Wall Street Breakfast: Must-Know News

• Abysmal auto sales. U.S. auto sales plummeted 36% in December, depressing industry volume in 2008 to a 16-year low. Vehicle sales for the year totaled just 13.2M, and the pain is expected to continue into 2009. Breaking U.S. December sales down for individual automakers: Ford (F) -32.4% to 138K units vs. -33% consensus, with market share of 14.6% up 0.77% from a year ago. Honda (HMC) -34.7% vs. -36% consensus, with 2008 sales of 1.28M (-8.2%). Toyota (TM) -37% to 142K units vs. -40% consensus, with 2008 sales down 16%. General Motors (GM) -31% to 222K units vs. -41% consensus, with total deliveries up 67K (+43%) from November. GM delivered 2.98M units for the year (-23%) for a market share of 22%. Nissan (NSANY) -30.7% to 62K units, and 838K for the year (-10.9%).
• Toyota cuts production. Following dismal 2008 auto sales and rapidly growing inventory, Toyota (TM) will suspend operations at all of its Japanese factories for an additional 11 days between February and March. Toyota had already planned a three-day suspension at most of its Japanese factories for January. The rare output reduction is expected to have a ripple effect through its subcontracting firms, including auto suppliers.
• Fed enters MBS market. The Federal Reserve began buying mortgage-backed securities issued by Fannie Mae (FNM), Freddie Mac (FRE) and Ginnie Mae yesterday, the latest in its unconventional efforts to kickstart the economy. The aim of the program is to provide an incentive for buyers to return to the housing market and to reduce monthly payments on existing loans. The $500B program has already had an effect, as mortgage rates dropped significantly in anticipation of the purchases after they were announced at the end of November. As of the end of December, the rate on 30-year fixed-rate mortgages was 5.03%; some analysts expect the Fed to try and push the rate down to around 4.50%.
• Apple a day fails to keep doctor at bay. Addressing persistent rumors about his health, Apple (AAPL) CEO Steve Jobs released a public letter yesterday, explaining that he's in treatment for a non-life-threatening hormone imbalance and will continue as Apple CEO while he recovers. Shares rose 4.2% on the news, though not all investors were pleased with the lack of disclosure until now. (Read Jobs' letter)
• GE offers FDIC-backed debt. General Electric's (GE) finance division launched a $10B sale of FDIC-backed debt yesterday, the largest sale under the government guarantee program since it was created in November. GE Capital's offering includes $2B in two-year notes, $5.5B of 3.5-year debt and $2.5B of 18-month securities. The sale will push total issuance under the government program to $115B.
• Clearinghouses move forward. Nasdaq OMX Group (NDAQ) has opened a derivatives clearinghouse and has started clearing over-the-counter contracts tied to interest rates. The clearinghouse will be competing with rival platforms operated by Chicago's futures giant CME Group (CME) and European clearing company LCH.Clearnet. Separately, derivative exchange operators CME Group and InterContinentalExchange (ICE) are preparing to launch their respective CDS clearinghouses later this month once they receive final approvals from U.S. regulators.
• Logitech cuts jobs, forecast. Logitech (LOGI) withdrew its FY 2009 financial targets (which had already been reduced in October) and announced it will cut 15% of its non-manufacturing jobs in the face of the deepening global recession. The company will also take an unspecified one-time charge in its FQ4 ending March 31. "The situation is really bad," said Chairman Guerrino De Luca. "We’re on really shaky grounds with the consumer. The situation is really unprecedented."
• Madoff off to jail? U.S. prosecutors are trying to have Madoff jailed for violating the conditions of his bail. Currently under house arrest, Madoff mailed over $1M worth of jewelry and other items to family and friends despite a court-ordered freeze on his assets.
• Germans eye more-generous stimulus. German lawmakers agreed on the broad outlines of a second stimulus plan worth €50B ($69B) over two years. The country's initial stimulus, worth €12B over two years, has widely been seen as inadequate to pull Europe's biggest economy out of an increasingly severe recession. Lawmakers are hoping to have full agreement on the package details by Jan. 12.
• Construction spending wobbles down. Construction spending in November fell 0.6% from the month before, better than the expected 1.3% drop, and was down 3.3% from the previous year. Residential private construction fell a heavy 4.2%; non-residential +1.4%.

