Wall Street Breakfast: Must-Know News

• Obama open to bigger rescue. In a key press conference yesterday, and his first since taking office, Obama signaled he would be open to expanding the $700B financial rescue program if need be, acknowledging the belief among many economists that the remaining $350B of TARP funds will not be enough to revive credit markets. Obama's economic rescue plan, which will be unveiled by Geithner later today, doesn't require an expansion of TARP funds and is designed to support about $1.5T in new lending and handling of distressed assets. Obama said the country faces a "profound economic emergency" and stressed that "the federal government is the only entity left with the resources to jolt our economy back into life." (Read the transcript of Obama's press conference)
• Stimulus vote today. The Senate is slated to vote on the stimulus bill today after a key procedural vote yesterday ended debate on the topic. The procedural vote passed 61-36, with 60 votes needed for the motion to pass; in addition to the narrow win, Democrats scored a small victory as three Republican Senators voted in favor of advancing the bill to a vote. The $838B package will likely be approved, clearing the way for the House and the Senate to create a compromise plan. Economists say the House version of the stimulus will create at least half a million more jobs than the Senate's version.
• UBS sinks into losses. UBS (UBS) posted heavy Q4 and full-year losses and announced it will cut an additional 2,000 jobs from its troubled investment banking unit. The Swiss bank saw a net loss of 8.1B Swiss francs ($6.92B) in the fourth quarter, bringing the total annual loss to 19.7B francs. CEO Marcel Rohner said UBS has experienced "the worst conditions we can imagine" for investment banking but offered a positive 2009 outlook, with an aim to return to profitability after some "encouraging" signs at the start of 2009 including a reversal of client withdrawals in January. UBS also announced structural changes to refocus the bank on its core Swiss businesses, its global wealth management operation and on the growth potential of its onshore business. Shares +3.8% premarket (7:00 ET).
• Fannie/Freddie vacuum up money. Fannie Mae (FNM) and Freddie Mac (FRE) may need more than the $200B of promised government funding if the housing market continues to deteriorate. Federal Housing Finance Agency Director James Lockhart said the companies' needs will depend largely on the direction of home prices, explaining "there’s been some significant events since [September] that weren’t in our forecast." Freddie, which has already taken $13.8B in federal aid, says it will need as much as $35B more by the end of the month. Fannie may ask for $16B.
• Rio talks confirmed. Aluminum Corp. of China (ACH), more generally known as Chinalco, confirmed it's in "intense" talks with Rio Tinto (RTP) about a potential deal and a seat on Rio's board. A Chinalco official said both sides are discussing the size of the deal and the financing involved, but declined to provide specifics, including whether Chinalco is seeking a 15-20% stake in the Anglo-Australian firm. Rio has been looking for ways to pay down some of its $38.9B in debt.
• Kuwait rethinks Dow deal. Sources say the Kuwait Investment Authority [KIA] would consider increasing its support for Dow Chemical's (DOW) takeover of Rohm & Haas (ROH) if the terms of the deal were updated to reflect the current downturn. Dow failed to complete its $15B deal with ROH after a Dow-Kuwaiti joint venture fell apart, leaving Dow without $7.5B to help pay for the acquisition. KIA was to have added another $1B for the acquisition. It's unlikely KIA would put in anything close to the $7B-$8B Dow would need to close the ROH deal, but even a partial investment could bring mutual benefits: bringing Dow closer to its financing target and salvaging some of KIA's reputation for direct foreign investment.
• Behind-the-scenes: Genentech and Roche. According to documents Roche Holding (RHHBY.PK) filed with the SEC yesterday, a special committee of Genentech's (DNA) board wanted Roche to pay $112/share to acquire the 44.2% Genentech stake that Roche didn't already own. This was $23 more than what Roche originally offered last July, and $25.50 more than the tender offer Roche is currently taking to shareholders. The documents describe a series of meetings between top officials of the two companies, and Genentech's refusal to "engage in a meaningful discussion on value." In addition to the tender offer, Roche said yesterday it plans to exercise its option to hold a majority of the seats on Genentech's board.
• Kindle 2. Amazon (AMZN) unveiled a new version of Kindle yesterday. The popular e-book reader features several improvements including pages that turn 20% faster, 25% longer battery life and seven times more storage. The new Kindle is also lighter and thinner and features an experimental read-to-me feature. Amazon says the original Kindle has been a very successful seller, but won't disclose how many have been sold.
• Bank failures could rise dramatically. An analyst at RBC Capital Markets estimates more than 1,000 banks could fail during the next 3-5 years as the recession intensifies and loan losses rise. Analyst Gerard Cassidy had originally forecast 200-300 bank failures, but the economic environment has since deteriorated. Cassidy bluntly called on investors to "avoid the bank stocks," warning "we are nowhere near the end of this down leg in the current credit cycle."

