- No surprises from FOMC. As expected, the FOMC kept its target range for the federal funds rate at 0%-0.25%, and said the rate is likely to stay at 'exceptionally low levels... for some time.' The committee noted that the economy has weakened since December, global demand is slowing substantially, credit remains tight and a gradual recovery may possibly begin later in 2009. In terms of policy, the Fed will continue to buy agency debt and is prepared to buy longer-term Treasurys "if evolving circumstances indicate that such transactions would be particularly effective in improving conditions in private credit markets." (Read the FOMC's press release)
- Stimulus passes House with lopsided support. The House of Representatives approved Obama's $819B stimulus plan but without the broad bipartisan support the president had hoped for. Despite a week of trying to find common ground with Republicans, the bill passed 244-188 - without a single Republican vote and down 11 Democrats. As one Republican opponent put it, "the strategy under this bill is to throw billions of dollars in every bureaucratic direction, and cross our fingers and hope for the best." The size of the package and the long-term nature of some of its spending could push the deficit to 10%-12% of GDP, roughly double the previous peacetime record. The Senate will vote on their own stimulus bill next week.
- Small steps towards TARP transparency. Under increased pressure from both taxpayers and elements of the government, the Treasury has said it will work to increase the transparency of its TARP program. Its first step is a promise to post all future TARP agreements with financial institutions on its website within 10 business days. Treasury's Geithner said doing so will allow taxpayers to see how their money is being spent. The Treasury has posted nine agreements on its website so far and other past agreements will be posted over the coming weeks. Separately, the Senate is working on a bill that would allow the Government Accountability Office access to the books and records of TARP recipients.
- Bank bailout, part deux. Sources say a revamped bank rescue plan may be on the way and could cost as much as $1T-$2T. The Obama administration could make an announcement within days, but several details of the plan have yet to be determined, including the key issue of how to fix ailing financial institutions without ending up owning them. If a 'bad bank' is created, it could be seeded with $100B-$200B from TARP, with the rest of the $1T-$2T coming from the sale of government-backed debt or Fed borrowing. Despite a desire to avoid nationalizing banks, the government may buy commons shares of struggling institutions, while economists say the government probably can't avoid owning at least some banks for a temporary period.
- CDS crackdown. Congress has been busy lately. Aside from working on the stimulus plan and TARP transparency, there is a movement underway in the House of Representatives to change how over-the-counter derivatives are regulated. The draft bill would ban credit-default swap trading unless investors owned the underlying bonds, potentially prohibiting as much as 80% of the trading in the $29T CDS market. The bill would also force U.S. trading in the $684T over-the-counter derivatives market to go through a central clearinghouse.
- Credit union backstop. Government regulators moved to guarantee $80B of uninsured deposits at corporate credit unions and to inject $1B of new capital into the largest of these wholesale credit unions after an unexpected $1.1B loss on mortgage-backed securities. Credit unions are generally considered to be among the most conservatively managed financial institutions, but regulators wanted to minimize the chances of pain spreading, saying "we are trying to institute confidence in the system, and we think this will do so."
- Mortgage apps plummet. Mortgage applications dropped 38.8% from a week ago, MBA reported, led by a 48% decline in refinances. 30-year fixed mortgages inched down 2bps to 5.22%.
