Wall Street Breakfast: Must-Know News 18 comments
-
Font Size:
-
Print
- TweetThis
- Closer ties in trade talks. The U.S. and China wrapped up two days of bilateral economic talks, their last before President-elect Obama takes office, with an agreement to deepen financial ties, and pledged $20B to fund trade. The U.S. agreed to institute a rapid approval process for Chinese financial firms that want to invest in the country. In a joint statement, the U.S. said it welcomes investments by China's sovereign wealth fund, while Chinese officials look forward to a 'candid and pragmatic dialogue' with the new administration. In response to urging by Treasury's Paulson to let the yuan appreciate, China said it remains committed to a 'stable' yuan and currency reform, and that the U.S. should deal with its own economic problems, including excessive consumption and debt.
- Job losses pile up. Anticipating declining sales and tougher times ahead, companies across a broad swath of industries are accelerating layoffs. Over 33,000 job cuts were announced this week alone, including 12,000 jobs at AT&T (T), as well as cuts at household names like Viacom (VIA), DuPont (DD) and Avis Budget Group (CAR). All told, the U.S. has lost around 1.2M jobs this year, and economists expect November's losses to reach 350,000. (The government will release its monthly employment report today at 8:30am.) Unemployment will likely tick up to 6.8% for November, or possibly as high as 7%, and break 8% by the end of the year. (More employment data below.)
- What next from the Fed? Central banks in Europe and Asia slashed interest rates aggressively this week in an effort to stabilize financial markets and check deflationary pressures (see below). Federal Reserve officials are weighing their options and considering following suit. Ahead of today's employment figures, the market priced in a 60% chance that the Fed would cut rates by 75 basis points to 0.25% on December 16. Aside from rate cuts, the Fed is also considering unconventional steps, including new efforts to bring down rates it doesn't usually target, such as those on mortgages, other consumer borrowing and Treasury bonds. Raising expectations for aggressive policy action as soon as next week, Bernanke called for new government measures to stem foreclosures, while two other Fed policy-makers said the economic outlook has 'clearly deteriorated' and is 'not encouraging.' Fed officials insisted the central bank has the necessary tools to tackle current weaknesses and future shocks, even as benchmark interest rates approach zero.
- Voters line up on BoA/MER deal. Shareholders of Bank of America (BAC) and Merrill Lynch (MER) face separate votes today to approve the takeover deal forged in September. Expected to close by the end of the year, the deal is a significant one in the reshaping of the U.S. financial industry, blurring the lines between investment bank and commercial bank. Some Merrill brokers are reportedly chafing at the BoA approach of peddling stocks through retail-bank branches, though executives have repeatedly denied any cultural tensions. Little has been said about the possible sales strategy for the combined companies, and the internal focus has been on cost-cutting, with as many as 25,000-30,000 positions, or 8%-10% of the new firm, likely to be eliminated over the coming three years.
- Lu to the search-ad rescue. Microsoft (MSFT) tapped Qi Lu, a former top executive from Yahoo (YHOO), to run its internet operations, a strategically important business in which Microsoft has struggled to gain traction. With Lu's appointment, Microsoft is looking to revamp its search ad-strategy to better compete with industry juggernaut Google (GOOG). Microsoft executives believe search engine technology is the most powerful way to make money on the internet, but the company remains a distant third place despite hefty investments. In October, 63.1% of U.S. searches were done with Google, 20.5% with Yahoo and just 8.5% with Microsoft.
- Retail sales plunge. For the month of November, U.S. retailers posted the biggest decline in same-store sales in at least 39 years, with heavy discounting keeping sales from falling even lower. Overall, retail sales were down 2.7% from last year, with ICSC's Michael Niemira forecasting 'the weakest holiday season in our record.' Wal-Mart (WMT) beat expectations, and helped pull up overall sales. Excluding Wal-Mart, same-store sales fell by 7.7%. (See how other retailers fared.)
- Central bank cuts. Bank of England cut its key interest rate by 100 BPs to 2%, as expected, saying "there remained a substantial risk of undershooting the 2% CPI inflation target in the medium term." The European Central Bank cut its key interest rate by 75 BPs to 2.5%. The cut was larger than the expected 50 BPs reduction, and the largest in the ECB's 10-year history, but many suspected something more was in store amid ever-weakening economic data. While economists were satisfied with the larger than expected cut, Nomura's Laurent Bilke says the central bank is late to the party. "The economy is in deep recession now."
- Monstrous employment numbers. Monster's online employment index fell 7 points in November to 143, and is down 22% from the previous year. Public administration remained Monster's most resilient industry category, but the trend appeared to be weakening. Online job availability rose in just one of Monster's 20 industry categories. The Labor Department's initial jobless claims, released yesterday, totalled 509,000, down 21K from last week. The numbers were less than the 540,000 economists expected, marking the second week in a row forecasts have overshot. The 4-week moving average moved up 6,250 to 524,500.
