Wall Street Breakfast: Must-Know News

• Kuwait quits Dow deal. Kuwait has notified Dow Chemical (DOW) that it's pulling out of their planned $17.4B petrochemical joint venture. Kuwaiti TV said the government no longer sees any benefit from the deal as a result of the global financial crisis and its impact on the OPEC producer. Kuwait's withdrawal deprives Dow of $9B earmarked for the acquisition of Rohm & Haas Co (ROH), and leaves the firm 'extremely disappointed.' DOW -2.5% premarket.
• NYT shrinks down. The New York Times Co. (NYT) is turning to asset sales as it faces a $400M debt repayment and a 60% drop in its stock price this year. In addition to trying to offload its 17.5% stake in the parent company of the Boston Red Sox, NYT is also looking to raise money with a sale-leaseback of its headquarters building and may also try to sell off some smaller assets. A spokesman said "we’ve been very clear that we were going to rebalance our portfolio and by rebalancing our portfolio that meant both acquisitions and divestitures." In plainer English, as one newspaper analyst put it, "basically everything’s on the table except the New York Times itself."
• IndyMac sale advances. IndyMac, one of the largest casualties of the subprime crisis, is on the verge of being sold to a private-equity group, with a deal possible as soon as today. Sources say the buyers include J.C. Flowers & Co., Dune Capital Management, and hedge fund Paulson & Co. The group would buy the bank and its 33 branches, IndyMac's reverse-mortgage unit and a $176B loan-servicing portfolio.
• Retailers left out of holiday cheer. Despite heavy holiday season promotions, retailers are facing what could be their worst season in 40 years. Same-store sales likely declined 2% in November and December, twice as much as previously projected, while retailers as a whole were down 5.5%-8%. Firms like AnnTaylor (ANN) and Sears (SHLD) have already announced plans to shutter underperforming stores, and analysts forecast as many as 12,000 store closings in 2009, in addition to further bankruptcy filings and consolidation.
• Online spending takes a hit. Online retailers fared slightly better than their brick-and-mortar cousins, but the season is still likely to go down as one of the worst on record for e-commerce. Down just 2% from November to Christmas Eve, the traffic was closely concentrated among key online players like Amazon (AMZN), Apple (AAPL) and Wal-Mart (WMT). Consumers were also lured by deep discounts that aren't likely to continue. In a sector where sales have historically increased 20% annually, this is the first holiday season where online sales haven't grown at all.
• Oil bounces on geopolitics. Oil is up nearly 8% as Israel continues its third consecutive day of air strikes on the Gaza Strip. Geopolitics, which had briefly slid to the background of the oil scene, is front and center again as investors are reminded of the risk, however remote, that tensions could threaten oil supplies from the Middle East. As of 5am, U.S. light, sweet crude was trading at $40.89/barrel, down from a session high of $42.20.

Today's Markets

• Asia markets closed lightly up. Nikkei +0.1% to 8,747. Hang Seng +1.0% to 14,328. Shanghai -0.1% to 1,850. BSE +2.2% to 9,533.
• In Europe at midday, London +2.4%. Paris +1.2%. Frankfurt +2.0%.
• U.S. futures: Dow +0.5%. S&P +0.3%. Nasdaq +0.6%. Crude +7.6% to $40.59. Gold +1.6% to $885.60.

Monday's Economic Calendar

• No events scheduled

Seeking Alpha editor Eli Hoffmann contributed to this post.

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Comments

[BlueOkie:]

If Kuwait is backing out of deal with DOW because of oil price too low, does that signal low oil is here to stay for awhile?

2008 Dec 29 08:42 AM

[Rob Viglione:]

Is "hedge fund Paulson & Co" a joke for the Treasury?

2008 Dec 29 09:35 AM

[notsosmart:]

sadly paulson & co. are a joke.

2008 Dec 29 10:37 AM

[blisterchicken:]

I think Israel is trying to artificially raise the price of oil by causing trouble. Did you see what they were bombing?

Please!

Hopefully we will see this as action that we can call them on they're BS finally as it's already been established that criticising Israel does not make one an anti-semite.

2008 Dec 29 10:41 AM

[User 283977:]

Since the price of oil has recently substantially dropped, I suspect Kuwait may be signalling it wants to renegotiate. The ROH deal is now under a cloud… I would think ROH's price will be dropping, and that opens up yet more wiggle room for renegotiating.

2008 Dec 29 10:47 AM

[HedgeMe:]

google 'hedge fund Paulson & Co.' and you will see if its a joke, their return is so high for the year I guess one can see it as a joke.


On Dec 29 09:35 AM Rob Viglione wrote:

> Is "hedge fund Paulson & Co" a joke for the Treasury?

2008 Dec 29 10:56 AM

[scfranklin94:]

A lot of people get mixed up between the cost to produce oil versus the cost to maintain a goverment's fiscal policy. Kuwait needs crude to stay at $45/bbl to maintain their level of government spending; they need it to rise to over $55/bbl so that all of their investments in Dubai don't default. Kuwait has a lot of projects on the drawing board; at $40/bbl, most will get shelved.

2008 Dec 29 11:35 AM

[Lynn:]

I missed the Wall Street Breakfast over the holidays. Absence DOES make the heart grow fonder.

2008 Dec 29 04:42 PM

[4eyedbuzzard:]

Of greater importance than Kuwait needing oil prices over $55/bbl, or the US wanting cheap oil, is the price Russia needs to break even or realistically, at least to bleed less profusely. Estimates are that they need $60 to $70/bbl oil. I would expect that to occur sooner than later, as neither the US nor Europe really wants to deal with the world's 2nd biggest nuclear power going belly up in a global depression.

<$40/bbl oil is just as unsustainable geopolitically as is $140/bbl oil. Starving a powerfully armed economic adversary isn't particularly thoughtful policy...

2008 Dec 30 06:19 AM

[BlueOkie:]

I think Congress needs to hold hearings on why the price of oil is so low. Is it those short sellers? We cannot have the price of gasoline so low maybe Congress will increase the gas tax. Every penny drop in gasoline is the equivalent of $1B stimulus.

2008 Dec 30 08:59 AM

[a. palmer jr.:]

Please don't encourage Congress to do anything...the last thing the working people need is another gas tax. They enact a gas tax when it is low priced and it is here to stay forever, even when gas gets to $4.50 a gallon. With Democrats in there will be enough taxes to go around without any encouragement.

2008 Dec 30 10:11 AM