much more thanks to SIPC payouts of up to $500,000 per account. Large, indirect Madoff clients might not get much of anything at all. Meanwhile, insurers who cover financial institutions may be on the hook for over $1B to cover the legal costs for investment managers who gave client money to Madoff. Swiss secrets revealed. UBS (UBS) will close 19,000 secret offshore accounts of wealthy U.S. clients under pressure from federal authorities who suspect the IRS is getting ripped off (no!). Balances will be transferred to other banks or UBS divisions, or else checks will be sent directly to clients - creating a damning paper trail. Here's how one UBS client puts it: "You can either take that check and throw it in the woods, or deposit it somewhere and get busted." Prosecutors suspect U.S. citizens have about $18B buried in UBS accounts (that's all?). Lehman reaches P-E deal. Lehman Brothers has reached an agreement to spin out its private equity arm into an independent firm. As part of the deal, Lehman will retain a significant interest in the private equity business, called Lehman Brothers Merchant Banking, and South African billionaire Johann Rupert will assume $250 million in unfunded commitments to the fund. The move is part of Lehman's restructuring strategy of retaining a stake in its assets rather than selling them off wholesale in a weak market. Palm Pre wows. Palm pre-viewed its iPhone rival, Pre, to widespread accolades at the Consumer Electronics Show, sending shares soaring an unbelievable 35% to $4.45. Besides a slideout keyboard to complement its touch screen, the Pre also features a super-fast CPU, wireless battery recharge, and an "incredibly well thought out and smooth" user interface that "may be quite a bit more revolutionary than the iPhone." The show-stealing smartphone was a surprise to many who had already counted Palm out of the game. Its response: "Mobile is our DNA." Sprint Nextel (S), the exclusive carrier, climbed 8.4%. Engadget also liveblogged the intro. Citi takes a hit on petrochem exposure. Citigroup (C) expects to take a $1.4B pre-tax charge in its just-finished Q4 on its exposure to LyondellBasell. Citi ended December with around $2B of gross exposure to LyondellBasell, the world's third-largest petrochemical company whose U.S. operations filed for bankruptcy this week. The charge is mainly to boost loan reserves, Citi said. Jobless claims. Initial Jobless Claims fell to 467,000 last week, down 24K from last week's 491K (revised), and far less than the 545K economists predicted. The 4-week moving average of 525,750 is down 27K. More jobless data is coming later today with nonfarm payrolls due out at 8:30. Economists predict the U.S. probably lost 525,000 jobs in December, capping the biggest collapse in employment since the end of WWII. Unemployment likely jumped to a 15-year high of 7%. Earnings: Friday Before Open R.R. Donnelley & Sons (RRD): Sees Q4 EPS of $0.51-0.61 vs. $0.78 consensus. Maintains dividend. (PR) Earnings: Thursday After Close Allscripts-Misys Healthcare Solutions (MDRX): FQ2 EPS of $0.14 beats by $0.01. Revenue of $173M (+4.3%) vs. $181M. Shares +4.2% after hours. (PR) Apollo Group (APOL): FQ1 EPS of $1.12 beats by $0.14. Revenue of $971M (+24.4%) vs. $912M. Shares +8.8% after hours. (PR) Lawson Software (LWSN): FQ2 EPS of $0.10 beats by $0.03. Revenue of $206M (-5.6%) in-line. Shares +2.9% after hours following a 9.6% fall during regular trading. (PR) Today's Markets Most Asian markets trended lower Friday. India led the losers on reverberation of the Satyam (SAY) scandal. Nikkei -0.45% to 8,837. Hang Seng -0.27% to 14,377. Shanghai +1.42% to 1,905. BSE -1.88% to 9,406. Europe is down a drop at midday; markets are quiet in anticipation of the U.S. employment data. London -0.6%. Paris -0.2%. Frankfurt -0.15%. U.S. stock futures are all lower, but have moved off overnight lows. Dow -0.4% to 8663. S&P -0.3% to 904. Nasdaq -0.5%. Crude -1.7% to $40.97. Gold +0.5% to $859. Friday's Economic Calendar 8:30 Non-farm payrolls 10:00 Wholesale Inventories Notable earnings before Friday's open: KBH Seeking Alpha editor Eli Hoffmann contributed to this post.