Earnings: Monday After Close

• Mosaic (MOS): FQ2 EPS of $1.53 beats by $0.10. Revenue of $3.01B (+36.9%) in-line. Shares -1.7% after hours. (PR)

Today's Markets

• Asia markets closed mostly higher. Nikkei +0.4% to 9,081. Hang Seng -0.35% to 15,510. Shanghai +3.0% to 1,937. BSE +0.6% to 10,336.
• In Europe at midday, London +1.1%. Paris +1.2%. Frankfurt +1.5%.
• U.S. futures: Dow +0.7%. S&P +0.7%. Nasdaq +1.0%. Crude +2.7% to $50.14. Gold -2.0% to $840.50.

Tuesday's Economic Calendar

• 7:45 ICSC Retail Store Sales
  8:55 Redbook
  10:00 Factory Orders
  10:00 ISM Non-Manufacturing Survey
  10:00 Pending Home Sales
  2:00 PM FOMC Minutes
  5:00 PM ABC Consumer Confidence Index

Seeking Alpha editor Eli Hoffmann contributed to this post.

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Comments

[notsosmart:]

sure put madoff in jail @ taxpayer expense.the taxpayer can take care of everything including the greedy who put all their money with this guy.it will cost app $170 @ day in jail. put him to work for the sec to get the right regs so this cant happen. no the st doesnt want that.the sheeples are so dumb.

Jan 06 09:41 AM

[Rob Viglione:]

The Fed entering the MBS market on this kind of scale is a new stage in this mess we should all watch closely. There are a few considerations:

1) This will weaken the Fed's balance sheet further, exposing them to liabilities that may prove destructive,
2) Buying MBS will flood the market with liquidity, but as we're finding out with the bank bailouts, liquidity has few productive uses currently,
3) Over-capitalization of the mortgage/real estate markets largely caused the current financial dilemma-more of the same inhibits the markets ability to shed over-capacity

My take is that these actions will cause more harm than good, likely prolonging the down time and unduly rewarding investment banks, other financiers, and real estate participants who should have otherwise been forced otu of the market.

I prefer sharp correction followed by healthy realignment of capital and subsequent growth, than this mentality of bailing everyone out, raging against reality and trying to prop up bad investments indefinitely.

Jan 06 11:49 AM

[bobbobwhite:]

The car sale figures above are totally confusing and are probably wrong.

The gov't thinks confining Madoiff to his home would make him less dishonest? Psst to gov't: the mail system exists; don't even have to leave home to use it. You even run some of it, if you forgot.

Jan 06 01:48 PM

[briacal:]

The patient is dying and he needs medication as soon as possible.The medication is too expensive.The best solution,according to writer of this article,is to let the patient die.Maybe I keep forgetting or I want to deny that humanism is dying too

Jan 06 02:03 PM

[jackooo:]

Let Madoff work for the SEC!! He sure is smarter then them... lol lol

Jan 06 02:49 PM

[bbowen7:]

In the long run, housing prices will revert to the mean - about 15% below where they are now - regardless of what artificial forces the government tries to impose. John Lennon had it right - "Let it be".

Jan 06 03:25 PM

[sr9web:]

Ouch!


On Jan 06 02:49 PM jackooo wrote:

> Let Madoff work for the SEC!! He sure is smarter then them... lol
> lol

Jan 06 11:48 PM

[econprof:]

OK its simple. I am NOT a huge fan of GE as a corporation - but as a trading stock this is Number One on my list. I trade it 2 - 4 times per week between $16 and $17. Very easy.

I purchase some more this afternoon and lok forward to cashing it in tomorrow PM if not sooner.

You Can Not Lose on this issue. And if you do wait it out for a longer term hold = there's an 8% annual dividend that is as cetain as sunset.

Call me a hyper? Just look at the returns if you follow my pattern. Soon the $16-$17 range will be gone until , well , the next market collapse in 25 years ? :-)

Jan 08 12:52 AM