Earnings: Tuesday Before Open

• AECOM Technology Corp (ACM): FQ1 EPS of $0.38 in-line. Revenue of $1.45B (+34.6%) vs. $1.58B. (PR)
• Arrow Electronics (ARW): Q4 EPS of $0.60 beats by $0.01. Revenue of $4.1B (-7.5%) in-line. (PR)
• Elan (ELN): Q4 EPS of -$0.10 beats by $0.01. Revenue of $269.8M (+23.6%) vs. $294.2M. (PR)
• Corrections Corp. of America (CXW): Q4 EPS of $0.32 beats by $0.02. Revenue of $414.4M (+8.8%) vs. $420.0M. (PR)
• Coventry Health Care (CVH): Q4 EPS of $0.60 beats by $0.01. Revenue of $3.0B (+8.3%) in-line. (PR)
• DirecTV Group (DTV): Q4 EPS of $0.32 misses by $0.01. Revenue of $5.3B (+9.0%) in-line. (PR)
• Health Care Property Investors (HCP): Q4 EPS of $0.14 misses by $0.08. Revenue of $263.3M (+3.5%) vs. $255.4M. (PR)
• Hercules Offshore (HERO): Q4 EPS of $0.42 beats by $0.16. Revenue of $313.5M (+28.4%) vs. $299.2M. (PR)
• IntercontinentalExchange (ICE): Q4 EPS of $0.82 misses by $0.01. Revenue of $207M (+30.1%) vs. $213M. (PR)
• Molson (TAP): Q4 EPS of $0.57 misses by $0.14. "Foreign currency movements alone accounted for more than 55% of the year-over-year decline in fourth quarter profit." (PR)
• Omnicom Group (OMC): Q4 EPS of $0.88 beats by $0.04. Revenue of $3.37B (-7.0%) in-line. (PR)
• Pepsi Bottling Group (PBG): Q4 EPS of $0.30 beats by $0.05. Revenue of $3.8B (-5.6%) vs. $3.9B. (PR)
• Qwest (Q): Q4 EPS of $0.11 beats by $0.01. Revenue of $3.31B in-line. "In light of the current economic environment, the company is maintaining a cautious view on its outlook for 2009." (PR)
• Terra Industries (TRA): Q4 EPS of $1.65 vs. consensus of $0.92. Revenue of $683M (+20.1%) vs. $544M. (PR)
• United Microelectronics (UMC): Q4 EPS of -$0.28 misses by $0.26. Revenue of $566.0M (-33.5%) vs. $569.4M. (PR)
• Vishay Intertechnology (VSH): Q4 EPS of -$0.07 misses by $0.07. Revenue of $575.4M (-21.1%) vs. $574.3M. (PR)
• Yingli Green Energy (YGE): FQ3 profit fell 7.1% to $22.2M, or $0.17/share, missing consensus by $0.06. Sales nearly doubled to $325M. Module shipments rose to 80 megawatts from 45.9; avg. sellling price rose to $4.04/watt from $3.70. (Bloomberg)