Earnings: Thursday Before Open
- 3M Company (MMM): Q4 EPS of $0.97 beats by $0.04. Revenue of $5.5B (-11.1%) vs. $5.67B. Sees 2009 organic sales volume of -5% to -9% from a previous -3% to -7%. (PR)
- Altria (MO): Q4 EPS of $0.37 in-line. Revenue of $3.83B (+3.5%) vs. $3.87B. (PR)
- American Electric Power Company (AEP): Q4 EPS of $0.59 beats by $0.06. Revenue of $3.5B (+6.1%) vs. $3.1B. (PR)
- AstraZeneca (AZN): Q4 EPS of $1.25 beats by $0.08. Revenue of $8.19B vs. $8.27B. Sees 2009 EPS of $5.15-5.45 vs. $4.97, and sales growth flat. Will cut 15,000 jobs by 2013 (up from 9,000). Shares -4.8% premarket. (PR)
- AutoNation (AN): Q4 EPS of $0.12 beats by $0.01. Revenue of $2.7B (-33.9%) vs. $3.1B. (PR)
- Ball (BLL): Q4 EPS of $0.56 misses by $0.04. Revenue of $1.73B (-1.3%) in-line. (PR)
- Black & Decker (BDK): Q4 EPS of $0.73 beats by $0.06. Revenue of $1.38B (-16.6%) vs. $1.41B. Sees Q1 EPS of $0.05-0.15 vs. $0.74 and full-year EPS of $1.75-2.25 vs. $3.62. Expects double-digit organic sales decline for next three quarters. (PR)
- Celgene (CELG): Q4 EPS of $0.43 beats by $0.01. Revenue of $623M (+52.3%) in-line. Sees 2009 EPS of $2.05-2.15 vs. $2.18 and revenue of $2.6-2.7B vs. $2.85B. (PR)
- Colgate-Palmolive (CL): Q4 EPS of $1.00 beats by $0.02. Revenue of $3.66B (+0.6%) in-line. "The benefits of recently easing commodity and oil prices should begin to flow through during the first and second quarters of 2009." (PR)
- Continental (CAL): Q4 EPS of -$0.84 beats by $0.05. Revenue of $3.5B (-1.5%) in-line. (PR)
- Dominion Resources (D): Q4 EPS of $0.72 beats by $0.03. Revenue of $4.17B (+14.4%) vs. $3.51B. Sees Q1 EPS of $0.85-0.90 vs. $0.99, but full-year EPS of $3.20-3.30 vs. $3.26. (PR)
- Eastman Kodak (EK): Q4 EPS of -$0.08 misses by $0.29. Revenue of $2.4B (-24.4%) vs. $2.8B. (PR)
- Eli Lilly (LLY): Q4 EPS of $1.07 beats by $0.02. Revenue of $5.2B (+0.4%) vs. $5.4B. (PR)
- Fairchild Semi (FCS): Q4 EPS of $0.06 beats by $0.01. Revenue of $321M (-25.7%) in-line. Sees Q1 revenue of $220-245M vs. $289M. Says orders stabilized in January and that it's now building backlog for Q1. (PR)
- Ford (F): Q4 EPS of -$1.37 misses by $0.07. Revenue of $29.2B vs. $27.07B. "Based on current planning assumptions, Ford has sufficient Automotive liquidity to fund its business plan and product investments and does not need a bridge loan from the U.S. government." (PR)
- Fortune Brands (FO): Q4 EPS of $0.68 misses by $0.17. Revenue of $1.79B (-19.4%) vs. $1.85B. Sees 2009 EPS of $2.00-2.50 vs. $3.47. Shares -9.1% premarket. (PR)
- Gentex (GNTX): Q4 EPS of -$0.08 misses by $0.13. Revenue of $122.3M (-28.4%) vs. $131.9M. (PR)
- L-3 Communications (LLL): Q4 EPS of $2.04 beats by $0.10. Revenue of $4.01B (+5.4%) vs. $3.87B. (PR)
- J.B. Hunt Transport Services (JBHT): Q4 EPS of $0.43 beats by $0.03. Revenue of $880M (-6.9%) vs. $950M. Shares -0.7% premarket. (PR)
- Illinois Tool Works (ITW): Q4 EPS of $0.54 beats by $0.06. Revenue of $3.68B (-5.9%) in-line. Sees Q1 EPS of $0.26-0.42 vs. $0.47. Shares -2.6% premarket. (PR)
- International Paper (IP): Q4 EPS of $0.21 in-line. Revenue of $6.5B (+12.1%) vs. $7.0B. (PR)
- Lear (LEA): Q4 EPS of -$8.91 including goodwill impairment of $530M and restructuring costs of $194M vs. consensus of -$1.21. Revenue of $2.6B (-32.6%) vs. $2.8B. (PR)
