Wall Street Breakfast: Must-Know News 19 comments
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- BoA gets another handout. Bank of America (BAC) is close to finalizing a deal in which the government will provide billions of dollars in aid to help the bank close its Merrill Lynch acquisition. BoA approached the Treasury in mid-December, sources say, warning that Merrill's larger-than-expected Q4 losses posed a problem in the acquisition process. Concerned the deal's failure would further hurt shaky financial markets, the Treasury agreed to help create a plan including additional funds from TARP. (BoA has already received $25B in federal rescue funds.) Details are still being finalized, and an announcement is expected on Tuesday when BoA reports quarterly earnings.
- Apple's Jobs loss. Apple (AAPL) shares plunged over 7% in after hours trading yesterday on the surprise announcement that CEO Steve Jobs will take a medical leave until June. Only nine days ago, Jobs reluctantly released a public letter saying he had a non-life-threatening hormone imbalance and would continue in his role as CEO as he recovered. In a new, cryptic letter, Jobs called his health problems 'more complex than I originally thought.' COO Tim Cook, respected in the company for his expertise, will take over day-to-day operations. This is his second time at the helm of the company, having taken over when Jobs underwent cancer treatment in 2004. Many investors and analysts are worried Jobs' absence will hurt the company at a time when it's struggling to find the next big thing, though others believe Apple is sufficiently innovative and well-placed in the market to continue without its famed leader. The company will likely face several lawsuits from investors angered over Jobs' failure to fully disclose his health problems.
- Fund custodians under fire for Madoff losses. HSBC (HBC) and UBS (UBS) are potentially facing liabilities of up to $3.2B as the financial custodians of funds in Luxembourg and Ireland with Madoff-related losses. As custodians, the two banks were charged with overseeing the funds and managing cash inflows and payments to investors. A lawyer representing 10 French retail investors and two institutions that face Madoff-related losses at Luxembourg funds said "UBS didn’t do its job of knowing at all times where the assets were, and the same with HSBC," a failure of duty lawyers will have to prove to recoup investor money. The legal firm representing both HSBC and UBS said the funds were created by investors specifically looking to place money with Madoff, and as such the custodian had only 'a very, very, very small role to play.'
- Lilly reaches drug settlement. Eli Lilly (LLY) agreed to a $1.42B settlement over criminal and civil charges that it illegally marketed Zyprexa, its blockbuster antipsychotic drug, for unauthorized patient use. Lilly was accused of pressing doctors for years to prescribe Zyprexa for children and the elderly, two groups for whom the drug is not federally approved and poses extra risks. Anticipating a settlement last fall, the company set aside $1.4B for that purpose. Lilly will also plead guilty to one misdemeanor violation of the Food, Drug, and Cosmetic Act.
- Black report from Beige Book. Overall economic activity has continued to weaken across nearly all of the Federal Reserve districts, according to the Fed's Beige Book. Retail sales were generally negative, manufacturing decreased, construction weakened, lending remained tight and the labor market continued to soften. As if the report weren't already sufficiently depressing, the Fed noted that a 'substantial number of job reductions in the financial sector have yet to show up in payroll statistics.' (Read the full report)
- Bartz searches for right MSFT approach. With Bartz as its new CEO, Yahoo (YHOO) is several steps closer to a search deal with Microsoft (MSFT), though sources from both companies said a deal is unlikely to be imminent. In a company-wide meeting, Bartz said she plans to spend considerable time researching whether to sell Yahoo's search business, but added that her 'gut' feeling was to hold on to the business. Although Bartz's appointment is seen as a fresh start for the company, Microsoft is busy dealing with other problems, including cost cutting, that could get in the way of a sale or partnership.
- Mortgage apps surge. Mortgage applications jumped 15.8% last week, MBA reported, as record-low interest rates spurred a 25.6% increase in refinances from the previous week. Refinances now account for 85.3% of all applications, up from 79.8%. The Average 30-year mortgage rate dropped to 4.89% from 5.07%.