- Underwhelming factory orders. October's factory orders were down 5.1% vs. -2.8% consensus, the third consecutive monthly decrease. Ex-transportation, orders fell 4.2%, the largest percentage decrease since 1992.
Earnings: Friday Before Open
Earnings: Thursday After Close
- Guess? (GES): Q3 EPS of $0.69 beats by $0.06. Revenue of $528M vs. $512M. (PR)
- Novell (NOVL): FQ4 EPS of $0.06 in-line. Revenue of $245M (-0.1%) vs. $250M. (PR)
Today's Markets
- No clear pattern in Asia trading Friday. Nikkei -0.08% to 7,918. Hang Seng +2.49% to 13,846. Shanghai +0.86% to 2,019. BSE Sensex -2.87% to 8,965.
- In Europe, markets are lower in anticipation of a weak U.S. payroll number. London -1.1%. Paris -2.6%. Frankfurt -2.5%.
- Futures are down a bit in light overnight trading. Dow -0.1% to 8395. S&P -0.2% to 845.50. Nasdaq -0.4%. Crude +1.4% to $44.29. Gold +0.6% to $770.
Friday's Economic Calendar
- 8:30 Non-farm payrolls
3:00 PM Consumer Credit - Notable earnings before Friday's open: BIG
Seeking Alpha editor Eli Hoffmann 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.
Related Articles
|
-
The Seeking Alpha 100
See allThe top 100 stock
market authors
selected for publication
Seeking Alpha 100 » -
Fastest Climbers
Authors with the largestSee all
increase in followers
in the last 7 days
Fastest Climbers » -
Top Commenters
Top commenters,See all
as ranked by their peers
Top Commenters » -
Top Instabloggers
The 100 most active
Instabloggers.-
1
David Fry
-
2
TraderMark
-
3
Don Dion
-
4
Cliff Wachtel
-
5
Mike Havrilla
Top Instabloggers » -
1
-
Top StockTalkers
TopSee all
StockTalkers.
Top StockTalkers »
This article has 18 comments:
There should be NO bailout money for Chrysler!!!!
Cerberus is a vulture fund that had every intention of stripping Chrysler of every penny and then bringing it back to the market and walking off with their fat billions and beating their chests while laughing there heads off at how they took the suckers money.
WELL, to bad boys, it did not work out so well for you this time, you were not as smart as you thought you were. EAT YOUR LOSSES, NO GOVERNMENT (TAXPAYER) MONEY FOR YOU!!
No money to slosh around in your fund to cover up all of your other mistakes and keep your sorry butts solvent and your pay checks fat.
Sell out or fold, your done, and I for one am going to write Dodd's office to make sure he hears it loud and clear, as we should all do.
Taxpayer dollars should not be being used to support PRIVATE VULTURE FUNDS business mistakes.
ggillin - 12-05-2008
Senator Dodd,
I am urging you NOT to support Chrysler and it's current owners with with any bailout money until they divest, break-up, sell or dissolve the company.
There should be NO bailout money for Chrysler!!!!
Cerberus is a vulture fund that had every intention of stripping Chrysler of every penny and then bringing it back to the market and walking off with their fat billions and beating their chests while laughing there heads off at how they took the suckers money.
NO GOVERNMENT (TAXPAYER) MONEY FOR THEM!!
No money to slosh around in their fund to cover up all of their other mistakes and keep their sorry butts solvent and their pay checks fat.
Taxpayer dollars should not be being used to support PRIVATE VULTURE FUNDS business mistakes.
Sincerely,
Ggillin - 12-05-2008
But it's all part of the economic cycle... if we are capitalist, anyway.
But is there any doubt of the ultimate outcome ? Whatever "American automakers" looks like now, is there any doubt that in ten years IF such a thing is still around, it will look radically different ? Even if we put the financial system on life support, is there any doubt that the best possible outcome will be to Zombify it like the Japanese did to their bloated banks 20 years ago.
The mountain of credit that Alan "Bubbles" Greenspin constructed turned into a mountain of debt and is now, daily, changing into a mountain of BAD debt
Employment is dropping fast. GDP is as well. Earnings, well, aren't there. Yet the federales are revving up the spending machine like teens on the strip, trying to impress Peggy Sue.
Posturing. It's all one big farce with a bunch of people who aren't good at anything other than making speeches making believe they know how to fix things. Worse, the help they've hired to do the work are the ones who souped up the machine beyond its capacity, which made it break down.
I get a kick out of the "it'll turn around in Q2 '09" crowd. This bus is NOT headed for Vegas.