- Newell Rubbermaid (NWL): Q4 EPS of $0.11 beats by $0.03. "Weakness in consumer spending, compounded by inventory reductions at retail, negatively impacted both sales and productivity." (PR)
- Oshkosh (OSK): FQ1 EPS of -$0.28 misses by $0.16. Revenue of $1.39B (-7.6%) vs. $1.35B. (PR)
- Occidental Petroleum (OXY): Q4 EPS of $1.18 beats by $0.23. Revenue of $4.02B (-27.1%) vs. $4.5B. (PR)
- Petro-Canada (PCZ): Q4 EPS of $1.07 beats by $0.18. "Our production came in at the high-end of our guidance range, largely due to strong reliability at most of our major facilities." (PR)
- Raytheon (RTN): Q4 EPS of $1.13 beats by $0.02. Revenue of $6.2B (+2.6%) in-line. (PR)
- Royal Caribbean Cruises (RCL): Q4 EPS of $0.01 misses by $0.06. Revenue of $1.46B (-2.3%) in-line. Sees Q1 EPS of -$0.35 to -$0.30 vs. -$0.08. Shares +1.5% premarket. (PR)
- Royal Dutch Shell (RDS.A): Q4 EPS of -$0.44 misses by $2.16. Revenue of $81.1B vs. $89.1B. (PR)
- SEI Investments Company (SEIC): Q4 EPS of $0.25 misses by $0.03. Revenue of $268M (-24.1%) vs. $339M. "The severe downturn in the capital markets made the fourth-quarter a particularly challenging one and had a significant negative impact on both our quarterly and annual results." (PR)
- Smith International (SII): Q4 EPS of $1.00 misses by $0.02. Revenue of $3.06B (+33.0%) vs. $3.04B. (PR)
- Starwood Hotels & Resorts Worldwide (HOT): Q4 EPS of $0.49 beats by $0.13. Revenue of $1.33B (-17.2%) vs. $1.39B. (PR)
- Textron (TXT): Q4 EPS of $0.40 beats by $0.05. Revenue of $3.61B (+0.4%) in-line. Sees 2009 EPS of $1.00-1.50 vs. $2.39 and revenue of $12.5B vs. $13.63B. (PR)
- Timken (TKR): Q4 EPS of $0.07 misses by $0.10. Revenue of $1.21B (-9.7%) vs. $1.25B. Sees 2009 EPS of $1.30-1.60 vs. $1.78. Shares -5.9% premarket. (PR)
- T. Rowe Price Group (TROW): Q4 EPS of $0.31 beats by $0.07. Revenue of $416M (-30.4%) vs. $436M. (PR)
- US Airways (LCC): Q4 EPS of -$1.93 beats by $0.22. Revenue of $2.76B (-0.5%) in-line. (PR)
- Xcel Energy (XEL): Q4 EPS of $0.35 misses by $0.02. Revenue of $2.7B (+4.0%) vs. $2.6B. (PR)
- Zimmer (ZMH): Q4 EPS of $1.00 in-line. Revenue of $1.03B (-4.0%) vs. $1.09B. (PR)
Earnings: Wednesday After Close
- Allstate (ALL): Q4 EPS of $0.97 misses by $0.38. Revenue of $6.57B (-26.9%) vs. $8.46B. $2.4B of realized net capital losses. Suspends share buybacks. Unrealized losses of $8.8B up from $4.1B, primarily due to widening spreads. (PR
- Ameriprise Financial (AMP): Q4 EPS of $0.80 vs. consensus of $0.27. Revenue of $1.4B (-21.1%) vs. $1.73B. "The deteriorating market and economic conditions in the fourth quarter had a significant impact on our results." (PR)
- Airgas (ARG): FQ3 EPS of $0.76 beats by $0.01. Revenue of $1.08B (+7%) in-line. (PR)
- Boston Scientific (BSX): Q4 EPS of $0.21 beats by $0.08. Revenue of $2B (-7%) in-line. Takes $2.7B writedown on Guidant defibrillator unit, but says it will continue to be "a key driver of the company's sales and earnings growth going forward." (PR)
- Compuware (CPWR): FQ3 EPS of $0.15 in-line. Revenue of $269M (-13.1%) vs. $295M. (PR)
- Covance (CVD): Q4 EPS of $0.72 beats by $0.02. Revenue of $439M (+6.7%) vs. $419M. (PR)