- Despite mortgage mods, foreclosures soar. Foreclosure filings jumped 81% in 2008 to 3.2M, RealtyTrac says, with one in every 54 U.S. households getting at least one foreclosure notice. "Clearly the foreclosure prevention programs implemented to date have not had any real success in slowing down this foreclosure tsunami," RealtyTrac's CEO James Saccacio said. Activity did slow by 4% in Q4, but jumped 17% in December from November - another signal mortgage moderations helped to temporarily slow, but not stop, foreclosures. On Wednesday, Foreclosures.com reported a 63.5% jump in foreclosures.
- Retail sales fall. Retail sales fell 2.7% from November to $343.2B, according to the Census Bureau, and were 9.8% lower than a year ago. Consensus was for -1.2% M/M. Excluding auto sales, December was -3.1% M/M vs. estimates of -1.3%. "We finally saw confirmation of our original expectations that holiday retail spending would prove acutely weak, though even we underestimated the degree of weakness," one economist says of the larger than expected drop in retail sales. "Bad ugly and worse," says another.
- Import/export prices. Import prices declined 4.2% in December from a month earlier, the fifth straight down month, vs. consensus of -5.3%. Export prices also fell for the fifth consecutive month, declining 2.3%. Import prices -9.3% on the year (fueled by a 47% drop in petroleum); exports -3.2%.
Earnings: Thursday Before Open
- ASML Holding (ASML): Q4 net loss of €88M ($115.9M), slightly better than consensus of -€104M but a far cry from profit of €193M in the year earlier period. Sales of €494M (-48%). 2009 outlook is grim, as "the severity of the global economic downturn has caused semiconductor manufacturers to delay their investment plans." (PR)
- JPMorgan (JPM): FQ4 EPS of $0.07 beats by $0.07. Revenue of $17.2B (-0.9%) vs. $18.8B. (PR)
Earnings: Wednesday After Close
Today's Markets
- Asia markets closed heavily down following Wall Street losses. Nikkei -4.9% to 8,023. Hang Seng -3.4% to 13,243. Shanghai -0.45% to 1,920. BSE -3.45% to 9,047.
- In Europe at midday, London -0.1%. Paris -0.4%. Frankfurt -0.05%.
- U.S. futures: Dow +0.1%. S&P -0.3%. Nasdaq -1.4%. Crude +0.8% to $37.59. Gold +0.5% to $813.10.
Thursday's Economic Calendar
- 7:45 ECB Announcement
8:30 Producer Price Index
8:30 Empire State Mfg Survey
8:30 Jobless Claims
9:00 RBC CASH Index
10:00 Senate confirmation hearings for SEC nominee Schapiro
10:00 Philadelphia Fed Survey
10:30 EIA Natural Gas Report
12:30 PM Fed's Yellen speaks on economic outlook
1:40 PM Fed's Lockhart speaks on economic outlook
1:55 PM Fed's Evans speaks on economic outlook
4:30 PM Money Supply - Notable earnings before Thursday's open: APH, ASML, JPM, MI
- Notable earnings after Thursday's close: DNA, INTC
Seeking Alpha editor Eli Hoffmann contributed to this post.
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This article has 19 comments:
Fire the bum first, then give the US taxpayers at least as good a deal as Warren Buffett would get!
On Jan 15 07:39 AM Jim Hawthorne wrote:
> Wonderful news re BAC! This is what we can expect from a CEO as negligent
> and incompetent as Ken Lewis, and is the result of his astounding
> 24 hours of due diligence! This is truly sickening!
> Fire the bum first, then give the US taxpayers at least as good a
> deal as Warren Buffett would get!
Then, exploiting these exhortations, the bankers have swooped in and preyed upon the lack of understanding of fundamental mathematics among Americans, selling them unsound loans - "Option ARM" and "Subprime" mortgages, "Rollover" car loans that are instantly upside down by thousands and credit cards with 30% "default" rates triggered if you are one hour late with a payment - on your water bill. They then "securitized" all this debt - debt they knew in advance could not be paid - and sold it off to unsuspecting suckers all over the world who were also duped through the issuance of bogus ratings that were literally "bought and paid for." Every bit of this was and is bogus and yet you have done nothing to put a stop to any of it.