The market is a multi-dimensional, artificial creation of Human beings. Taxes and regulations are only a small piece of the whole. We absolutely foolish if we just stand back and let this income provider die because political dogma. Its our source for bread winning not a tool to punish inept CEO's. England let its auto manufacturing die, and now Germany and Japan have replaced them. It is dumb-American to give our auto Industry to China. We must not follow the same dogma that got us into this mess to bury us deeper.
Our economy must be manage by clear thought, with a eye on the future. If can use these hard times to extract necessary improvements to the current system so that when the markets return we will be in a stronger position or we can behave like children (Bush) and do nothing now and buy all our cars in the future from some where else.
1. Why should they all be considered together when Chrysler is owned by venture capitalists, Ford was profitable in the first quarter, and GM doesn't have a clue?
2. Why is all of the discussion about the Big Three - with the assumption that the money will trickle down to the suppliers (who may be increasingly in China)?
3. Why should GM be allowed to become a bank - displacing local banks as a source of car loans - when they can't succeed at making cars?
4. Why isn't the technology money pooled into a joint venture, rather than having three separate efforts?
There are some thoughtful congress members; others who just reflect a populist sentiment. A very interesting exercise in both economics and politics. If only the 25% who are insightful (in both parties) could dominate the Congress rather than Nancy Pelosi and Harry Reid who understand the politics, but not the economics.
OR, we simply continue the blame game. What if, for instance, the 3 automakers do not reform the way they do business; then simply drive your vehicle another year or two, instead of buying that foreign-made job-taking vehicle. Stand up America we are still in the driver’s seat. You want to make a statement, you want Washington, the Corporate Executives, China, other countries attention; and then pay attention on how you spend you’re hard earned money. These are times to sit-up and take notice, to write our destiny, and change our culture in this global economy. If you do not think your habits change the global economy, look at OPEC. What and where is the price of oil since our culture, the American culture, decided (whether we liked it or not) to cutback our spending habits. It came crashing down. Americans, we still have power; let us use it wiser. EITHER we make it happen by adjusting our courses and stop whining about what we created or be like Washington D.C. or those three automakers who believe we are ignorant about their jesters in manufacturing vehicles that provided the best return on their (and the shareholders) investment by building the gas guzzling machines. Now, because of our choices, we are involved in a major shift. I ask you America, are you willing to make tough choices to create a comeback or shall we seek individuality and ridicule our neighbors by the blame game. We can stop sending jobs overseas because simple economics of supply and demand still DRIVE finances. We stop buying overseas items, and stop the bleeding. We did not get here overnight and it will cause all of us to roll up our sleeves.
The Federal Reserve cartel thinks that liquidity is the problem; that reducing borrowing rates of interest for banks and printing more money will induce banks to start lending again. Businesses will be able to finance their operations and consumer credit lines will open up so Mary and Joe can begin purchasing imported goods again. But it still comes down to the average citizen and the reality of their pocket books.
The American people may not be sophisticated when it comes to arcane financial discussion, but they do have a sense of impending strife at the personal level.
They look at their earned income, their monthly bills, their check book and for homeowners, their shrinking home equity lines of credit. They see the deteriorating value of their financial investments and they are reducing their exposure by selling their stocks, bonds, mutual funds, etc. to raise cash. They are not going to spend much beyond their capability to repay because they're beginning to understand how the debt economy works and their individual role in this ruse of a monetary shell game.
Layoffs and pay reductions are accelerating, which means people have less disposable income. Local, state and the federal government income and property tax revenues are shrinking as well.
This economic debacle will not end by printing more money. It will not end with taxpayer stimulus packages. It will not end with government forcing the lowering of mortgage interest. It will not end with selling more debt to other countries. It will not end by making more credit available to citizens.
It will only turnaround when government understands that a consumer economy works when people have sufficient earned and investment income to participate as capitalists. Washington must stop listening to the creators of debt and start listening to the builders of wealth.
Government must focus on reducing business taxes and burdensome regulation to induce a re-growth of manufacturing here in the U.S. It is imperative that energy be directed towards marketing America as the global center of commerce. Jobs will grow, banks will have an increase in demand deposits which means more money to loan; people will begin spending again and so on and so on.
Again, it’s all about putting people back to work to create wealth, not about the availability of debt.
Capital Gains tax 15%, I work for a living and pay over 30%.
Lack of lending regulation caused the lenders to loan to anyone with a pulse just to get a fee. This caused the erosion of the value of underlying assets guaranteeing the value of bonds.
Creation of wealth only occurs with natural occurring demand that is in line with the buyers ability to pay.
This economic melt down proves real growth or creation of wealth does not come from eliminating regulations or cutting taxes, only greed.
Our national debt has grown, with tax cutting.
Home values have increased way more than there real value because of easy money policies and lack of regulation.
Lowering the taxes on business and eliminating regulations help to get us into this mess.
So old sailor how is cutting business taxes and removing regulations going to pay off the trillions needed for the economy's resuscitation?