- Flextronics (FLEX): FQ3 EPS of $0.16 misses by $0.03. Revenue of $8.15B (-10.1%) vs. $7.99B. Sees FQ4 EPS of $0.02-0.07 vs. $0.14 and revenue of $5.5-6.5B vs. $7.17B. (PR)
- Hanesbrands (HBI): Q4 EPS of $0.50 beats by $0.13. Revenue of $1.03B (-10.7%) vs. $1.08B. Expects soft retail consumer environment to continue and does not expect macroeconomic conditions to be conducive to growth in 2009. (PR)
- Intersil (ISIL): Q4 EPS of $0.11 beats by $0.02. Revenue of $131M (-38.3%) vs. $128M. Sees Q1 revenue of $105-115M vs. $125M. (PR)
- Lam Research (LRCX): FQ2 EPS of -$0.09 misses by $0.04. Revenue of $283M (-53.6%) vs. $277M. "The global semiconductor industry has entered one of the most difficult periods in its history, one that is presenting severe challenges to our customers and thus severely limiting investment in wafer fab equipment." (PR)
- LSI Logic (LSI): Q4 EPS of $0.06 beats by $0.02. Revenue of $610M (-17.7%) vs. $588M. (PR)
- Murphy Oil (MUR): Q4 EPS of $0.83 beats by $0.04. Revenue of $4.43B vs. $5.79B. (PR)
- Qualcomm (QCOM): FQ1 EPS of $0.31 misses by $0.16. Revenue of $2.51B (+3%) vs. $2.42B. Sees 2009 revenue of $9.3-9.8B vs. $10.25B. EPS were dragged down by "other-than-temporary impairments" to its securities portfolio. (PR)
- Robert Half International (RHI): Q4 EPS of $0.26 beats by $0.01. Revenue of $990M (-18.9%) vs. $1.04B. (PR)
- Ryland Group (RYL): Q4 EPS of -$1.40 misses by $0.34. Revenue of $528M (-38.6%) vs. $540M. (PR)
- Starbucks (SBUX): FQ1 EPS of $0.15 misses by $0.02. Revenue of $2.62B (-5.5%) vs. $2.69B. Increases 2009 cost reduction target to $500M from $400M. New U.S. stores target lowered to 140 from 200. Store layoffs could equal 6,000. (PR)
- Sepracor (SEPR): Q4 EPS of $0.92 beats by $0.36. Revenue of $370M (+8.7%) vs. $353M. Will reduce workforce by 20%, or about 540 jobs. (PR)
- Symantec (SYMC): FQ3 EPS of $0.42 beats by $0.10. Revenue of $1.54B (+0.6%) vs. $1.48B. (PR)
- Western Digital (WDC): FQ2 EPS of $0.55 beats by $0.24. Revenue of $1.82B (-17.3%) vs. $1.75B. "Against a backdrop of unprecedented global economic turmoil and a rapid intra-quarter fall off in demand for hard drives, WD acted swiftly to align production and operating expenses with significantly lower-than-originally planned unit volumes." (PR)
- Asia markets closed mostly up. Nikkei +1.8% to 8,251. Hang Seng +4.6% to 13,154. Shanghai closed. BSE -0.2% to 9,236.
- In Europe at midday, London -2.2%. Paris -1.6%. Frankfurt -1.4%.
- U.S. futures: Dow -1.1%. S&P -1.2%. Nasdaq -0.9%. Crude -2.5% to $41.12. Gold -1.1% to $878.80.
Thursday's Economic Calendar
- 8:30 Durable Goods Orders
8:30 Jobless Claims
10:00 New Home Sales
10:30 EIA Natural Gas Report
4:30 PM Money Supply
- Notable earnings before Thursday's open: AEP, AMB, AN, AZN, BC, BDK, BLL, CAL, CELG, CL, CNX, D, EK, EQT, ERIC, F, FCS, FO, GNTX, HOT, HP, IP, ITW, JBLU, LCC, LEA, LLL, LLY, MMM, MO, MPW, NWL, OSK, OXY, PCZ, RCL, RDS.A, RTN, SEIC, SII, SNE, TKR, TROW, TXT, XEL, YRCW, ZMH
- Notable earnings after Thursday's close: ACF, AMZN, ARBA, BRCM, CA, CB, EMN, IDTI, INFA, JNPR, KLAC, MCHP, MXIM, PKI, PMCS, QTM, RMBS, SPWRA, VAR, VSEA, WMS
Seeking Alpha editor Eli Hoffmann contributed to this post.
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