Earnings: Monday After Close

• Axis Capital (AXS): Q4 EPS of $0.94 misses by $0.06. Revenue of $579M (-28.1%) vs. $731M. (PR)
• Comstock Resources (CRK): Q4 EPS of $0.22 misses by $0.09. Revenue of $100.2M (+4.9%) vs. $106.8M. (PR)
• Charles River Laboratories (CRL): Q4 EPS of $0.59 beats by $0.04. Revenue of $311M (-2.1%) in-line. Sees 2009 EPS of $2.30-$2.60 vs. $2.62 and revenue down 2-7%. (PR)
• Genworth Financial (GNW): Q4 EPS of -$0.48 vs. consensus of $0.37. Revenue of $2.63B (-5.3%) vs. $2.93B. (PR)
• Lincoln National (LNC): Q4 EPS of -$0.48 vs. consensus of $0.10. (PR)
• Nuance Communications (NUAN): FQ1 EPS of $0.24 beats by $0.02. Revenue of $217M (+16.9%) vs. $245M. (PR, earnings call transcript)
• Pharmaceutical Product Development (PPDI): Q4 EPS of $0.44 in-line. Revenue of $368M (-1.8%) vs. $364M. (PR)
• ProLogis (PLD): Q4 FFO of $0.61 beats by $0.04. Revenue of $239M (-5.88%) vs. $250M. Sees 2009 FFO of $1.85-2.05 vs. $1.86. (PR)
• tw Telecom (TWTC): Q4 EPS of $0.06 beats by $0.01. Revenue of $295M (+5.4%) in-line. (PR)
• UDR Inc. (UDR): Q4 FFO of $0.31 misses by $0.07. Revenue of $149.5M (+19.5%) vs. $147M. Sees 2009 FFO of $1.23-1.35 vs. $1.36. (PR)
• Vulcan Materials Company (VMC): Q4 EPS of $0.14 misses by $0.16. Revenue of $765M (-6.3%) vs. $834M. Expects capital spending to fall to $200M in 2009 from $400M. Shares -2.6% AH. (PR)

Today's Markets

• Asia markets closed slightly up. Nikkei -0.3% to 7,946. Hang Seng +0.8% to 13,881. Shanghai +1.8% to 2,265. BSE +0.7% to 9,647.
• In Europe at midday, London -0.9%. Paris -1.1%. Frankfurt -1.3%.
• U.S. futures: Dow -0.8%. S&P -1.0%. Nasdaq -1.0%. Crude +3.2% to $40.83. Gold +0.5% to $897.50.

Tuesday's Economic Calendar

• Tuesday's economic calendar:
  7:45 ICSC Retail Store Sales
  8:55 Redbook
  10:00 Wholesale Inventories
  1:00 PM Bernanke testifies on Fed liquidity measures
  2:30 PM Geithner testifies on new TARP plan
  5:00 PM ABC Consumer Confidence Index

• Notable earnings before Tuesday's open: ACM, ARW, CVH, CXW, DTV, ELN, HCP, HERO, ICE, OMC, PBG, PNX, Q, TAP, TRA, UMC, VSH, YGE
• Notable earnings after Tuesday's close: AMAT, BGC, CBG, CERN, CF, CSC, FIS, MVSN, NVDA, PL, QSFT, SIAL, VFC, XL

Seeking Alpha editor Eli Hoffmann contributed to this post.

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Comments

[know nothing:]

Hows that stimulus working today? (sell the news)

Feb 10 02:45 PM

[AndrewBaker:]

Well ... no-one likes it, the market's selling off, and billions of dollars are going to be thrown around and wasted. Our dollars! I tried to like things, and even went long financials (foolish, I know): my answer now is to short, short and short again until I get back the good money of my own I tried to use to support the "recovery." With dishonest bankers and incompetant politicians (regardless of creed), we best look out for ourselves 'cos sure as anything, they won't do it for us.

Feb 10 03:26 PM

[Joseph Sherman:]

Kindle 2: Cause; people need meaning and purpose. Environmentalism is a great cause. No treas means no oxygen, and no oxygen means no humans. The Kindle 2 saves trees, you can finish the equation.

Feb 10 03:53 PM

[bbowen7:]

Tis a gloomy day indeed. The markets need clarity, and the administration has given only urgency. The NYT talks today about David Axelrod, Obama's chief political advisor, wanting to fire the leaders, cap salaries, and wipe out stock holders of the banks. Oh, and to create a public/private partnership to buy up the toxic assets that Paulson wanted to buy with TARP I. Good luck getting into business with this administration.

Feb 10 04:09 PM

[grh1212:]

The Wall Street worthies and shills have simply gone into a temporary state of shock trauma upon hearing words like transparency and accountability from Mr. Geithner. It looks like we have a Treasurer who has better ideas than mindlessly throwing money at our opaque banks.

Feb 10 05:15 PM

[bobbobwhite:]

Neither Paulson nor Obama via Geithner moved the market(except for down, don't forget that "move") with their failsafe bailouts and stimulus packages.

What more can they do to (try to) convince us that all things financial will soon not only be operational, but humming again?

Looks like two strikes so far to me.

Feb 11 03:44 PM