  • Wall Street Breakfast: Must-Know News

    Management shake-up at Fannie. Fannie Mae (FNM) announced broad changes to its top financial management in an attempt to create an executive team that can stem growing credit losses and conserve capital. Stephen Swad, formerly the CFO, was replaced, as was the chief risk officer, and Peter Niculescu, the chief business officer, will have expanded responsibilities. Daniel Mudd will retain his position as CEO. Fannie Mae shares were up on Wednesday for the third day in a row as investor fears about a government bailout abated. Dollar intervention planned, abandoned. The U.S., Europe, and Japan created a dollar rescue plan in March when the currency was plummeting, reports the Nikkei business newspaper. The officials did not choose which exchange rate would trigger the plan, but were prepared to aggressively buy dollars and sell yen in the event of strong dollar weakness. The intervention was never put into action, but makes some investors wonder whether a future fall in the dollar could spark a new multi-governmental rescue plan. After you finish reading Wall Street BreakfastSeeking Alpha's Market Currentswill keep you current all day long. U.S. companies might start using international accounting rules. The SEC proposed a tentative timeline on Wednesday that could require U.S. companies to switch to international accounting standards by 2014. Until now, the U.S. has used Generally Accepted Accounting Principles [GAAP], which are considered less flexible and more clearly defined than the international financial reporting standards [IFRS] used in Europe and in dozens of other countries. The timeline fits with a global plan to converge GAAP and IFRS, a move that would be welcome to many in the accounting industry. Sears seared by frugal consumer. Sears (SHLD) posted worse-than-expected Q2 earnings (see below) as shoppers cut back on appliances and clothing purchases. The results "reflect the continued effects of a slowing economy which contributed to the earnings declines we have experienced since the third quarter of 2007," it said. Inventories fell by $500M, which should allow it to reduce markdowns and boost its margins. Gross margin fell 1.2% to 26.5%. Same-store sales fell 6.2% - less than Q1's 8%+ drop. "Despite the difficult economic environment, we remain focused on long-term value creation and continue to invest in the future of the company," CEO Bruce Johnson said. Toyota slashes sales targets, production. Toyota Motor (TM) cut its 2009 growth forecast for auto sales to 2.1% from 5.6%. Toyota, the world's second-largest carmaker, will reduce production in the U.K. and Poland, and has already announced cuts in the U.S., its biggest market, where it has lowered its growth target by 10%. iTunes sees music label backlash. A growing number of record companies are trying to avoid Apple's (AAPL) iTunes store, arguing that selling individual songs is hurting overall music sales and is less profitable than selling complete albums. iTunes sells at least 90% of U.S. digital downloads, and it is widely believed in the industry that downloads will eventually replace CDs. Still, not everyone is ready to switch to the new model. Says one holdout manager, iTunes is "part of the death knell of the music business." Signs of a music piracy crackdown. The FBI arrested a man for copyright-infringement after he posted songs from a not-yet-released commercial album on his website, possibly signalling a new, more aggressive stance in the battle against online music piracy. The Recording Industry Association of America [RIAA] says that a lack of deterrents has allowed online piracy to flourish and that a more aggressive approach would be welcome. MBIA to reinsure FGIC municipals. MBIA (MBI) has agreed to backstop $184B in FGIC municipal bonds. FGIC's future remains uncertain and the reinsurance agreement allows it to focus on other problems connected to mortgage securities. MBIA will receive a $741M premium. Mortgage apps climb slightly. MBA Mortgage Applications rose 0.5% to 421.6, the first increase in three weeks. The 30-yr. fixed mortgage rate fell to 6.44% from 6.47%. Bankruptcies soar. Bankruptcy