Fully aware of the mathematics of the matter - that if GDP growth is 3% but debt growth is 6% the law of exponents says that eventually the game of musical chairs will end in tears both The Executive and The Fed have desperately tried to blow bubble after bubble, knowing full well that when the last bubble bursts an enormous deflationary credit collapse must and will come crashing down upon the economy just as it did in 1929 and 1873, bankrupting tens of millions of Americans, throwing millions out of their homes and destroying hundreds of thousands of businesses.
THAT DAY HAS NOW ARRIVED AND INSTEAD OF ACCEPTING THEIR JUST PROPORTION OF THE DAMAGE THEY ARE CRAVENLY APPEARING IN FRONT OF CONGRESS AND DEMANDING TO BE SAVED, COMPLETE WITH THEIR LEARJETS, HOMES IN THE HAMPTONS AND YACHTS WHILE EVERYONE ELSE LITERALLY BURNS IN HELL, THREATENING ECONOMIC NUCLEAR WAR IF YOU REFUSE THEIR BIDDING - AND YOU HAVE SAID "YES" INSTEAD OF JAILING THE LOT OF THEM FOR EXTORTION!
The necessary GDP adjustment - a moderate recession - should have been taken in 1987. It was not, and instead a bubble was intentionally blown. We got the Internet Bubble.
exerprts from Karl Denningerhttp://market...
Stop the madness!!!! Or Stop the world I want to get off!!
On Jan 15 08:13 AM Britishsteel wrote:
> market-ticker.org/arch...
A big hurdle with the Zyprexa issue is Lilly's credibility over their continuous PR on how they are going to pay out $1.2 billion in damages.As long as they keep up this rhetoric and don't actually pay the issue won't go away.
They need to think about 'putting their money where their mouth is'. I have NOT been paid yet .
--
Daniel Haszard-www.zyprexa-victims.co.../
On Jan 15 09:01 AM know nothing wrote:
> This is a must watch video!! Great job Britishsteel!! My complements..
>
"How do we make money giving change? Volume."
On Jan 15 07:49 AM Herbert Hoover wrote:
> Hey man, Relax. Ken Lewis was Banker of the Year, remember? LOL
>
We will eventually get back to a secure fiancial future, but in spite of, not because of, the policies currently being enacted in both the US and countries worldwide.
Also, it's clear that Apple is giving out details of Jobs health in dribs and drabs so as to not upset the stock price any more than it already is. Any lawsuit over that lack of full disclosure will not cost as much as Apple announcing immediately that, "yes, Steve's cancer has returned and this is the end", with the stock then taking another $50 hit.
Bartz will set Yahoo up for sale, all or part. Yang arrogantly threw monkey wrenches in that process everywhere he looked, so he had to go for Yahoo to get something done to save what may be left. Bartz is strict no nonsense, and will get it done to shareholder's approval.
Would you be able to reccommend a group in wisconsin or website where a person could expand on this subject and have discussion?
On Jan 15 09:04 AM Dr Pandey, S.N wrote:
> Bubbles are expected. What is bad is planned fraud.The treasury/
> Fed has lender of the last resort chareter. We can not expect the
> two to abdicate their responsibilities. One does not have to fear
> 1929-30. This was the time when J.M KEYNES had not come up.There
> is need to fine tunecheck and balance. As an Indian, bred in optimism
> and ceaseless work cultural inheritence, I would advice American
> friends to be patient, contemplate and correct what ever is either
> wrong and/ or abberation.
Sir, youir optimism seems to know no bounds.
While I can understand your belief that everything will turn out OK, the corruption in the US government and busines community has become obvious to even the densest Sheeples of the US. Both parties are stealing form us to give to the corporations that provide the highest contriutions.
I doubt the Missiha will change that, only it will be the Chicago mob instead of the east coast (Boston-NY) mob running things.
Our country is being destroyed much like Ronald Reagan destroyed the Soviet block. He bankrupted them and now the Islamic Jhadists are bankrupting us. The next step will be to disarm America in the name of "security" while those thieves in the Hamptons keep their armed guards to protect them from the rath they so richly deserve.
Then our countrry will be sold off to pay the debts of BAC et al.