filings shot upwards in the year ending June 30, to nearly 1M total. Business filings were up 41% and personal filings rose 28% on the previous year. Filings are expected to reach 1.2M this year. Job market confidence same as 2001. in the A new survey shows worker confidence at a low last seen during the 2001 recession. With unemployment at a four-year high, 65% of respondents said this is a bad time to find a quality job, and 33% of workers said they don't always have enough money to make ends meet. Durable goods show surprise growth. July durable goods orders rose an unexpected 1.3% on strong transportation equipment demand vs. a consensus 0.2%. Excluding transportation, orders rose 0.2%. U.S. Treasury debt prices fell as the report suggested resilience despite the deep housing correction and credit crunch. Lockhart: Fed prepared to raise rates when needed. Federal Reserve Bank of Atlanta President Dennis Lockhart said Wednesday that the Fed's interest rate is consistent with slowing inflation, and signalled readiness to raise borrowing costs if such a move is needed. UK housing woes continue. UK home prices fell 10.5% in August, the biggest annual drop in 18 years. The 1.9% drop from July was the 10th straight monthly decline. Including inflation, residential real estate could lose 1/5 of its value in 2008. Europe retail sales contract, again. Euro-region retail sales fell for the third straight month amid high inflation and economic weakness. "Inflation is squeezing disposable incomes and the outlook for consumer spending and for retailers is gloomy," economist Ken Wattret said. HK exports bounce back. Hong Kong's exports grew 11.1% in July vs. last year after slipping 0.6% in June. Economists expected a 5.5% gain. "The weakness in the U.S. economy is expected to continue to drag down Hong Kong's export performance," the government said. HK's economy "stayed in a good shape, virtually unscathed by the global credit market turbulence." (ETF: EWH) Earnings: Thursday Before Open Diageo (DEO): FH2 profits fell 8.1% to £546M ($1B). Sales rose 9.9% to £3.8B. Full-year profit climbed 2.1% to £1.52B, just short of the £1.56B consensus. DEO sees 2009 operating profit growth of 7-9%, vs. this year's 9%. Shares -0.9% in London. [Bloomberg] Sears (SHLD): Q2 EPS of $0.21 misses by $0.12. Revenue of $11.8B (-4.1%) vs. $11.7B. [PR] Vimpel-Communications (VIP): Q2 EPS of $0.46 misses by $0.15. Revenue of $2.61B (+52%) vs. $2.65B. [PR] Earnings: Wednesday After Close Benihana (BNHN): FQ1 EPS of $0.12 misses by $0.04. Revenue of $94.5M (+5.1%) vs. $92.7M. [PR] Coldwater Creek (CWTR): Q2 EPS of $0.04 beats by $0.03. Revenue of $241M (-0.9%) vs. $242.5M. [PR] FuelCell Energy (FCEL): FQ3 EPS of -$0.39 misses by $0.12. Revenue of $27.9M (+106.7%) vs. $21.1M. [PR] Giant Interactive Group (GA): Q2 EPS of $0.2 in-line. Revenue of $73.6M (+36.3%) vs. $72.2M. [PR] Greif Bros. (GEF): FQ3 EPS of $1.18 beats by $0.05. Revenue of $1.0B (+18.3%) vs. $927M. [PR] Heico (HEI): FQ3 EPS of $0.47 beats by $0.01. Revenue of $147M (+10.6%) in-line. [PR] Jo-Ann Stores (JAS): Q2 EPS of -$0.47 beats by $0.19. Revenue of $403M in-line. [PR] Men's Wearhouse (MW): Q2 EPS of $0.72 beats by $0.02. Revenue of $545M vs. $556M. Sees Q3 EPS of $0.36-0.40 vs. $0.53. [PR] TiVo (TIVO): Q2 EPS of $0.03 beats by $0.05. Revenue of $53.5M vs. $55.3M. Sees Q3 revenue of $49-51M vs. 57M. [PR] Today's Markets Asia markets closed mixed. Nikkei +0.1% to 12,768. Hang Seng -2.3% to 20,972. Shanghai +0.3% to 2,350. BSE -1.7% to 14,048. In Europe at midday, London -0.3%. Paris -0.5%. Frankfurt -0.6%. U.S. index futures are largely unchanged at 7:00 AM, with light overnight volume. Dow -0.03%. S&P -0.04%. Nasdaq -0.14%. Crude +1.18% to $119.55. Gold +0.94% to $841.80. Thursday's Economic Calendar Thursday's economic calendar: 8:30 Corporate Profits 8:30 GDP (preliminary) 8:30 Jobless Claims 10:35 EIA Natural Gas Report 11:00 Kansas City Fed Mfg Survey 4:30 PM Money Supply Notable earnings before Thursday's open: DLM, ENER, SHLD, TIF, VIP, WSM Notable earnings after Thursday's close: DELL, MRVL, NOVL, OVTI, PETM, SIGM, WIND Seeking Alpha editor Eli Hoffmann contributed to this post.

  • Wall Street Breakfast: Must-Know News

    BoA bites back against Cuomo. Bank of America (BAC) said it's 'surprised and disappointed' by accusations that's it's hiding behind attorney-client privilege, and called New York Attorney General Andrew Cuomo's allegations 'spurious' and 'simply wrong.' Meanwhile, Bank of America and the SEC are making their third attempt to convince Judge Jed Rakoff to approve a $33M settlement over disclosures of Merrill Lynch bonuses. The SEC called the settlement 'fair' and 'reasonable,' and Bank of America said it's prepared to litigate if the settlement isn't approved. Phasing out debt guarantees. The FDIC is considering a six-month, emergency-only extension to its debt guarantee program and is seeking public comment on the proposal, with FDIC's Sheila Bair noting "it has been a successful program but we would like to end it." The guarantee program had around $320B in outstanding debt guaranteed as of the end of July, and whether it expires Oct. 31 as planned or is extended by six months, the phase-out should provide an early indicator for how banks fare once emergency government support measures have been removed. U.S. levies duties on Chinese steel. In the largest countervailing duty case to date against Chinese-made products, the U.S. Commerce Department decided to impose preliminary duties of up to 31% on Chinese steel pipe because of unfair subsidies, bringing average duties on the $2.8B of annual imports to 21.3%. China 'strongly opposes' the ruling, which is only the latest in a series of events contributing to escalating trade tensions. Beige Book: Signs of slow improvement. In the Federal Reserve's latest Beige Book, most districts reported the economy was firming up overall and stability increasing, though many sectors still show weaknesses. In particular, despite some improvements in residential real estate, commercial real estate remains weak and non-residential construction activity is down. Credit remains tight, loan demand is down and retail sales are soft. (Read the Beige Book summary) OPEC holds steady. As expected, OPEC agreed to keep its oil production quotas unchanged, betting a recovery in the global economy will help keep prices near the current $72/barrel. The decision comes even as the Energy Information Administration's latest forecast calls for weaker oil demand and higher supply, which is projected to result in a daily world surplus of 70,000 barrels. Beijing Automotive steers for Saab. After a failed bid for Opel, Beijing Automotive is joining Koenigsegg Group's offer to buy General Motors' Saab. Beijing Automotive will become a minority shareholder in the bidding team, with the hope that a successful bid will allow it to spur model development and sales growth. (Read the memorandum of understanding) Apple's iPod refresh fails to dazzle. Investors were generally unimpressed at Apple's (AAPL) "Let's Rock" event yesterday, where Apple introduced a new version of iTunes, updated iPhone software and an iPod Nano with video camera and FM radio. Many had been hoping to see a camera on the iPod Touch and there was no sign of a much-talked-about tablet device. With no major product surprises, much of the attention was focused on CEO Steve Jobs, who made his first public appearance since returning from medical leave. Foreclosures remain elevated. U.S. foreclosure filings topped 300,000 for the sixth month in a row, coming in at 358,471 in August, according to RealtyTrac Inc. The number is just 0.5% below July's record all-time high, and is up 18% from August 2008. Nevada had the highest foreclosure rate, followed by Florida and California. With unemployment hovering at 9.7%, RealtyTrac expects foreclosures to rise for another year. Google preps for micropayments. Google (GOOG) plans to introduce a micropayments platform within the next year to help newspapers charge for their content. The move would create a direct competitor for Journalism Online, a site launched by media executives that aims to provide one-stop subscriptions for newspapers and magazines that want to charge for online content. (Read Google's micropayments plan (.pdf)) Retail sales inch up. Chain store sales rose 0.2% in the first week of September, Redbook reported, better than the -0.3% expected. According to ICSC, weekly sales rose 0.6% from the previous week but dipped 0.1% vs. the previous year. Sales for September are expected to be down 2% vs. the previous year. Earnings: Thursday Before Open Lululemon Athletica (LULU): Q2 EPS of $0.13 beats by $0.03. Revenue of $98M vs. $88M. (PR) Earnings: Wednesday After Close Men's Wearhouse (MW): Q2 EPS of $0.75 beats by $0.14. Revenue of $526M (-4%) vs. $523M. Sees Q3 EPS of $0.27-0.30 vs. $0.32. (PR) Navistar International (NAV): FQ3 EPS of -$0.16 does not compare to consensus of $0.69. Revenue of $2.5B (-38%) vs. $2.7B. Lowers full-year EPS guidance, which includes effects of Ford (F) settlement, to $4.95-5.25 vs. $2.92. (10-Q) NCI Building Systems (NCS): FQ3 EPS of $0.25 beats by $0.14. Revenue of $238M (-50%) vs. $263M. (PR) Smith & Wesson (SWHC): FQ1 EPS of $0.21 beats by $0.11. Revenue of $102M (+30%) vs. $94M. (PR) Today's MarketsAsia locked in some gains but European markets and U.S. futures are trading down.

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